A.M. Best Co. joined Standard & Poor's and Fitch Ratings in placing the financial strength ratings (FSR) and issuer credit ratings (ICR) of the domestic and international P/C and life/health subsidiaries of Berkshire Hathaway Inc. (BRK) under review with negative implications.
Best has also placed the FSRs of 'A++' (Superior) and ICRs of "aaa" of National Indemnity Group and Government Employers Group (GEICO) and their members under review with negative implications.
In addition, placed the FSRs of 'A++' (Superior) and ICRs of "aa+" of General Re Group and its members under review with negative implications.
Best took the actions following BRK's announced acquisition of Burlington Northern Santa Fe Corporation (BNSF) for $100 per share in cash and common stock, making it the 100 percent owner of the railroad. The transaction is valued at $44 billion and includes the assumption of $10 billion of BNSF debt.
Best said it had taken the rating actions as it has concerns "regarding the utilization of BRK's insurance and reinsurance operations as a funding source for this transaction."
Best said it is also "concerned with the liquidity and concentration risk pertaining to a single large investment as a substantial portion of BRK's portfolio, since the majority of BRK's equity investments are held at the insurance and reinsurance entities."
Best will assess the under review status over the near term as more details regarding the capitalization and liquidity of the insurance and reinsurance operations is presented by management.
For a complete listing of Berkshire Hathaway Inc.'s domestic and international property/casualty and life/health subsidiaries, FSRs, ICRs and debt ratings, go to: www.ambest.com/press/110603berkshirehathaway.pdf.
Source: A.M. Best - www.ambest.com
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