Berkshire Hathaway Ratings Outlook Cut
NU Online News Service, April 19, 4:18 p.m. EDT?Fitch Ratings has downgraded its outlook on Berkshire Hathaway Inc. to "Negative" from "Stable," citing concerns over investigations of the company's reinsurance unit and its failure to announce a leadership succession plan.[@@]
The ratings firm remarked that Berkshire has an outstanding long-term success record that can be largely attributed to the legendary talents of its Chairman Warren Buffett who has no one designated to fill his post if he should retire.
"Mr. Buffett's reputation with shareholders allows the company to adopt strategies and accumulate capital in ways that would generally not be accepted at other public companies," Fitch observed.
The ratings firm currently has "AAA" long-term issuer and unsecured senior debt ratings on the Omaha, Neb.-based firm and its auto insurance unit GEICO Corp.
But Fitch warned that Berkshire has not made its succession plans public. And although the 74-year-old Mr. Buffett is reportedly in good health and has expressed no intention of retiring, Fitch said "it does not believe that Mr. Buffett's talents can be easily replaced, or that Berkshire's current strategies would be sustainable in his absence."
The continuing regulatory probes into Berkshire's General Re unit and its finite reinsurance transactions with American International Group were another factor behind the ratings outlook change.
Fitch said it believes General Re may have suffered "some reputation damage" due to its involvement in such transactions. AIG has stated its finite arrangements with Berkshire were improperly accounted for.
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