Impacted by its derivative contract investments, Berkshire in the 2008 fourth quarter saw profits fall 96 percent and net worth drop by $10.9 billon. On March 13 Fitch dropped its rating from "triple-A" to "double-A-plus."

Standard & Poor's credit analyst John Iten wrote, "The decline in equity values in 2009 has reduced the statutory capital of the insurance operations, and a preliminary analysis of the group's capital adequacy indicates that the group's capital is no longer redundant at the 'AAA' level."

He noted that in December 2008, S&P had said it would consider revising the outlook to negative "if capital markets continued to deteriorate, investment-related losses reduced capital below the 'AAA' level, and Berkshire was not able to rebuild capital back up to that level within a reasonable time..."

"At year-end 2008, the capital adequacy of Berkshire's insurance operations was significantly lower than it was one year earlier, but it was still appropriate for the rating," Mr. Iten continued.

S&P said the time horizon for the outlook is 12 months. The rating service said it could revise the outlook back to stable if a number of things occurred.

It mentioned stabilization or improvement in value of the group's equity investment holdings or a likelihood that the company will be able to rebuild capital back to a level commensurate with the current ratings within a reasonable period of time (typically one to two years) through earnings or other means.

S&P said it will also take into account any steps Berkshire might take to mitigate volatility of its statutory capital. But it warned it could lower ratings "if continued substantial deterioration in the equity markets hurts capital further, or if it appears that the insurance group will not be able to restore capital back to the 'AAA' level through earnings or through capital contributions from Berkshire's noninsurance operations or external sources."

However, S&P said it does not currently anticipate that any possible downgrade of the insurance company ratings would be by more than one notch.

S&P said there is currently no difference between the holding and operating company ratings because of the substantial amount of earnings and cash flow available from the company's noninsurance affiliates.

"If we were to downgrade the holding company, we could either lower the holding company rating by the same amount as the operating company ratings or begin to differentiate between these ratings. If this occurs, we do not currently anticipate that the holding company rating would be more than one or two notches below the operating company rating," the firm said.