Fitch Downgrades Berkshire Hathaway's IDR to 'AA-'; IFS to 'AA+'

CHICAGO & NEW YORK--Fitch Ratings has removed the following ratings on Berkshire Hathaway Inc. and BRK's key insurance subsidiaries from Rating Watch Negative and downgraded the ratings as follows:

Berkshire Hathaway, Inc.

--Issuer Default Rating (IDR) to 'AA-' from 'AA+';

Berkshire Hathaway Finance Corporation

--IDR to 'AA-' from 'AA+';

--Senior unsecured notes to 'A+ 'from 'AA'

Insurance Company Subsidiaries

--Insurer Financial Strength (IFS) ratings to 'AA+' from 'AAA'.

The Rating Outlooks are Stable. A full list of rating actions is shown at the end of this release.

Fitch had placed its ratings on BRK and the company's insurance subsidiaries on Rating Watch Negative on Nov. 5, 2009 after BRK and Burlington Northern Santa Fe Corporation (BNSF) announced they had entered into an agreement under which BRK would acquire the 77% of BNSF shares it did not already own in exchange for cash or BRK shares. BRK and BNSF have announced that pending BNSF shareholders' approval, they plan to close the transaction on Feb. 12, 2010.

The downgrades reflect Fitch's concerns about the BNSF acquisition's effect on BRK's asset profile, capitalization, and interest coverage. The downgrades also reflect Fitch's ongoing concerns with the BRK organization's significant equity market exposure.

Fitch views the BNSF acquisition, along with BRK's investments in utilities and energy and finance company subsidiaries, as increasingly shifting the company's overall asset profile towards concentrated investments in operating subsidiaries with comparatively lower credit-quality and less liquidity than the company's long-held insurance and holding-company equity oriented investments. These businesses use more financial leverage and often have greater sensitivity to general economic conditions.

BRK's financing of the BNSF acquisition is expected to result in a meaningful increase in financial leverage, especially on a tangible capital basis. BRK partially funded the acquisition with $8 billion of new senior notes with maturities ranging from 2011 through 2015. Including this issuance on a pro forma basis, Fitch estimates BRK's debt-to-total capital and debt-to-tangible capital ratios at the holding company level (including debt issued by the company's finance company subsidiaries and guaranteed by BRK) at Sept. 30, 2009 at 16% and 22%. In comparison, excluding the impact of the BNSF acquisitions, these ratios are 13% and 16% respectively.

Fitch also believes that the insurance subsidiaries' risk-based capitalization metrics will suffer moderately if the subsidiaries provide a material portion of the $8 billion of internal assets used to partially fund the BNSF acquisition in exchange for concentrated ownership interests in BNSF.

Fitch forecasts that BRK's operating earnings based interest coverage at the holding company level (including finance operations' earnings and interest expense) is likely to approximate 10-12 times (x) including the impact of the debt issued to partially fund the BNSF acquisition. In comparison, this coverage ratio averaged roughly 15x in recent years. Fitch views the anticipated coverage ratio as solid, but not materially better than those of most insurance holding companies that have been traditionally lower rated than BRK.

The BRK organization has significant exposure to equity market investments. In recent years key insurance subsidiaries National Indemnity Company's (NICO) and Government Employees Insurance Co.'s (GEICO) investment allocations to equities have been more than twice the industry average. While these equity investments have historically been major contributors to the subsidiaries' capital growth, Fitch increasingly views the capital volatility that can accompany such investments as inconsistent with the stability expected at the prior ratings levels.

Fitch also notes that the BRK faces equity market exposure through long-dated European style equity put contracts the company has written that had a notional value of $39 billion at Sept. 30, 2009. Fitch views the ultimate financial impact of these contracts on BRK as highly uncertain but views the contracts' long-duration (weighted average maturity of approximately 12 years at Sept. 30, 2009) and the fact that BRK generally collected the premiums on these contracts at inception, as significant risk mitigators. Additionally, Fitch views the potential collateral requirements associated with these contracts as manageable for a company with BRK's financial strength. Nonetheless, inclusion of these exposures and credit market exposure from credit default swap contracts the company has written places BRK's Total Financing and Commitments (TFC) ratio at 0.9x, which is above average compared to most other insurance organizations. The TFC is a recently introduced leverage measurement that captures broad capital markets exposure relative to capital.

The two notch downgrade of BRK's Holding company IDR and senior debt ratings reflects movement towards 'standard notching' of BRK's holding company obligations relative to its insurance company policyholder obligations. The prior narrower notching, in part, reflected previous lower levels of debt leverage.

Fitch views the IFS ratings of key BRK's insurance subsidiaries, National Indemnity Company (NICO), General Reinsurance Corporation (GenRe) and Government Employees Insurance Company (GEICO) as linked to one another, due to each of the subsidiaries' importance to the overall Berkshire organization and in the case of NICO and GenRe, the existence of significant reinsurance between the companies.

Fitch has downgraded the following ratings and assigned Stable Rating Outlooks:

Berkshire Hathaway, Inc.

--Issuer Default Rating (IDR) to 'AA-' from 'AA+'.

Berkshire Hathaway Finance Corporation (BHFC)

--IDR to 'AA-' from 'AA+';

--$500 million 4.2% notes due Dec. 15, 2010 to 'A+' from 'AA';

--$1.5 billion 5.11875% notes due Jan. 11, 2011 to 'A+' from 'AA';

--$1 billion 4.0% notes due April due April 15, 2012 to 'A+' from 'AA'

--$700 million 4.75% notes due May 15, 2012 to 'A+' from 'AA';

--$750 million 5.125% notes due Sept. 15, 2012 to 'A+' from 'AA';

--$500 million 4.5% notes due Jan. 1, 2013 to 'A+' from 'AA';

--$1 billion 4.6% notes due May 15, 2013 to 'A+' from 'AA';

--$1 billion 5.0% notes due Aug. 15, 2013 to 'A+' from 'AA';

--$950 million 4.625% notes due Oct. 15, 2013 to 'A+' from 'AA';

--$400 million 5.1% notes due July 15, 2014 to 'A+' from 'AA';

--$1 billion 4.85% notes due Jan. 15, 2015 to 'A+' from 'AA';

--$250 million 5.4% notes due May 15, 2018 to 'A+' from 'AA'.

GEICO Corporation

--IDR to 'AA-' from 'AA+';

--$150 million 7.4% senior notes due July 15, 2023 to 'A+' from 'AA'.

General Re Corporation

--IDR to 'AA-' from 'AA+'.

XTRA Finance Corp.

--Long-term IDR to 'A-' from 'A+';

--$400 million 5.15% senior notes due April 1, 2017 (guaranteed by BRK), to 'A+' from 'AA'

XTRA Corporation

--Long-term IDR to 'A-' from 'A+';

--$5 million 8.514% senior notes due Sept. 15, 2010, to 'A-' from 'A+';

--$5 million 6.96% senior notes due Oct. 18, 2010, to 'A-' from 'A+';

--$2 million 7.71% senior notes due May 30, 2012, to 'A-' from 'A+';

--Short-term IDR to 'F1' from 'F1+';

Fitch has removed the following IFS ratings from Rating Watch Negative and downgraded the ratings to 'AA+' from 'AAA' and assigned Stable Rating Outlooks:

--Government Employers Insurance Company;

--General Reinsurance Corporation;

--General Star Indemnity Company;

--National Reinsurance Corporation;

--General Star National Insurance Company;

--Genesis Insurance Company;

--Genesis Indemnity Insurance Co.;

--Fairfield Insurance Company;

--National Indemnity Company;

--Columbia Insurance Company;

--National Fire and Marine Insurance Company;

--National Liability and Fire Insurance Company;

--National Indemnity Company of the South;

--National Indemnity Company of Mid-America;

--Wesco Financial Insurance Company.

Fitch has assigned the following ratings:

Berkshire Hathaway, Inc.

--$2 billion floating rate senior notes due Feb. 10, 2011 at 'A+';

--$1.1 billion floating rate senior notes due Feb. 10, 2012 at 'A+';

--$1.2 billion floating rate senior notes due Feb. 11, 2013 at 'A+';

--$600 million 1.40% senior notes due Feb. 10, 2012 at 'A+';

--$1.4 billion 2.125% senior notes due Feb. 11, 2013 at

'A+';

--$1.7 billion 3.20% senior notes Feb. 11, 2015 at 'A+';

Berkshire Hathaway Finance Corp.

--$250 million floating rate senior notes due Jan. 13, 2012 at 'A+';

--$750 million 5.750% senior notes due Jan. 15, 2040 at 'A+'.

Fitch has removed the following ratings from Rating Watch Negative and affirmed the ratings:

General Re Corporation

--$500 million commercial paper program at 'F1+';

--Short-term IDR at 'F1+'.

Xtra Corporation

--$300 million commercial paper program at 'F1+' (program is guaranteed by BRK)

These rating actions reflect the application of Fitch's current criteria which is available on Fitch's website at www.fitchratings.com and specifically include:

--'Insurance Rating Methodology', dated Dec. 29, 2009;

--'Life Insurance Rating Criteria (Global)' dated March 2, 2007;

--'Non-Life Insurance Rating Criteria (Global)' dated March 2, 2007;

--'Reinsurance (Life and Non-Life) Rating Criteria (Global) dated March 2, 2007.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.