Fitch Affirms Berkshire (BRK-A)(BRK-B) Ratings at 'AA+'; Offers Update

Fitch Ratings has affirmed the 'AA-' Issuer Default Rating of Berkshire Hathaway Inc. (NYSE: BRK-A)(NYSE: BRK-B) and the 'AA+' Insurer Financial Strength Ratings on BRK's key insurance subsidiaries. The Rating Outlook is Stable. A complete list of ratings and rating actions is shown at the end of this release.

KEY RATING DRIVERS

Fitch's ratings on BRK are supported by extremely strong capitalization and market position of its insurance subsidiaries, solid operating performance with good diversification across business lines and excellent financial flexibility and liquidity.

Also considered in the ratings are material equity market risk, insured natural catastrophe exposures, growing exposure to asbestos and environmental (A & E) risk and various issues associated with the company's acquisition strategy.

BRK has a unique insurance franchise with major positions in reinsurance and personal auto lines. Capitalization was 'Extremely Strong' at BRK's consolidated insurance operations, measured by Fitch's Prism capital model at year-end 2012. More traditional measures of leverage such as operating leverage and net leverage were also conservative at 0.2x and 1.0x, respectively at year-end 2013.

BRK's consolidated financial leverage ratio was 25% as of Dec. 31, 2013 and interest coverage was 8.9x after excluded investment and derivative gains from the calculation. Interest coverage was below Fitch's 12x expectations for the current rating category, but this is somewhat offset by BRK's $48 billion of consolidated cash and equivalents which covers interest expense by 17x.

Fitch's expectation is that BRK's major non-insurance business units, such as the company's utilities and railroad business, will service their own debt. BRK's holding company financial leverage ratio, including debt issued by the finance subsidiaries and guaranteed by BRK, was moderate at 15% at Dec. 31, 2013. The finance companies' debt is guaranteed by BRK, allowing it to obtain low cost funding which is a significant competitive advantage.

BRK reported net income of $19.5 billion in 2013, up from $14.8 billion in 2012. BRK's return on equity was 9.6% in 2013, excluding unrealized gains on fixed income securities from stockholders' equity, up from 8.5% in 2012.

Pre-tax earnings grew by greater than 15% in 2013 to $23.4 billion with all segments reporting year-over-year improvement. BRK's insurance group reported $7.8 billion in pre-tax earnings, and was responsible for more than one-half of the total increase in 2013.

Burlington Northern and Santa Fe (BNSF) railroad operation continues to make significant contributions to earnings. BNSF reported pretax earnings of $5.9 billion (one-quarter of BRK's total pre-tax earnings) for 2013, up from $5.4 billion in 2012.

As a large conglomerate, BRK has a long history of acquisition activity. Over the past year BRK's management has been discussing the likelihood of a large acquisition given its currently sizeable cash position. Depending on the size and credit quality of any acquired business, ratings could be adversely affected by a major acquisition of a lower credit quality business.

BRK's GAAP basis earnings will continue to be exposed to earnings volatility given its large notional values and long duration of outstanding derivative contracts as well as catastrophe-related losses from the company's reinsurance businesses. Stockholders' equity will continue to be exposed to volatility from the company's large equity investment portfolio.

BRK has grown its A & E insured liability exposure through retroactive reinsurance contracts most notably with Equitas Limited, AIG and CNA. Fitch estimates BRK has approximately $14 billion in A & E reserves net of reinsurance at year-end 2013 with nearly $12 billion assumed under retroactive reinsurance contracts.

RATING SENSITIVITIES

Key rating triggers that could lead to a future downgrade include:

--Deterioration in the credit quality of key insurance subsidiaries (National Indemnity, GenRe, and GEICO) that is no longer consistent with the current 'AA+' rating. Measures of credit quality include Fitch's judgment of capitalization, a total financing and commitments ratio greater than 1.5x, net leverage (excluding affiliated investments) over 3.5x or a sharp and persistent reduction in underwriting profits.

--A consolidated run-rate debt-to-total capital ratio that exceeds 30% or a run-rate debt-to-total capital ratio from the holding company, insurance and finance operations (including debt issued or guaranteed by the holding company) that exceeds 25%.

--Material increases in leveraged equity market exposure such as its equity index put derivative portfolio.

--Acquisitions or other actions that reduce outstanding cash below $10 billion or approximately 5x consolidated interest expense.

Key rating triggers that could lead to an upgrade include:

--A commitment to lower debt-to-tangible capital ratios attributed to the holding company, insurance and finance operations. Fitch believes that this would likely require the scaling back of the finance operations.

Fitch has affirmed the following ratings:

Berkshire Hathaway, Inc.

--Issuer Default Rating (IDR) at 'AA-'.

--$750 million floating rate senior notes due August 2014 at 'A+';

--$1.7 billion 3.20% senior notes February 2015 at 'A+';

--$300 million 0.8% senior notes due May 2016 at 'A+';

--$750 million 2.20% senior notes due August 2016 at 'A+';

--$1.1 billion 1.9% senior notes due January 2017 at 'A+';

--$800 million 1.55% senior notes due February 2018 at 'A+';

--$500 million 3.75% senior notes due August 2021 at 'A+';

--$600 million 3.40% senior notes due January 2022 at 'A+'

--$500 million 3.0% senior notes due February 2023 at 'A+';

--$1 billion 4.5% senior notes due February 2043 at 'A+'.

Berkshire Hathaway Finance Corporation (BHFC)

--IDR at 'AA-';

--$400 million 5.1% notes due July 2014 at 'A+';

--$1 billion 4.85% notes due January 2015 at 'A+';

--$500 million 2.45% senior notes due December 2015 at 'A+';

--$1 billion 0.95% senior notes due August 2016 at 'A+';

--$650 million floating rate senior notes due January 2017 at 'A+';

--$1,350 million 1.6% senior notes due May 2017 at 'A+';

--$1.25 billion 5.4% notes due May 2018 at 'A+';

--$500 million 2.0% senior notes due August 2018 at 'A+'

--$500 million 1.3% senior notes due May 2018 at 'A+';

--$550 million 2.9% senior notes due October 2020 at 'A+';

--$750 million 4.25% senior notes due January 2021 at 'A+';

--$775 million 3.0% senior notes due May 2022 at 'A+';

--$750 million 5.75% senior notes due January 2040 at 'A+'

--$725 million 4.4% senior notes due May 2042 at 'A+'

--$500 million 4.3% senior notes due May 2043 at 'A+'.

GEICO Corporation

--IDR at 'AA-';

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

General Re Corporation

--IDR at 'AA-'.

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

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

Fitch has affirmed the following insurance subsidiaries that carry an 'AA+' Insurer Financial Strength:

--Government Employees Insurance Company;

--General Reinsurance Corporation;

--General Star Indemnity Company;

--General Star National Insurance Company;

--Genesis 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.

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

Applicable Criteria & Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Although BRK's General Reinsurance Corp. subsidiary participated directly in the rating process, BRK DID NOT PARTICIPATE OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE.

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=825350

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