TEXT-Fitch affirms Berkshire Hathaway, rates Berkshire Hathaway Finance debt

Thu Sep 20, 2012 12:07pm EDT

Sept 20 - Fitch Ratings has assigned 'A+' ratings to the $750 million of new
5-year, 10-year and 30-year senior unsecured notes issued by Berkshire Hathaway
Finance Corp. (BHFC). The notes are guaranteed by Berkshire Hathaway Inc.
 (NYSE:BRK) and proceeds are expected to be used for general corporate
purposes. The 'A+' ratings are equivalent to Fitch's ratings on BHFC's
outstanding senior unsecured notes that are guaranteed by BRK.  

In addition, Fitch affirmed the 'AA-' Issuer Default Rating on Berkshire 
Hathaway Inc. (NYSE:BRK) 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. 

Fitch's ratings on BRK are supported by the 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 risk exposures related to an 
above-average investment allocation to common stocks, a substantial position in 
equity derivatives, insured natural catastrophe exposures, and various issues 
associated with the company's acquisition strategy and succession planning. 

BRK's pro forma consolidated financial leverage was 25% of total capital as of 
June 30, 2012. Consolidated interest coverage for the first six months of 2012 
was 7x and excluded investment gains from the calculation. 

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) were 20% and 27%, respectively on a pro 
forma basis as of June 30, 2012. The agency views BRK's ability to fund finance 
operations at a low cost as an important competitive advantage for the finance 
operations and also notes that much of the finance company debt is guaranteed by
BRK.

  

Fitch's expectation is that BRK's major business units, such as the company's 
utilities and railroad business, will service their own debt. 

BRK reported improved net income of $6.4 billion for the first half of 2012, up 
from $4.9 billion in the comparable period of 2011. The Insurance segment inside
BRK was responsible for the majority of the period-to-period increase. 
Specifically, Berkshire Hathaway Reinsurance Group and General Re reported 
year-to-date pretax gains, reflecting a more normal level of catastrophe losses 
relative to 2011.

Burlington, Northern and Santa Fe (BNSF) railroad operation continues to make 
significant contributions to earnings. BNSF reported a pretax gain of $2.4 
billion for the first six months of 2012, up from $2 billion over the comparable
period in 2011.

BRK's annualized return on surplus was 7.5%, excluding unrealized gains on fixed
income securities, for the first half of 2012, up from 6.2% in the comparable 
period of 2011. 

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

--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 assigned the following ratings:

Berkshire Hathaway Finance Corporation (BHFC) 

--$325 million 1.6% senior notes due May 2017 'A+';

--$200 million 3.0% senior notes due May 2022 'A+';

--$225 million 4.4% senior notes due May 2042 'A+'.

Fitch has affirmed the following ratings: 

Berkshire Hathaway, Inc. 

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

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

--$1.4 billion 2.125% senior notes due Feb. 2013 at 'A+';

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

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

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

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

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

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

Berkshire Hathaway Finance Corporation (BHFC) 

--IDR 'AA-';

--$500 million 4.5% notes due Jan. 2013 at 'A+'; 

--$1 billion 4.6% notes due May 2013 at 'A+'; 

--$1 billion 5.0% notes due Aug. 2013 at 'A+';

--$950 million 4.625% notes due Oct. 2013 at 'A+'; 

--$375 million floating rate senior notes due Jan. 2014 at 'A+' 

--$375 million 1.50% senior notes due Jan. 2014 at 'A+';

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

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

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

--$750 million 1.6% senior notes due May 2017 at 'A+';

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

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

--$350 million 3.0% senior notes due May 2022 at 'A+';

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

--$500 million 4.4% senior notes due May 2042 at 'A+'.

GEICO Corporation 

--IDR 'AA-';   

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

General Re Corporation 

--IDR 'AA-'.

--$500 million CP program at 'F1+';

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

Fitch affirmed the Insurer Financial Strength rating of the following insurance 
subsidiaries at 'AA+':

--Government Employers Insurance Company; 

--General Reinsurance Corporation; 

--General Star Indemnity Company; 

--General Star National Insurance Company;

--Genesis Insurance Company; 

--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.

Additional information is available at 'www.fitchratings.com'. 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. The ratings above were unsolicited and have been provided by Fitch 
as a service to investors.

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