KABOOOM: BERKSHIRE HATHAWAY INC OUTLOOK TO NEGATIVE FROM STABLE BY S&P

Tyler Durden's picture

More shortly. And yes, just as ZH predicted an hour ago.

Full report:

Overview

On Aug. 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' and assigned a negative outlook.

As a result, we have lowered the long-term counterparty credit and financial strength ratings on five U.S. insurance groups to 'AA+' and assigned negative outlooks.

We have also affirmed the ratings on five other U.S. insurance groups and revised the outlooks on these companies to negative from stable.

In our view, the U.S. sovereign credit rating constrains the long-term ratings on these U.S. insurers because their businesses and assets are highly concentrated in the U.S. and they have significant holdings in U.S. Treasury and agency securities.

Rating Action

On Aug. 8, 2011, Standard & Poor's Ratings Services lowered to 'AA+' from 'AAA' its long-term counterparty credit and financial strength ratings on the member companies of five U.S. insurance groups: Knights of Columbus, New York Life, Northwestern Mutual, Teachers Insurance & Annuity Assoc. of America (TIAA), and United Services Automobile Assoc. (USAA). The outlooks on the ratings on all of these companies are negative. In addition, Standard & Poor's lowered the ratings on approximately $17 billion of securities issued by New York Life, Northwestern Mutual, TIAA, USAA, and their affiliates.

At the same time, Standard & Poor's affirmed the 'AA+' ratings on the members of five other insurance groups--Assured Guaranty, Berkshire Hathaway,
Guardian, Massachusetts Mutual, and Western & Southern--and revised the outlooks on ratings on these companies to negative from stable.

Rationale

The rating actions on these 10 insurance groups follow the lowering of the long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' (see "United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative," Aug. 5, 2011.) We factor direct and indirect sovereign risks--such as the impacts of macroeconomic volatility, currency devaluation, asset impairments, and investment portfolio deterioration--into our financial strength ratings. Per our criteria, the sovereign local-currency credit rating constrains our financial strength ratings on insurers (see "Counterparty Credit Ratings And The Credit Framework," April 14, 2004). The 10 affected insurance groups operate in the U.S. and generally have significant holdings of U.S. Treasury and agency securities. For the insurers with the most exposure, these investments constituted as much as 200% of total adjusted capital at year-end 2010.

In our opinion, very strong financial profiles and favorable business profiles support the 'AA+' ratings on the 10 affected U.S. insurance groups. In our view, these companies maintain very strong capital and liquidity. In addition, we believe that the significant retail insurance liabilities--such as whole life insurance and deferred annuities--that some of these companies have are less prone to withdrawals or surrenders than institutional liabilities. Knights of Columbus, TIAA, and USAA also benefit from affinity relationships with their policyholders, which enhance the persistency of liabilities.

Our view of these companies' fundamental credit characteristics has not changed. Rather, the rating actions reflect the application of criteria and our view that the link between the ratings on these entities and the sovereign credit ratings on the U.S. could lead to a decline in the insurers' financial strength. This is because these companies' businesses and assets are highly concentrated in the U.S.

For related rating actions on other U.S. financial services companies, select GSEs, and funds, see "Ratings On Select GREs And FDIC- And NCUA-Guaranteed Debt Lowered After Sovereign Downgrade," also published today.

Outlook

Under our criteria, the local-currency sovereign credit rating on the U.S. constrains the ratings on domestic insurance operating and holding companies. If we were to lower our rating on the U.S. again, we would likely take the same rating action on the affected insurers and their related obligations. Alternatively, if we were to revise the rating outlook on the U.S. to stable, we would likely revise the outlook on the affected insurers to stable, assuming there is no deterioration in a particular insurer's business and financial profiles.

Related Criteria And Research

    Ratings On Select GREs And FDIC- And NCUA-Guaranteed Debt Lowered After Sovereign Downgrade, Aug. 8, 2011
    United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative, Aug. 5, 2011
    Counterparty Credit Ratings And The Credit Framework, April 14, 2004

Ratings List

Ratings Lowered And Removed From CreditWatch Negative
                                 To                    From
Knights of Columbus
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg

New York Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/A-1+     AAA/Watch Neg/A-1+
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg
 Subordinated Debt               AA-                   AA/Watch Neg
New York Life Insurance & Annuity Corp.
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg
New York Life Funding
New York Life Global Funding
 Senior Secured                  AA+                   AAA/Watch Neg

Northwestern Mutual Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg
 Subordinated Debt               AA-                   AA/Watch Neg
Northwestern Long Term Care Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg

Teachers Insurance & Annuity Assoc. of America
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg
 Senior Unsecured                AA+                   AAA/Watch Neg
 Subordinated Debt               AA-                   AA
TIAA-CREF Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg

United Services Automobile Assoc.
USAA Casualty Insurance Co.
USAA General Indemnity Co.
USAA Life Insurance Co.
USAA Life Insurance Co. of New York
 Counterparty Credit Rating      AA+/Negative/--       AAA/Watch Neg/--
 Financial Strength Rating       AA+/Negative          AAA/Watch Neg
USAA Capital Corp.
 Counterparty Credit Rating      AA+/Negative/A-1+     AAA/Watch Neg/A-1+
 Senior Unsecured                AA+                   AAA/Watch Neg
 Commercial Paper                A-1+                  A-1+

Ratings Affirmed; Outlook Revised To Negative
                                 To                    From
Assured Guaranty Ltd.
 Counterparty Credit Rating      A+/Negative/--        A+/Stable/--
 Junior Subordinated Debt        A-                    A-
 Senior Unsecured Debt           A+                    A+
Assured Guaranty (Bermuda) Ltd.
Assured Guaranty (Europe) Ltd.
Assured Guaranty (UK) Ltd.
Assured Guaranty Corp.
Assured Guaranty Municipal Corp.
Assured Guaranty Municipal Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
 Financial Enhancement Rating    AA+/Negative          AA+/Stable

Berkshire Hathaway Inc.
 Counterparty Credit Rating      AA+/Negative/A-1+     AA+/Stable/A-1+
 Senior Unsecured                AA+                   AA+
 Commercial Paper                A-1+                  A-1+
Berkshire Hathaway International Insurance Ltd.
 Counterparty Credit Rating      AA+/Negative/A-1+     AA+/Stable/A-1+
 Financial Strength Rating       AA+/Negative          AA+/Stable

Berkshire Hathaway Life Insurance Co. of NE
Columbia Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative/--       AA+/Stable/--
 Financial Enhancement Rating    AA+/Negative          AA+/Stable
GEICO Corp.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Senior Unsecured                AA+                   AA+
General Re Corp.
 Counterparty Credit Rating      AA+/Negative/A-1+     AA+/Stable/A-1+
 Commercial Paper                A-1+                  A-1+
General Re Financial Products Corp.
National Re Corp.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
Berkshire Hathaway Assurance Corp.
 Financial Strength Rating       AA+/Negative          AA+/Stable
 Financial Enhancement Rating    AA+/Negative          AA+/Stable
National Fire & Marine Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
 Financial Enhancement Rating    AA+/Negative          AA+/Stable
Central States Indemnity Co. of Omaha
Continental Divide Insurance Co.
Cornhusker Casualty Co.
CSI Life Insurance Co.
Cypress Insurance Co. (CA)
Fairfield Insurance Co.
GEICO Casualty Co.
GEICO General Insurance Co.
GEICO Indemnity Co.
General Reinsurance AG
General Reinsurance Australia Ltd.
General Reinsurance Corp.
General Star Indemnity Co.
General Star National Insurance Co.
Genesis Indemnity Insurance Co.
Genesis Insurance Co.
Government Employees Insurance Co.
Kansas Bankers Surety Co.
Medical Protective Co.
National Indemnity Co.
National Indemnity Co. of Mid-America
National Indemnity Co. of the South
National Liability & Fire Insurance Co.
National Reinsurance Corp.
Redwood Fire & Casualty Insurance Co.
Wesco-Financial Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
Faraday Reinsurance Co. Ltd.
General Re Life Corp.
General Reinsurance Africa Ltd.
General Reinsurance Life Australia Ltd.
 Financial Strength Rating       AA+/Negative          AA+/Stable

Guardian Insurance & Annuity Co.
Berkshire Life Insurance Co. of America
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
Guardian Life Insurance Co. of America
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
 Subordinated Debt               AA-                   AA-

Massachusetts Mutual Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/A-1+     AA+/Stable/A-1+
 Financial Strength Rating       AA+/Negative          AA+/Stable
 Commercial Paper                A-1+                  A-1+
 Subordinated Debt               AA-                   AA-
C.M. Life Insurance Co.
MML Bay State Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable

Western & Southern Financial Group Inc.
 Counterparty Credit Rating      AA-/Negative/--       AA-/Stable/--
 Senior Unsecured                AA-                   AA-
Western and Southern Life Insurance Co.
Western-Southern Life Assurance Co.
Columbus Life Insurance Co.
Integrity Life Insurance Co.
National Integrity Life Insurance Co.
 Counterparty Credit Rating      AA+/Negative/--       AA+/Stable/--
 Financial Strength Rating       AA+/Negative          AA+/Stable
Lafayette Life Insurance Co.
 Financial Strength Rating       AA+/Negative          AA+/Stable

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TheTmfreak's picture

Its clear somebody really pissed off S&P. Probably got cut out of the loot.

Harlequin001's picture

That's what happens when you refuse to give them immunity from prosecution for their own (over) ratings...

dbach's picture

Was that part of the Frank Dodd bill? If so, HA! This is what happens when you make the cheerleader go back to math club.

Haywood Jablowme's picture

 

"SUCK IT UP" MUNGER!  YOU FUCKIN' ASSHOLE!  BWAAAA-HAAAA-HAAAAA


RockyRacoon's picture

Yeah, take THAT Mr. Oracle, sir.

fx's picture

I'd say, S&P is playing their final cards. the US govt will of course NOT shut them down asap - as that would look like punishing them for their downgrade of the US. And imho getting that kind of 'protection' was S&P's ONLY motivation behind their downgrade action. But expect regulatory issues and accusations of fraudulent behaviour agains S&P to surface by October at the latest both in Europe and in the US. S&P will not be around any more one year from now. And boy, do they deserve it - and Moody's, too. Nobody needs ratings agencies - at least not in the powerful market driving position that they command these days.

schoolsout's picture

I just texted my buddy the same thing...someone is just a little pissed off...

TheTmfreak's picture

There is no question about it. For all of the talk about "TPTB" its always assumed that they will work together lock and step. In reality, piss one of them off and they'll blow the lid off of the whole scheme. I welcome these downgrades if anything to continually destablize these clowns.

Don Birnam's picture

It appears Uncle Warren needs a shoulder to cry on. A nice pair of legs is always good for some "alpha" as well.

http://cdn1.benzinga.com/files/becky%20quick%20222%20hot%202.jpg

gorillaonyourback's picture

uncle warren should call becky quick for a blow job.

High Plains Drifter's picture

no honor among thieves.   however,  they are also pissing off the boys from brighton beach (maybe)........

 

slewie the pi-rat's picture

@ "I just texted my buddy the same thing...someone is just a little pissed off..."

hey! at least it isn't the Justice Dept.!!!

Aductor's picture

Didn't the "Oracle" say that in his book, the US was AAA? LoL.

TruthInSunshine's picture

Que Obama in 32 minutes.

He's going to speak some more words. Into the camera. Read from the teleprompter. About.....stuff.

duffelpud's picture

He'll recommend we all drink Brawndo because "it has electrolytes".

 

Pontificating Buffoon's picture

It will sound something like this:

 

"Whaaa, whaa, whaaa, whaaa, whaaan, whaaan, whaan!" (Kind of like the sound of the teacher on the Charlie Brown cartoons, use your imagination)

citrine's picture

If I recall correctly, he also suggested to "bet havily against double dip recession"

Shock and Aweful's picture

Shit...

 

This old fool said the U.S. should be rated "QUADRUPLE A". . . just yesterday

I thought it was funny all weekend....all of the shills were out in full force making statements about how they saw no need to sell U.S. Treasuries....

You know for a damn fact that Obungo and Jeethner were on the phones all weekend...calling in "favors" from their billionaire friends....I can hear it now...

 

"Hey Warren...we know that for some reason...millions of morons in the U.S. actaully listen to you....so do you think you could do Barry a favor and make a statement ...bsacially calling into question the reasoning of the move by S&P and saying how wonderful of an investment idea you think Treasuries are?"

The next 30 days are going to be very, very interesting me thinks....

cossack55's picture

Don't forget the means to protect above list.

Zeppelin5637's picture

Gold and Lead,  bitchez!!

madbomber's picture

in the photos of your farm there is a real alien inside the

second pacman's head eating the property (forest) ?

i see.

I LIKE TURTLES.

slaughterer's picture

Berkshire Hathaway: gigantic derivative positions.   S&P no longer overlooks them.  The day S&P made history. 

H. Perowne's picture

Suck it up, buddy. Suck it in and cope.

Greater Fool's picture

...but they're still AAA in Omaha.

The Shootist's picture

Wow, things are moving fast, sorry Gwandpappy Wawwen.

"Where did ya come from, where did ya go, where did, ya come from, Cotton eyed Joe!"

dbach's picture

Is S&P under new management or something? What's gotten into them?

Doyle Hargraves's picture

Probably gonna piss in everyone's cheerios and then merge with DaGong Credit Ratings to avoid the persecution surely coming their way.

cossack55's picture

Good call. China has much more clout after Clinton sold them the W88 plans.

Doyle Hargraves's picture

"When you take away the impossible whatever remains no matter how improbable must be the truth..."-Mr. Spock

fuu's picture

Italy raided their offices last Thursday.

TruthInSunshine's picture

Here's to hoping that Warren 'Uncle Sugar-Thanks For Bailing Me Out' Buffet and co-partner in crime, Charlie 'Suck It Up Taxpayers' Munger both get what's coming to them sooner rather than later.

They are both part of the cancer that is causing the rot process that is hollowing out the nation.

Kina's picture

If they did all this shit two years ago we wouldn't be in the trouble we now are.l

Harlequin001's picture

er we would, we would just be a little nearer to a final solution...

I am a Man I am Forty's picture

fucking awesome, warren and charlie can suck it

LOWNskater52's picture

Oh thats awesome.  Suck on that Buffet!

Fazzie's picture

 Warren and Charlie dont suck it up, they whine like 5 year old girls and expect Uncle Sam to cover their losses.

choorles's picture

good times. crazy days. great site: www.silverrevolucion.com

anynonmous's picture

just watch

S&P is about to be (has been) named public enemy #1 by the administration

they will be called before congress

their senior employees will be targets of smear campaigns

they will be broken up

just watch

Harlequin001's picture

I'm throwing my hat in for the top job...