Fitch Ratings has affirmed the AA- issuer default rating of investment veteran Warren Buffett’s firm Berkshire Hathaway.
The firm had its outlook affirmed as “stable” and had its AA+ insurer financial strength rating affirmed by Fitch.
The rating was affirmed based on “extremely strong capitalisation and market position of its insurance subsidiaries, solid operating performance with good diversification across business lines and excellent financial flexibility and liquidity”.
However, the ratings agency warned of “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”.
The agency praised its £58.8bn capitalisation, adding that liquidity and financial flexibility were “very strong” characterised by “consistently solid operating cash flow, a large and liquid investment portfolio, a history of maintaining large consolidated cash balances and excellent capital markets access”.
The firm holds $77 billion in common stock holdings and $34 billion notional value in equity index put options.
It warned a future downgrade could be triggered by a deterioration in the credit quality of its insurance subsidiaries, material increases in its leveraged equity market exposure, or, acquisitions that reduced outstanding cash to less than $10 billion.
The firm could be upgraded if it lowers debt-to-tangible capital ratios attributed to the holding company, insurance and finance operations.
Buffett recently announced he had been diagnosed with prostate cancer but planned to carry on heading the firm he has run for decades.