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Rating Action:

Moody’s affirms Berkshire Hathaway’s Aa2 senior debt rating, stable outlook

10 December 2021


New York , December 10, 2021 – Moody's Investors Service has affirmed the Aa2 senior unsecured debt rating and Prime-1 short-term issuer rating of Berkshire Hathaway Inc. (Berkshire, NYSE: BRK) as well as the ratings on subsidiary debts that are unconditionally and irrevocably guaranteed by Berkshire (see list below). The rating outlook for Berkshire is stable.

RATINGS RATIONALE

According to Moody's, the rating affirmation reflects Berkshire's extraordinarily well capitalized (re)insurance operations, its highly diversified earnings and cash flow from regulated and non-regulated businesses, and its conservative financial policy, by which it maintains a large liquidity pool and moderate financial leverage. Partly offsetting these strengths are potential earnings and capital volatility related to the company's large, concentrated stock investments and its large individual (re)insurance transactions. Other challenges include enterprise risk management given the vast business portfolio, and leadership succession given the critical role CEO Warren Buffett has played in developing Berkshire's culture and financial performance.

Berkshire reported net operating earnings of $20.2 billion for the first nine months of 2021, up 19% versus the prior year period, reflecting strong double-digit increases in the railroad, utilities and energy, and manufacturing, service and retailing segments, partly offset by a double-digit decline in the (re)insurance segment. The year-to-date decline in (re)insurance results reflects lower underwriting income, partly because of higher catastrophe losses, along with slightly lower investment income. Moody's expects that Berkshire will benefit from the recovering economy in 2022 and will continue to grow its operating earnings, cash flow and capital base over time.

As of September 30, 2021, Berkshire had consolidated cash and equivalents totaling $149 billion, a majority held within the (re)insurance segment. The company had total borrowings of $115 billion, a majority issued by the railroad and utilities and energy segments. Consolidated total leverage, which incorporates all reported debt plus Moody's adjustments for pensions and leases, was about 20% at September 30, 2021, within Moody's rating expectations. Berkshire generates healthy pretax interest coverage, averaging more than 10 times over the past five years. The company holds at least $30 billion of cash and equivalents at or readily available to the parent to address potential needs or opportunities.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Factors that could lead to an upgrade of Berkshire's ratings include (i) meaningful improvement in standalone credit profiles of major operating units, and (ii) continued holdings of substantial cash and equivalents at or readily available to the parent company relative to outstanding indebtedness.

Factors that could lead to a rating downgrade include: (i) meaningful deterioration in standalone credit profiles(s) of one or more major operating units, (ii) a shift towards a less conservative financial profile (for example, total consolidated leverage exceeding 30%, or total leverage excluding railroad, utilities and energy exceeding 15%), (iii) losses from (re)insurance underwriting and/or investments causing a 15% decline in shareholders' equity in a given year, or (iv) a significant decline in cash and equivalents at or readily available to the parent (for example, declining toward $30 billion, which management cites as a minimum balance).

Moody's has affirmed the following ratings:

Berkshire Hathaway Inc. -- long-term issuer rating and senior unsecured debt at Aa2, senior unsecured shelf at (P)Aa2, short-term issuer rating at Prime-1;

Berkshire Hathaway Finance Corporation -- backed senior unsecured debt at Aa2, backed senior unsecured shelf at (P)Aa2;

The Lubrizol Corporation -- backed senior unsecured debt at Aa2;

Precision Castparts Corp. -- backed senior unsecured debt at Aa2.

The rating outlook for these companies is stable.

The methodologies used in these ratings were Property and Casualty Insurers Methodology published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254163 , and Reinsurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187551 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Based in Omaha, Nebraska, Berkshire is a holding company engaged through subsidiaries in diversified businesses that fall into four broad segments: (re)insurance; railroad; utilities and energy; and manufacturing, service and retailing. Berkshire also holds sizable minority interests in several publicly traded firms through its portfolio of common stocks, held mainly by its (re)insurance subsidiaries. Berkshire generated total revenue of $204 billion, net operating earnings of $20.2 billion, and net income attributable to Berkshire of $50.1 billion for the first nine months of 2021. The main differences between net income and operating earnings are that net income includes unrealized gains on stock investments plus a smaller amount of realized investment gains. Berkshire had total assets of $921 billion and Berkshire shareholders' equity of $472 billion as of September 30, 2021.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Bruce Ballentine
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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