Moody’s Investors Service has pegged down Warren Buffett’s Berkshire Hathaway credit rating in a move the Oracle of Omaha had to have seen coming. Reuters reports that the investment guru’s holding company lost its Aaa rating, falling to the third-highest grade, Aa2, while Buffett’s reinsurance and bond insurance arms were cut to Aa1, the second-highest credit rating.
The downgrades follow Berkshire’s reporting of a 62 percent drop in profit in February, in which Berkshire suffered nearly $7.5 billion in investment and derivative losses in 2008. Berkshire’s book value lost 9.6 percent in 2008, only the second time the holding company has suffered a book value loss under Buffett.
Moody’s credit rating cut comes weeks after fellow ratings agency Fitch made the decision to downgrade Berkshire’s top-tier rating. “AAA ratings are not appropriate at the holding company level for financial-oriented enterprises,” said Fitch after making the cut.
Standard & Poor’s, the third member of the credit ratings trifecta, still holds Berkshire at it’s highest ratings level, but changed its outlook on the holding company to negative last month, indicating that a downgrade could be forthcoming.
The Berkshire downgrade is simply a sign of the times, says one Berkshire shareholder, Michael Holland, who heads investment firm Holland & Co. “This has been the most critical financial environment of our lifetimes. Any financial company, including Warren Buffett’s, has been affected by it. Moody’s is saying it is so, long after the fact.”