CNBC: Warren Buffett's Berkshire Hathaway Gets 'Negative' Outlook from S&P

Published: Monday, 8 Aug 2011 | 1:11 PM ET

By: Alex Crippen
Executive ProduceR

Standard & Poor's has lowered its outlook on Berkshire Hathaway's debt from "stable" to "negative" but the revision isn't due to something Warren Buffett did or didn't do.

In its news release issued a few minutes ago, S&P says its downgrade of U.S. debt over the weekend "constrains our financial strength ratings on insurers," including Berkshire.

Berkshire and four other U.S. insurance group keep their AA+ ratings, but they now have "negative" outlooks.

Another five insurance group had their rating downgraded from AAA to AA+, and they've also been assigned a "negative" outlook.

Why the changes? S&P explains:

"In our view, the U.S. sovereign credit rating constrains the long-term rating 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"

It goes on to say, "In our view, these companies maintain very strong capital and liquidity" and "our view of these companies' fundamental credit characteristics has not changed."

We assume Buffett's criticism of S&P for stripping the U.S. of its triple-A rating has nothing to do with this latest action.

Berkshire, we need to note, reports holding 28.4 million shares of Moody's, S&P's arch- competitor. That's as of March 31.

Berkshire's stock price is taking a hit today, but the drop is much smaller than the market's. (As of 1:20p ET, Berkshire shares are down around 2 percent vs. the benchmark S&P 500 stock index's 4 percent plunge.)

Year-to-date, the S&P's 8.3 percent drop is outperforming Berkshire's 12.7 percent fall.

Earlier today, analysts at Keefe, Bruyette & Woods called Berkshire shares "increasingly attractive amid worried financial markets," upgrading its rating to "Outperform."

Noting Berkshire's $43 billion in cash and "relatively steady operating earnings," KBW raised its forecast for the company's 2011 EPS while maintaining a Class A target price of $133,000.

Current Berkshire stock prices:

Class B: [BRK.B 68.7715 2.1215 (+3.18%) ]

Class A: [BRK.A 102990.0078 1990.0078 (+1.97%) ]

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