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November 4, 2009

Research Update:
Berkshire Hathaway Inc. And
Various Affiliates Ratings Placed On
Watch Negative On Planned
Acquisition
Primary Credit Analyst:
John Iten, New York (1) 212-438-1757;john_iten@standardandpoors.com
Secondary Credit Analyst:
Damien Magarelli, New York (1) 212-438-6975;damien_magarelli@standardandpoors.com

Table Of Contents
Overview
Rating Action
Rationale
CreditWatch
Related Research
Ratings List

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Research Update:
Berkshire Hathaway Inc. And Various Affiliates
Ratings Placed On Watch Negative On Planned
Acquisition
Overview
• Berkshire Hathaway is acquiring Burlington Northern Santa Fe for
approximately $44 billion, in a cash and stock transaction.
• We expect that a significant part of the cash portion will come from
Berkshire's core insurance operations, as has historically been the case
in other transactions.
• We are placing the ratings on Berkshire and various affiliates on
CreditWatch with negative implications.

Rating Action
On Nov. 4, 2009, Standard & Poor's Ratings Services placed its ratings on
Berkshire Hathaway Inc. (BRK) and various affiliates on CreditWatch with
negative implications following the company's announcement that it will
acquire Burlington Northern Santa Fe Corp. (BNSF). The transaction is valued
at approximately $44 billion, including the assumption of approximately $10
billion of BNSF debt, making it BRK's largest acquisition to date. BRK already
owns nearly 23% of the stock of BNSF. The acquisition of the remaining shares
will be financed with a combination of 60% cash and 40% through the issuance
of new BRK shares.
Standard & Poor's expects that a significant part of the cash portion
will come from BRK's core insurance operations, as has historically been the
case in other transactions.

Rationale
We believe that this transaction will decrease the liquidity and capital
adequacy of the insurance operations. For the consolidated organization,
financial leverage will increase and fixed-charge coverage may decline.
The capital adequacy of the insurance operations has declined over the
past year, reflecting the drop in the market value of BRK's extensive
portfolio of equity holdings, which the insurance subsidiaries hold. This was
the primary reason for our decision to change the outlook on all BRK ratings
to negative from stable on March 24, 2009 (see research update). Moreover, the
insurance operations over the past 12 months have been the buyers of BRK's
well-publicized investments in Goldman Sachs, General Electric Co., WM.
Wrigley Jr. Co., and Swiss Re. These large investments have attractive coupons
and are boosting investment income, but have also increased the exposure of
the insurance companies' statutory capital to equities and speculative-grade
bonds. The investments have also reduced insurance company liquidity, as BRK

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Research Update: Berkshire Hathaway Inc. And Various Affiliates Ratings Placed On Watch Negative On Planned
Acquisition

paid for them primarily out of cash and short-term investments and not from
the sale of longer-term investments. The insurance companies already own a
substantial amount of BNSF stock, so any further share purchases will increase
the concentration risk associated with having a substantial portion of
invested assets in securities of one company.
The recession has hurt consolidated earnings. Pretax income for the first
half of 2009 declined to $2.3 billion from $5.9 billion in the prior year
period, reflecting lower operating income from BRK's manufacturing, service,
and retailing business segment and higher investment and derivative losses.
Financial leverage, excluding the borrowings of separately rated MidAmerican
Energy Holdings Co. and its regulated utility subsidiaries, was about 16% at
June 30, 2009.

CreditWatch
As the full details of this transaction become available, we will evaluate the
impact on the liquidity and capital adequacy of the insurance operations, as
well as the implications for liquidity, earnings, financial leverage, and
fixed-charge coverage of the consolidated organization and the holding
company. We expect to complete our analysis and remove the company from
CreditWatch within 90 days. We currently expect that any ratings change would
be by no more than two notches.

Related Research
• "Berkshire Hathaway Inc. And Related Entities Outlook Revised To
Negative; Ratings Affirmed," March 24, 2009

Ratings List
CreditWatch Action
To From
Berkshire Hathaway Inc.
General Re Corp.
Berkshire Hathaway International Insurance Ltd.
Counterparty Credit Rating AAA/Watch Neg/A-1+ AAA/Negative/A-1+

Berkshire Hathaway Assurance Corp.


Wesco-Financial Insurance Co.
Redwood Fire & Casualty Insurance Co.
National Reinsurance Corp.
National Liability & Fire Insurance Co.
National Indemnity Co. of the South
National Indemnity Co. of Mid-America
National Indemnity Co.
National Fire & Marine Insurance Co.
Medical Protective Co.
Koelnische Rueckversicherungs-Gesellschaft AG
Koelnische Rueckversicherung Gesellschaft AG, Niederlassung Wien

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Research Update: Berkshire Hathaway Inc. And Various Affiliates Ratings Placed On Watch Negative On Planned
Acquisition

Kansas Bankers Surety Co.


Government Employees Insurance Co.
Genesis Insurance Co.
Genesis Indemnity Insurance Co.
General Star National Insurance Co.
General Star Indemnity Co.
General Reinsurance UK Ltd.
General Reinsurance Life Australia Ltd.
General Reinsurance Corp.
General Reinsurance Australia Ltd.
General Reinsurance Africa Ltd.
General Re Life Corp.
GEICO Indemnity Co.
GEICO General Insurance Co.
GEICO Casualty Co.
Faraday Reinsurance Co. Ltd.
Fairfield Insurance Co.
Cypress Insurance Co. (CA)
Cornhusker Casualty Co.
Continental Divide Insurance Co.
Columbia Insurance Co.
Central States Indemnity Co. of Omaha
CSI Life Insurance Co.
Berkshire Hathaway Life Insurance Co. of NE
Berkshire Hathaway International Insurance Ltd.
Financial Strength Rating AAA/Watch Neg/-- AAA/Negative/--

Berkshire Hathaway Assurance Corp.


National Fire & Marine Insurance Co.
Columbia Insurance Co.
Berkshire Hathaway Life Insurance Co. of NE
Financial Enhancement Rating AAA/Watch Neg/-- AAA/--/--

Berkshire Hathaway Life Insurance Co. of NE


Wesco-Financial Insurance Co.
Redwood Fire & Casualty Insurance Co.
National Reinsurance Corp.
National Re Corp.
National Liability & Fire Insurance Co.
National Indemnity Co. of the South
National Indemnity Co. of Mid-America
National Indemnity Co.
National Fire & Marine Insurance Co.
Medical Protective Co.
Koelnische Rueckversicherungs-Gesellschaft AG
Kansas Bankers Surety Co.
Government Employees Insurance Co.
Genesis Insurance Co.
Genesis Indemnity Insurance Co.
General Star National Insurance Co.

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Research Update: Berkshire Hathaway Inc. And Various Affiliates Ratings Placed On Watch Negative On Planned
Acquisition

General Star Indemnity Co.


General Reinsurance UK Ltd.
General Reinsurance Corp.
General Reinsurance Australia Ltd.
General Re Financial Products Corp.
GEICO Indemnity Co.
GEICO General Insurance Co.
GEICO Corp.
GEICO Casualty Co.
Fairfield Insurance Co.
Cypress Insurance Co. (CA)
Cornhusker Casualty Co.
Continental Divide Insurance Co.
Columbia Insurance Co.
Central States Indemnity Co. of Omaha
CSI Life Insurance Co.
Counterparty Credit Rating AAA/Watch Neg/-- AAA/Negative/--

Berkshire Hathaway Inc.


Senior Unsecured AAA/Watch Neg AAA

Berkshire Hathaway Finance Corp.


Senior Unsecured AAA/Watch Neg AAA

GEICO Corp.
Senior Unsecured AAA/Watch Neg AAA

XTRA Finance Corp.


Senior Unsecured AAA/Watch Neg AAA

Ratings Affirmed

Cologne Re of Dublin (The)


Counterparty Credit Rating A/Stable/--
Financial Strength Rating A/Stable/--

Finial Holdings Inc.


Counterparty Credit Rating BBB/Stable/--

Finial Holdings Inc.


Senior Unsecured BBB

General Re Corp.
Commercial Paper A-1+

Netjets Inc.
Commercial Paper A-1+

R.C. Willey Home Furnishings

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Research Update: Berkshire Hathaway Inc. And Various Affiliates Ratings Placed On Watch Negative On Planned
Acquisition

Commercial Paper A-1+

XTRA Inc.
Commercial Paper A-1+

Complete ratings information is available to RatingsDirect subscribers at


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