Buffett Watch

Warren Buffett's Bond Insurer Rapidly Reaps Second AAA Rating

Warren Buffett's new municipal bond insurer has received its second AAA credit rating, just months after it was created in response to the stumbles of veteran insurers like Ambac and MBIA, two companies that are at risk of losing their own triple-As.

Today, Moody's gave its highest rating to Berkshire Hathaway Assurance Corporation.  In a news release (free registration required), Moody's says, "BHAC's rating reflects its strong capital position and its high-quality insured portfolio of public finance credits, as well as the guaranty from (Berkshire subsidiary) Columbia (Insurance Company) and implicit support from Berkshire."

The release quotes analyst James Eck as saying, "BHAC has rapidly grown its insured portfolio of U.S. public finance credits during a period of great stress in the credit markets.  The company's sound financial profile and its affiliation with Berkshire give it a meaningful presence in the financial guaranty insurance marketplace."

Eck tells Reuters that BHAC has guaranteed more than $8 billion (net par amount) in muni bonds.

Earlier this month, S&P gave its top rating to BHAC.  Bonds backed by Buffett's company have been getting their own AAA ratingsfor a couple of months.

As the Wall Street Journal's Deal Journal points out, when Buffett's bond insurer first hit the scene around New Year's Day, executives at Ambac and MBIA, along with a number of analysts, predicted it would be years before BHAC had enough of a track record to earn the coveted triple-A.

Instead, it's been months.  To Deal Journal, the rapid AAA ratings for BHAC in the face of rivals' predictions to the contrary are evidence that Ambac and MBIA are "obviously out of touch with how to assess the threat of competition" from Buffett.

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