Buffett successor ‘concerns’ ratings agency

Buffett successor ‘concerns’ ratings agency

Buffett successor ‘concerns’ ratings agency A.M Best has affirmed the financial strength rating (FSR) and issuer credit rating (ICR) of Berkshire Hathaway and its subsidiaries, including Berkshire Hathaway Specialty Insurance however, the ratings agency said that the succession planning of the company surrounding CEO Warren Buffett could be a cause for concern.

“The importance of Mr. Buffett (as CEO) to the entire Berkshire organisation and the lack of transparency with regard to his successor continue to pose a concern for A.M. Best,” the company said in a statement.

The ratings agency stated that, while the company is not lacking in candidates for the top job, it is the lack of clarity surrounding the position that could prove detrimental to the business.

“Although A.M. Best believes there are very strong internal candidates to succeed Mr. Buffett, the lack of clarity in regards to a chosen successor adds a degree of uncertainty to the future direction of the corporation, as Mr. Buffett personally controls the capital allocation within the firm.

“Nevertheless, A.M. Best believes Berkshire’s corporate strategy, culture and decentralised operating structure will facilitate a successful transition in management when it occurs.”

A.M Best affirmed the FSR of 'A++' and the ICR of ‘aaa’ for the National Indemnity Company, a Berkshire Hathaway subsidiary, and its affiliates including Berkshire Hathaway Specialty Insurance Company but the ratings agency warned that “negative ratings actions” could affect the business.

“National Indemnity’s ratings could experience negative rating actions if large catastrophic losses in combination with large investment losses decrease its risk-based capitalisation below the expectations of A.M. Best or the company experiences a series of operating losses over several years that exceed A.M. Best’s expectations.”