Standard & Poor's cut its ratings outlook on Warren Buffett's conglomerate Berkshire Hathaway to negative from stable on Monday, part of a broad action on 10 insurers linked to last Friday's downgrade of the United States credit rating.
S&P downgraded five insurers to AA+ from AAA, as it had warned it would do: Knights of Columbus, New York Life, Northwestern Mutual, TIAA and USAA.
But it also unexpectedly revised the ratings outlook on five insurers already rated AA+ to negative from stable, among them Berkshire and bond insurer Assured Guaranty.
The agency made clear that the move was wholly linked to last Friday's action, and it warned that if the United States were downgraded again, the insurers likely would be as well.
Our view of these companies' fundamental credit characteristics has not changed, S&P said. Rather, the rating actions reflect the application of criteria and our view that the link between the ratings on these entities and the sovereign credit ratings on the U.S. could lead to a decline in the insurers' financial strength.
For Berkshire, the move affects a variety of its insurance businesses, including auto insurer Geico and reinsurance business General Re.
One Berkshire investor immediately questioned the agency's logic but also played down the impact.
I don't think it matters much to Berkshire and I don't think it makes much sense, said Steve Check, president of Check Capital Management in Costa Mesa, California.
(Reporting by Ben Berkowitz; Editing by James Dalgleish)