Moody's Finally Explains Why BHAC is Rated AAA

Moody's finally explains why BHAC is rated AAA while Assured Guaranty and FSA are under rating review (for what it's worth S&P and Fitch still rate them AAA.) From their FAQ, this is what Moody's says (report not free):

Q4. If a decline in industry fundamentals is an important factor leading to the rating actions on FSA and Assured, why was Berkshire Hathaway Assurance not similarly affected?

A:

(...snip...)

Although the portfolio risk at BHAC is low and capitalization is high, the company would still be rated below Aaa, due to its positioning on the key rating factors, were it not for a guaranty from its Aaa-rated affiliate, Columbia Insurance Company. As outlined in Moody's credit opinion on BHAC, the company's stand-alone rating (before consideration of the guaranty) is Aa2.


As far as I'm concerned this is a lame excuse. It's true that if Columbia Insurance is AAA and is guaranteeing BHAC then it should get a stronger rating. However, when did a guarantee matter more than actual cold cash on hand? If a company is way above rating requirements it seems bizarre to rate them lower except for one company that supposedly has a guarantee.

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