The counterparty credit rating on Berkshire Hathaway Inc. (BRK) is based on BRK's insurance operations' extremely strong capitalization, competitive position, and financial flexibility. In addition, BRK has improved its operating performance since 2001, though results in 2005 were affected by catastrophes. With its extremely sizeable capital base, it is not expected that that BRK will generate an ROE consistent with smaller and lower-rated companies that more aggressively place capital at risk. In addition, BRK and its insurance operations do not target market share and are unwilling to write business if it doesn't meet BRK's view of price adequacy. This strategy will limit writings because of the concern that long-term reserves could develop adversely if a more aggressive strategy was pursued.
