Standard & Poor's said today the "triple-A" ratings of the financial guaranty subsidiaries of Berkshire Hathaway Inc. would not be affected by the company's decision to get involved in the municipal bond market.

However, S&P said the "triple-A" rating would only be based on an evaluation of each particular deal.

The decision to grant the "triple-A" rating had been expected following the announcement several weeks ago by Berkshire Hathaway's chairman, Warren Buffett, that units of his company would soon begin to insure municipal bonds.

Mr. Buffett announced his decision to expand the businesses of National Indemnity Company (NICO) and Berkshire Hathaway Assurance Corporation in the wake of turmoil in the bond insurance market.

Berkshire will insure municipal bonds through a 100 percent-owned subsidiary of BHAC.

A decision to examine each transaction before assigning it a "triple-A" rating was based on the structure of the subsidiary, S&P analysts said.

The rating firm noted there are significant contractual commitments associated with the financing of the new subsidiary, including a contingent payment insurance policy and a financial enhancement letter from NICO in support of BHAC.

S&P said it was assigning the "triple-A" rating on a transaction-only basis "so as to monitor and measure this additional required capital charge within the consolidated NICO capital adequacy model and existing NICO rating expectations."

The market turmoil was prompted by the decision several years ago by the major players in the financial guaranty market to expand their business by insuring credit default swaps, financial derivatives whose underlying assets include subprime mortgages.

It also led Mr. Buffett to make an offer to Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Company--three of the largest bond insurers--to reinsure $800 billion of their tax-exempt municipal bond business. The billionaire investor from Omaha, Neb., said the premium involved "would be equal to, essentially, one-and-a-half-times the remaining premium left over the life of the bonds."

The existing financial guaranty insurers shunned the offer because of the high cost and have been working on alternatives to shoring up their balance sheets, including splitting their companies, locating municipal bonds in one segment and creating a second firm to insure the riskier mortgage-backed segment.

Problems with the derivative segment of the financial guaranty market developed when subprime borrowers began defaulting.

S&P said the Berkshire Hathaway Inc. rating (including NICO) is based on its extremely strong competitive position, extremely strong insurance and reinsurance capitalization, and extremely strong financial flexibility.

The rating firm said Berkshire Hathaway Inc. is one of the few holding companies with insurance and reinsurance operations that maintain pricing power, cycle management, distribution and underwriting competitive advantages.

S&P noted that the company had shareholders' equity of about $120 billion as of Sept. 30, 2007. Offsetting these positives, it said, are concerns about Berkshire Hathaway Inc.'s exposure to large loss events, investment concentrations and exposure to adverse reserve development due to the assumption of retroactive risks.

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