Buffett's Berkshire Backs Over 100 Muni Bonds In Last Two...

Buffett's Berkshire Backs Over 100 Muni Bonds In Last Two Days
Posted By:Alex Crippen
Topics:Credit | Warren Buffett
Sectors:Insurance
Companies:Moody's Corp | Ambac Financial Group Inc | MBIA Inc | Berkshire Hathaway Inc.

Warren Buffett's new bond insurance company has backed more than 100 municipal bonds in the past two days, according to Reuters.

The wire service quotes a Moody's Investor Services spokesman as saying, "We have rated approximately 112 Berkshire Hathaway Assurance Corp-insured issues between yesterday and today."

Reuters calls it a "development that shows just how fast the new unit is growing in a field where rivals are struggling."

Ambac AMBAC Financial Group IncABK
10.71 1.48 +16.03% NYSE


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[ABK 10.71 1.48 (+16.03%) ] and MBIA MBIA IncMBI
12.18 0.28 +2.35% NYSE


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[MBI 12.18 0.28 (+2.35%) ] have been on the brink of losing their own AAA ratings from Moody's, Standard and Poor's and Fitch due to exposure to potentially big losses from risky investments like collaterialized debt obligations (CDOs). In the last few minutes, however, CNBC's Charlie Gasparino reported that banks working on a bailout for Ambac could announce a deal Monday or Tuesday.

Even though BHAC doesn't have its own AAA credit rating yet, the bonds it guarantees are getting the top rating from Moody's Investors Service.

In a news release, Moody's says BHAC's guarantees are backed by Berkshire-owned National Indemnity Co. (NICO), which does have its own AAA credit rating. VP Bruce Ballentine, co-author of a new Moody's report on BHAC says in the release, "Moody's Aaa insurance financial strength rating on NICO reflects its superior capitalization, its unique ability to assume large and unusual risks, its expertise in managing long-tail portfolios, and the implicit support from Berkshire." (I found a link to the report, but it's a bit expensive.)

Buffett revealed the creation of his new bond insurer just about two months ago. It's in the process of getting a "streamlined" nationwide application for licenses to sell in all 50 states.

Earlier this month, during a live appearance on CNBC's Squawk Box, Buffett offered to reinsure $800 billion dollars worth of municipal bonds now backed by Ambac, MBIA and FGIC.