Berkshire’s combined operating businesses have generally provided the firm with a narrow moat, with its ability to produce additional excess returns from the cash flows thrown off by its disparate operations historically pushing our rating into wide territory. But we’ve seen more signs of slippage in the railroad business, as well as increased litigation exposure for the utilities/energy business, which have put downward pressure on excess returns for the noninsurance operations. Meanwhile, price hardening in the property and casualty market, more manageable catastrophe losses, and robust investment returns (all of which may not repeat themselves) have masked years of poor performance from Geico.

Berkshire’s size has also made it difficult to find deals or investments that can add significant value, due to increased competition from private capital and the company’s constricted opportunity set, diminishing the benefits from ongoing capital allocation. With the firm also unlikely to replicate the historical advantages of CEO Warren Buffett overseeing investments once he departs, it has gotten harder to see Berkshire generating excess returns consistently beyond the next decade, leading us to lower our moat rating to narrow from wide.

morningstar.com - Berkshire hathaway moat rating lowered narrow firm faces diminishing returns over time