Buffett rescues Swiss Re

After forecasting dismal 2008 results, Swiss Reinsurance Group has announced that it will receive a capital infusion from billionaire Warren E. Buffett.
FEB 05, 2009
By  Bloomberg
After forecasting dismal 2008 results, Swiss Reinsurance Group has announced that it will receive a capital infusion from billionaire Warren E. Buffett. His company, Berkshire Hathaway Inc. of Omaha, Neb., will invest 3 billion Swiss francs ($2.57 billion) in Swiss Re of Zurich Switzerland, boosting the reinsurance giant’s capital levels. The carrier estimates that its year-end capital levels were between 1.5 billion to 2 billion francs ($1.29 billion to $1.72 billion) below what was necessary for it to maintain its AA rating. The capital infusion from Berkshire Hathaway will come in the form of bonds issued by Swiss Re with a 12% coupon. After three years, the bonds may be converted into Swiss Re shares, valued at 25 francs ($21.45) per share. Berkshire Hathaway’s stake could amount to 20% of Swiss Re. Swiss Re forecast that it would be in the red for the 2008: It estimates it will take a 1 billion franc loss ($858 million). The company attributed the loss to mark-to-market losses that it recognized in impairments in its investment portfolio. Swiss Re also recorded a 6 billion franc ($5.15 billion) mark-to-market loss on credit default swaps and the former trading business of its financial markets unit. That also includes a 2 billion franc ($1.72 billion) mark-to-market loss on structured credit default swaps. New York-based Standard and Poor’s Ratings Services immediately placed its AA- rating on Swiss Re’s long-term counterparty credit and insurer financial strength ratings on CreditWatch with negative implications. “Both the magnitude of the additional write-downs and the resulting need to raise capital are outside of our expectations,” S&P credit analyst Peter Grant said in a statement. The firm expects to resolve its CreditWatch in two weeks and says it does not expect to lower Swiss Re’s ratings by more than one notch, or below A+.

Latest News

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

The average retiree is facing $173K in health care costs, Fidelity says
The average retiree is facing $173K in health care costs, Fidelity says

Research reveals a 4% year-on-year increase in expenses that one in five Americans, including one-quarter of Gen Xers, say they have not planned for.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.