Berkshire Hathaway Buys 3% Stake in Swiss Re; Reinsurance Pact Signed

January 23, 2008

Swiss Re announced today that Berkshire Hathaway has acquired a three percent stake in the company.

Swiss Re has also entered into a reinsurance contract with Berkshire Hathaway which will give it a share of Swiss Re’s property/casualty business.

Swiss re said that the capital released as a result of this reinsurance contract will be used to buy back shares.

Berkshire Hathaway reported that it holds 11, 250, 000 registered shares or 3.03 percent of the voting rights of Swiss Re, which it acquired in the open market, through its subsidiary Columbia Insurance Co.

Under the proportional reinsurance contract Swiss Re signed with Berkshire Hathaway, Berkshire Hathaway will assume a 20 percent share of all Swiss Re’s property/casualty business for the next five years. The contract is effective as of Jan. 1, 2008. This will lead to a reduction in the capital deployed in Swiss Re’s P/C business.

As a result, Swiss Re said that it intends, in addition to its previously announced buy-back program, to acquire its own shares in the market for general treasury purposes up to a total value of CHF 1.75 billion. This buy-back is expected to be completed over the next 24 months as the capital relief resulting from the quota share arrangement is achieved. As a result, Swiss Re now targets a total buy-back, including shares already re-purchased, of up to CHF 7.75 billion. Since March 1, 2007, Swiss Re has re-purchased 16,650,479 shares from General Electric Co. and 11,083,000 shares under its existing buy-back program.

“This reinsurance arrangement is further evidence of our commitment to actively manage the P/C cycle in the best interest of our shareholders,” commented Swiss Re Chief Executive Officer Jacques Aigrain. “The additional capital efficiency as well as the downside protection will permit Swiss Re to retain flexibility in a softening property and casualty market. The arrangement also underlines the strength of our underwriting capabilities. It will allow us to increase capacity rapidly should pricing conditions improve. Furthermore, it will advance our efforts to manage earnings volatility – a key strategic priority.”

Source: Swiss Re

Topics Mergers Reinsurance Property Casualty Swiss Re Berkshire Hathaway

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