Swiss Reinsurance Co. said today it will get a capital injection of $2.6 billion from U.S. investor Warren Buffett’s company after warning investors it expects to lose $869 million for the full year.
Buffett’s Omaha, Neb.-based company, Berkshire Hathaway Inc., owns several major insurance companies, including Geico and reinsurance giant General Re Corp. in Stamford.
Swiss Re, which based its expected net loss on preliminary figures, said it will seek a further 2 billion francs on the capital markets.
Writedowns of approximately $5.2 billion for the full year offset strong underwriting performance, Swiss Re said.
“We are disappointed with our overall results in 2008, but our core business — property and casualty and life and health — is performing well,” said Chief Executive Jacques Aigrain.
“We have taken steps to protect our capital strength to ensure the continued trust of our clients,” he said in a statement. “Warren Buffett’s agreement to invest in Swiss Re is a testament to the strength of our franchise.”
Berkshire Hathaway also owns a diverse mix of more than 60 businesses — including furniture, jewelry, candy, natural gas and corporate jet firms — but the company’s insurance group generated about 40 percent of its pretax profits in the most recent quarter.
Berkshire’s new investment in Swiss Re will carry a 12 percent dividend, and after three years, the investment can be converted into conventional Swiss Re shares with a price of 25 francs per share.
Berkshire already holds 3 percent of Swiss Re shares. The increase in stake is subject to approval by Swiss Re’s shareholders. (AP)
