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Swiss Re Investment Details


benhacker
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http://www.marketwatch.com/news/story/swiss-re-provides-details-buffetts/story.aspx?guid=%7B9AE85930%2DFFA4%2D416F%2DA3AE%2DD42AFAF760EA%7D&tool=1&dist=bigcharts&

 

LONDON (MarketWatch) -- Reinsurance group Swiss Re said Friday that its planned 3 billion Swiss franc ($2.5 billion) capital injection from Warren Buffett's Berkshire Hathaway will be in the form of a perpetual instrument with no maturity date. Berkshire Hathaway will have the right to convert the investment, which pays annual interest of 12%, into shares after three years. The conversion price will be 25 francs a share, which is still 70% above Thursday's close of 14.68 francs. Swiss Re can repurchase the investment at any time in the first two years for a 40% premium and any time after that for a 20% premium. The reinsurance group can also elect to pay interest in shares, which would be valued at a slight discount to the average price over the previous five days.

 

I really think the market is just missing that fact that Buffett is shooting elephants left and right and everybody is pissing and moaning about a potential $40B liability in 15 years... talk about the forest for the trees...

 

Probably the safest company on Earth, but the key man risk I guess is ever present.

 

Ben

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As a follow up, I've never really looked into SWCEY much, but I have to say it bears some work I think.

 

1) Buffett is involved in a way that at least is mildly positive for the equity

2) Price implies a Mkt Cap of 1x operating earnings from 2007

3) Price to book is 25%, or 33% if you remove goodwill

 

The above was a totally brainless grab from reuters with no fact checking... still, seems enough to pique your interest no?

 

Anyone have any research here they care to share?

 

Thanks,

 

Ben

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It seems like a good deal...

 

Buffett bought at 80 and he put more down to get a total 20% stake with convertible to common, right?

I think he really likes this company, compared to Vulcan, TIF, HOG, etc where he wasn't really interested in the equity.

 

I was going to buy if it went under 10 bucks, but it never did. What warrant price did buffett get?

 

Thanks,

 

Mandeep

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Shah, if you read this I'd be interested in what you have to say about these guys.  This appears to be an amazingly cheap company.  Insurance is definatly not a business to buy a mediocre company, but I think this company is far from mediocre.

 

I'll try to take some time and make a post dedicated to them.

 

Ben

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Guest ericopoly

Shah, if you read this I'd be interested in what you have to say about these guys.  This appears to be an amazingly cheap company.  Insurance is definatly not a business to buy a mediocre company, but I think this company is far from mediocre.

 

I'll try to take some time and make a post dedicated to them.

 

Ben

 

 

Which companies are they on the hook for with regard to the CDS they wrote?  They reported $5.2b in mark-to-market losses there.

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Guest misterstockwell

We want Prem to win his bet against Swiss Re too--I wonder if he covered his $105 million CDS yet.

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We want Prem to win his bet against Swiss Re too--I wonder if he covered his $105 million CDS yet.

 

 

Not sure that I'd characterize the SwissRe CDS as a "bet."  That particular CDS is one of a select group that directly hedges reinsurance recoverable exposure.  If Prem wins his bet on that CDS, FFH may lose a bit on the reinsurance recoverable.

 

On the other hand, it would be nice if capital exited the reinsurance industry!

 

SJ

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