Buffett Heads To Switzerland (BRK-A)

Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have been out making fairly large bets in recent months.  It seems that distressed prices are tempting the Oracle of Omaha.  But what is interesting is that Mr. Buffett has invested roughly $2.5 billion into diversified Swiss Reinsurance Co. Ltd.

This is one of the top global brands in reinsurance.  But the topbrands are not immune.  The company claimed strong underwriting andhedging programs for its portfolio, but mark to market losses put the company in the red for 2008.

The company is dropping its financial market activities and willrefocus on asset management to bolster its books.  Swiss Re has alsoentered into an adverse development pact with Berkshire Hathaway on itsProperty & Casualty reserves, and that amount looks to be up to 5billion Swiss Francs.  Swiss Re also noted that its board isconsidering another 2 billion Swiss Francs in a capital raise and isrecommending a cut to its dividend.

Warren Buffett is investing in a 140-year brand and the company issticking to its long term goals of 10% earnings growth and 14% returnon equity.  Whether or not those are attained will be found out as timepasses.  The mark to market losses may continue for some time andit seems no one is immune from the financial fallout.  And reinsuranceprofits, those are mostly up to mother nature.

• Buffett also bought into Harley-Davidson bonds.
• He keeps adding to his position in Burlington Northern Santa Fe.

Jon C. Ogg
February 5, 2009