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(Corrects sentence in sixth paragraph: Berkshire will have the option to convert the instrument into Swiss Re shares after three years, at a price of 25 francs a share.)
Munich Re reported that Warren Buffett-led Berkshire Hathaway has built up a stake of over 3% in the reinsurer’s stock.
In an ad hoc statement, Munich Re said Buffett informed the company that as of Jan. 18, he has a 3.045% stake in Munich Re’s voting rights. Munich Re did not say whether Buffett held any share before moving over the 3% mark. At 3%, Munich Re was required to issue a statement acknowledging the investment position.
Munich Re spokeswoman Johanna Weber said the reinsurer’s only official comment is that “we welcome all investors and see investments in Munich Re as proof for our sustainable strategy.”
Buffett’s stake, amounting to more than 6 million shares with voting rights in the reinsurer, is valued at about 710 million euros.
At midday in Frankfurt, Germany, Munich Re shares were priced at 110 euros on the Deutsche Bourse, up 1.3% from the previous day.
A year ago, as it faced a net loss of 1 billion francs for 2008, Swiss Re turned to Buffett’s Berkshire Hathaway for a 3 billion franc (2 billion euro) capital infusion aimed at shoring up its capital base (BestWire, Feb. 5, 2009). Berkshire’s capital investment took the form of a convertible perpetual capital instrument issued by Swiss Re, with a 12% coupon. Berkshire will have the option to convert the instrument into Swiss Re shares after three years, at a price of 25 francs a share.
Swiss Re was the world’s largest reinsurer in 2008, with US$29.2 billion in gross premiums written, according to A.M. Best Co.’s 2009 Global Reinsurance Market Review. Munich Re was a close second, with US$28.8 billion, followed by Berkshire Hathaway’s General Re with US$12.8 billion.
Swiss Re is currently rated A (Excellent) by A.M. Best. The current A.M. Best rating for Munich Re is A+ (Superior). General Re is rated A++ (Superior).
(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)