Buffett Watch

Warren Buffett "Delighted" With New Swiss Re Investment Paying 12 Percent

Warren Buffett says he is "delighted" to have an opportunity to increase Berkshire Hathaway's investment in Swiss Re by 3 billion Swiss francs, or about $2.6 billion.

Berkshire's cash infusion is seen as a vote of confidence in the troubled reinsurer, which is bolstering its capital position in an effort to save its credit rating.

As usual, however, Buffett will be well paid for his support.  Berkshire is buying bonds that pay 12 percent a year.  After three years, they're convertible into Swiss Re common at 25 francs a share.

Buffett got a 10 percent return on his investments late last year in General Electric and Goldman Sachs, and 15 percent from Harley-Davidson a few days ago. 

A news release from Swiss Re quotes Buffett as saying, "I am very impressed by (Swiss Re) CEO Jacques Aigrain and his management team."

Aigrain says, "Warren Buffett's agreement to invest in Swiss Re is a testament to the strength of our franchise."

Investors aren't so sure.  In early New York trading today, Thursday, ADRs of Swiss Re are down over 26 percent to $19.05.

Current price:

Along with the Berkshire investment, Swiss Re announced today that it expects to report a loss of 1 billion francs in 2008.  It's been hammered by massive red ink in its financial markets operations, which have since been terminated.  Berkshire bought a three percent stake in Swiss Re a year ago, getting 20 percent of its property/casualty business for five years.

Current Berkshire stock prices:

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