Berkshire Hathaway Buys Converium’s US Assets
Posted by investor on October 17th, 2006
It was announced this morning that Berkshire Hathaway’s National Indemnity unit would be buying the US assets of Swiss reinsurer Converium for $95 million in cash and $200 million in assumed debt. The unit has $1.06 billion in reinsurance liabilities. It is unclear how much worth of reserves are included to back up the liabilities.
Converium had run into serious trouble in 2004 when it discovered a $500 million shortfall and stopped writing new insurance in America. The company needed to sell this asset to a strong buyer in order to improve its credit rating. The circumstances of the deal would imply that Berkshire is buying this at a fire sale price, but even with the rosiest projections, this will be barely material to a company the size of Berkshire. What this should do is further improve the results of a reinsurance unit already poised to have a great year with dramatically increased premiums and no major disasters.