Buffett Gives Swiss Re a Boost with P/C Deal
Swiss Re announced on Wednesday that Warren Buffett's Berkshire Hathaway Inc. has taken a 3% stake in the reinsurer and will assume 20% of its property and casualty business for the next five years. This move allows the company to increase its share buyback, but also concerns the reinsurer was giving a rival too much access to its core business.
The news on Wednesday that one of the world's most respected investors was teaming up with Swiss Re gave the company a much-needed confidence boost. Its shares rose 12 percent in early trading, pulling along rival reinsurers.
"Buffett obviously thinks all bad news is in the price and they don't come much smarter, especially in the insurance space. Big positive sector read-across today," one trader said.
Swiss Re stock has been hammered since its 1.2 billion Swiss franc ($1.10 billion) subprime-related write-down in November, as markets feared more bad news.
The company's reassurances have done little to convince investors the stock is worth buying, despite some analysts saying the company is now looking like a bargain.
Published on January 23, 2008
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