Swiss Re will repay Buffett loan earlier

City A.M. Reporter
SWISS Re said it would repay a costly loan from US billionaire Warren Buffett early, as it had replenished its capital to comfortable levels since taking a hit during the global credit crisis.

The world’s second-biggest reinsurer almost doubled third-quarter profit, comfortably beating analysts’ forecasts.

Swiss Re said yesterday it would not be penalised for bringing forward the repayment date on the $3.1bn (£1.9bn) convertible loan from Buffett-owned rival Berskshire Hathaway from early 2011. But it would have to pay full interest due including an adjustment for foreign exchange, leading to a $1bn charge in the fourth quarter.

Swiss Re took out the loan, which carries a hefty 12 per cent coupon, with Buffett in February 2009 after taking hits from risky assets during the credit crisis, putting its capital base in jeopardy. The firm also has to pay Buffett a 20 per cent repayment premium, or Sfr600m (£385m).

Swiss Re chief financial officer George Quinn said he could not comment on whether Buffett was interested in adding to his three per cent in the company.

Buffett raised his stake in Munich Re to above 10 per cent and planned to further expand the holding, Swiss Re’s rival said in October. Third-quarter net profit almost doubled to $618m as property and casualty reinsurance profit margins improved markedly on below average natural catastrophe losses.