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.