Warren Buffett continues to be a net buyer of equity:
"Berkshire To Buy General Re"
By DENISE LAVOIE
AP Business Writer
STAMFORD, Conn. (AP) -- Warren Buffett is adding one of the
world's leading insurers of insurance companies to his Berkshire
Hathaway (BRK - news) portfolio: General Re Corp. (NYSE:GRN -
news), for $22 billion worth of stock.
The deal will allow General Re to use Berkshire's considerable
capital to expand its business.
Berkshire announced Friday after the stock market closed that it
would let General Re operate independently of its other insurance
operations, National Indemnity and GEICO.
News of the deal sent General Re's stock up $52 per share to $275
in after-hours trading. Berkshire's stock, by far the most
expensive on the New York Stock Exchange, was up $1,900 per share
at $80,900, a 2.4 percent increase.
Berkshire, based in Omaha, Neb., has a portfolio that already
includes Coca (NYSE:KO - news)-Cola, Gillette, American Express
(NYSE:AXP - news) and Walt Disney. At $56 billion, the new
company would have the largest net worth of any in the United
States.
General Re, based in Stamford, is already the largest reinsurer
in the United States and the third-largest in the world. Its
largest subsidiary, General Reinsurance, accounts for half of its
sales. Its second-largest operating company is 78 percent-owned
Cologne Re of Germany, which was founded in 1846 and is the
world's oldest reinsurer.
The deal, which is subject to approvals by regulators and
shareholders of both companies, is expected to be completed in
the fourth quarter.
Buffett, the second-wealthiest American behind Microsoft's
(Nasdaq:MSFTP - news) Bill Gates, has been attracted to insurance
companies by their ability to invest premiums that are being held
to pay off future claims. In announcing the deal, Buffett
trumpeted the more than $24 billion worth of additional
investments the acquisition would bring to Berkshire.
''General Re brings a lot of float to the party,'' Buffett said
at a news conference. Float refers to premiums that can be
invested by insurers.
General Re writes insurance policies for other insurance
companies that are trying to spread out their risk of having to
pay big claims.
Buffett said the deal was worth the money because as part of
Berkshire, General Re's finances will be stronger and it will be
able to issue policies it had avoided in the past.
[Anyone care to speculate that Buffett won't return to being the world's richest private citizen 10 years from now? -- RR] |
