Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (443240)	12/30/2008 8:31:48 AM
From: bentway	Read Replies (2) \| Respond to of 1575523

Buffett Wins $224 Million Storm Bet With Florida (Update2) bloomberg.com ( Looks like whether or not you get wiped out is a casino bet! ) By Hugh Son Dec. 29 (Bloomberg) -- Billionaire Warren Buffett’s Berkshire Hathaway Inc. won a $224 million bet that Florida would escape major damage from hurricanes this year. Florida’s option agreement that would have compelled Buffett to buy $4 billion of bonds to finance storm recovery will expire Dec. 31, Dennis MacKee, a spokesman for the State Board of Administration, said in an interview today. The state earlier paid Buffett $224 million in return for his commitment to buy the debt if needed. The calm season meant Florida had no need to raise the money. Florida turned to Omaha, Nebraska-based Berkshire to erase doubts about the state’s ability to raise money after a hurricane. The state sells coverage to homeowners and private companies at below-market rates, and plans to fund cash shortfalls in the bond market. Finding investors could be a “very challenging task,” Fitch Ratings said in March. “It would’ve been difficult to issue bonds in this environment, so I do think it ended up working out well for everyone involved,” MacKee said. “We were fortunate to have a mild hurricane season.” Under the terms of the deal disclosed in July, Berkshire agreed to buy the debt if the state’s fund incurred $25 billion in losses by yearend. Berkshire would have collected 6.5 percent annual interest over the 30-year life of the bond. Texas, Louisiana The state predicted a single storm could cause losses of that magnitude once every 32 years. The most-expensive disaster in U.S. history, Hurricane Katrina in 2005, cost the insurance industry about $41.1 billion. Florida was hit by four hurricanes in 2004 for the first time since record-keeping began in 1851, according to the U.S. National Oceanic and Atmospheric Administration. This year’s hurricane season, which ended Nov. 30, was among the five worst since 1944, according to the NOAA, with the damage in the U.S. concentrated in Texas and Louisiana. The season was the first to have a major hurricane form in each of five straight months. Ten of the past 14 years have had above-average storm activity in the Atlantic, the NOAA said Nov. 26. Berkshire, which gets about half its profit from insurance, is willing to risk a payment of as much as $6 billion on a single storm if the risk was adequately compensated, Buffett has said. The firm had more than $30 billion in cash as of Sept. 30. Jackie Wilson, a spokeswoman for Berkshire, didn’t immediately return a call seeking comment. MacKee said the state would evaluate reinsurance contracts before deciding whether to pursue a similar deal for the 2009 hurricane season, which begins June 1. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net Last Updated: December 29, 2008 15:40 EST