Buffett's Swiss Re investment may return more than $1.3 billion

OMAHA, Neb. (Bloomberg)—Warren Buffett's two-year return on his Swiss Reinsurance Co. Ltd. investment may exceed $1.3 billion, or more than 40% of the funds he injected, when the reinsurer repays Berkshire Hathaway Inc. in January.

Berkshire will receive a “premium” of 600 million Swiss francs ($623 million) on the 3 billion francs ($3.12 billion) injected into the world's second-biggest reinsurer, the Zurich-based company said Thursday. Interest payments of 12% a year on the convertible notes purchased in February 2009 add up to about 700 million francs ($726.8 million), Swiss Re Chief Financial Officer George Quinn said.

Mr. Buffett made the investment after Swiss Re's strategy of trading securities such as credit-default swaps led to record writedowns and losses of $8.3 billion in 2008. Swiss Re is repaying Berkshire ahead of schedule after profit almost doubled in the third quarter and the reinsurer accumulated excess capital of $10 billion by the end of June.

Mr. Buffett didn't respond to a request for comment left with his assistant, Carrie Kizer.

Mr. Buffett built Omaha, Neb.-based Berkshire into a $200 billion company by investing premiums from insurance and reinsurance operations while waiting for claims to emerge. Mr. Buffett seized opportunities amid the global recession to make investments in firms including Goldman Sachs Group Inc. and General Electric Co.

Mr. Buffett also receives 20% of Swiss Re's property/casualty premiums for five years in return for assuming the same share of the risk, said Swiss Re spokeswoman Simone Lauper.

“That wouldn't have happened” if the economy was growing, Mr. Buffett said in May 2009.