Warren Buffett’s conglomerate Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) claims that Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF), a reinsurer, owes it $1 billion because of a dispute in connection with a life insurance deal they made two years ago.
Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF)'s earnings statement from its third quarter shows that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) alleges damages between $500 million and $1 billion, although the reinsurer said that there was no merit to the claim.
Swiss Re is the world’s second largest reinsurer, and in 2009 it received a $3.3 billion emergency loan from Berkshire, after incurring major losses on its derivative investments in the midst of the financial crisis. Swiss Re even lost its AA rating with Standard & Poor’s. Although the loan has been repaid, the issue stems from an agreement Swiss Re refers to as a “stop loss” and “coinsurance” agreement that was made between the company’s U.S. health and life insurance unit and Berkshire in 2010.
Swiss Re said Berkshire’s allegations are based on the way it perceives “the performance of the retroceded business and losses incurred to date.” The Insurance Insider first reported Berkshire’s allegations against Swiss Re last night. Neither company is answering requests for comments on the dispute. The two companies have met to begin discussions on the claim, although it could result in arbitration if no resolution is agreed on.
JPMorgan analysts say Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF) will still meet dividend forecasts, even if it ended up being forced to pay Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). This morning, shares of both companies are trading mostly flat.