Bloomberg News

Swiss Re’s Lippe Invests Capital as Buffett Buys Back Stock

September 28, 2011

Sept. 29 (Bloomberg) -- Swiss Re’s Stefan Lippe, chief executive officer of the world’s second-biggest reinsurer, is seeking to spend more of his company’s capital on underwriting as rival Warren Buffett allocates cash to buybacks.

“We assume there will be significant opportunities, and it will be very easy for us” to deploy capital in the business, Lippe said yesterday in a telephone interview from Munich. A buyback is “part of our tool kit. But at the moment we’d rather like to explore the other possibilities we have.”

Lippe, 55, oversaw a gain of more than 10 percent in property-casualty premiums earned in the second quarter. Buffett’s Berkshire Hathaway Inc., the No. 4 reinsurer, ended June with $47.9 billion of cash and said this week it plans to repurchase its first shares in at least 40 years. Zurich-based Swiss Re said it had excess capital of more than $10 billion at the end of December.

“If I had $45 billion excess capital and liquidity, I also would think I can finance both growing at 60 percent-plus and” a buyback, Lippe said. Buffett “never does dividends, so we at minimum pay a dividend.”

Swiss Re paid a dividend of 2.75 Swiss francs a share in April, up from 1 franc a year earlier. Buffett, Berkshire’s 81- year-old chairman and CEO, has shunned dividends and instead used the company’s capital to fund investments, acquisitions and reinsurance underwriting.

Book Value

Swiss Re stock trades at about 63 percent of its book value, the lowest of the world’s five biggest reinsurers. Losses during the credit crunch three years ago prompted Swiss Re in 2009 to raise 3 billion francs ($3.3 billion) from Berkshire and oust Lippe’s predecessor, Jacques Aigrain. Lippe repaid Berkshire’s investment.

Munich Re, the largest provider of backstop coverage to insurance companies, trades at about 81 percent of book; No. 3 Hannover Re, 94 percent; No. 4 Berkshire, 108 percent; and No. 5 Scor SE, 78 percent. Omaha, Nebraska-based Berkshire got about 27 percent of its revenue last year from insurance and reinsurance units, with the rest coming from businesses ranging from railroads and energy to bricks and ice cream, according to data compiled by Bloomberg.

Berkshire has reported a stake of 3 percent in Swiss Re.

--Editors: Dan Reichl, David Scheer

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Carolyn Bandel in Zurich at cbandel@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net Frank Connelly at fconnelly@bloomberg.net


Steve Ballmer, Power Forward
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus