Warren Buffett to Face Questioning Over Finite Reinsurance Transactions

Strategic Insights -

Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., will be questioned by state and federal regulators regarding his company's involvement in finite reinsurance transactions, a practice that has been under investigation for its potential to manipulate financial statements. The investigation, led by a joint group representing the SEC, the US Department of Justice, and the New York state attorney general, aims to uncover the truth behind these transactions, which have been linked to the collapse of several insurance companies, including Virginia's largest medical-malpractice insurer, Reciprocal of America. Buffett will be interviewed on April 11, along with current and former officers and employees of Berkshire's General Reinsurance Corp.

Key Takeaways:

  • Warren Buffett will face questioning over finite reinsurance transactions, a practice that has been linked to the collapse of several insurance companies.
  • The investigation, led by a joint group representing the SEC, the US Department of Justice, and the New York state attorney general, aims to uncover the truth behind these transactions.
  • Buffett will be interviewed on April 11, along with current and former officers and employees of Berkshire's General Reinsurance Corp.
  • American International Group, Inc. (AIG) has already admitted to improperly accounting for finite reinsurance transactions with General Re and other reinsurers.
  • Berkshire Hathaway's General Reinsurance Corp. and National Indemnity Co. have been responding to requests from regulators for information related to these transactions.
  • Australian regulators have been investigating finite reinsurance transactions related to the collapse of HIH Insurance Ltd., Australia's largest general insurer before its collapse in 2001.
  • The financial strength of General Reinsurance Corp. and National Indemnity Co. is rated A++ (Superior) by A.M. Best Co., while American International Group's A++ (Superior) rating is under review with negative implications by A.M. Best.

Statistics:

  • 4: The number of government agencies involved in the investigation, including the SEC, the US Department of Justice, and the New York state attorney general.
  • 5: The number of years ago that American International Group Inc. improperly accounted for a finite reinsurance transaction with General Re.
  • 90: The number of people named for investigation and possible charges related to the collapse of HIH Insurance Ltd. in Australia.
  • 56: The number of possible breaches of federal law related to HIH's demise identified by the HIH Royal Commission.
  • $87,200.10: The trading price of Berkshire Hathaway's stock on the morning of April 8, down 0.34% from the previous close.

Sources:

  • A. M. Best via COMTEX, Omaha, Neb., Apr 08, 2005
  • BestWire, Feb. 9, 2005
  • BestWire, March 30, 2005
  • BestWire, April 4, 2005
  • BestWire, April 16, 2003
  • BestWire, Dec. 17, 2003
  • A. M. Best Company, Inc. News Provided by COMTEX (http://www.comtexnews.com)