Berkshire Hathaway and Swiss Re: It Wasn’t Really A Win-Win

I’m waiting for a transcript of the Berkshire Hathaway 2013 Annual Meeting to write more about the Berkshire Hathaway Annual meeting. I didn’t go this year, as much as I would have liked to. It sounds like not much “news” was made but, for me, there’s always “news” where I look. My interests are different than mainstream media and so I tend to focus on obscure details like some snark from Buffett about resolving a dispute with Swiss Re:

9:27 am SwissRe settlement by David Benoit

Buffett says the company settled a “disagreement” with SwissRe and both sides marked big gains on the settlement. He promises, with tongue firmly planted in his cheek, to get into more of these disagreements if they help both sides so well.

Wall Street Journal Live Blog: Berkshire Hathaway’s Annual Meeting

Like a lot of things Buffett and Berkshire, there’s more to the story than his snappy repartee will tell you.

I wrote about the deal in Forbes on Monday, “Buffet’s Gentle Ribbing About Swiss Re Dispute More Like Fibbing”:

When the dispute was resolved on March 28 of this year, Swiss Re took back the contracts in dispute and reported a gain of approximately $100 million for the first quarter of 2013. That’s based on a cash payment from Berkshire Hathaway, re-establishing Swiss Re reserves for payment of the benefits under the contracts, and unwinding the reinsurance recoverable amounts due from Berkshire from the books.

Berkshire Hathaway also reported a one-time, pretax accounting gain of $255 million and a cash payment to Swiss Re of $675 million in its first quarter 2013 10-Q. Berkshire’s gain, which was non-cash, came from reversing the reserve for benefits to be paid under the contracts that were more than the previously recorded premiums of approximately $1.3 billion already on the books. In other words, Berkshire unwound a losing deal where the company had already recorded the premiums for some losses it would now, based on a negotiation, not have to pay.

When I attended the annual meeting in person in 2011 there was lots to see. Maybe I will try to go next time. The meeting this year was dominated by succession talk. One reporter asked Buffett what he would most worry about in the ten years after he turned over the reins of the company to a successor. That’s too funny. Buffett won’t worry about anything after he turns over the company because he won’t be going anywhere until they have to pry Berkshire Hathaway from his cold dead hands.

I wrote about the David Sokol scandal at Berkshire Hathaway from the beginning, along the way getting several prominent legal experts to contribute their take on what proved to be a strange but, eventually, rather uneventful case. A compilation, Part One available via Amazon, covers the period from April 4 to May 3 when I attended the Berkshire Hathaway Annual Meeting in Omaha, Nebraska. It’s all my writing on the subject from re: The Auditors and my Forbes column, Accounting Watchdog.

An upcoming Part Two will cover the post 2011 Annual Meeting stories, including an update on what David Sokol, Warren Buffett and Berkshire Hathaway have been doing since.

You can purchase the e-Book on Amazon here.