Buffett Wins World Cup Bet as France Falls to Host South Africa
Warren Buffett won his bet against France in the World Cup when the 1998 champion was eliminated by South Africa.
France fell 2-1 to the host nation today, after drawing Uruguay and dropping 2-0 to Mexico. Berkshire Hathaway Inc. had sold insurance requiring the Omaha-based company to pay a client if France won the tournament, Buffett told CNBC in March.
“I think we’re going to lose 30 million bucks or something like that” if France wins, Buffett, Berkshire’s 79-year-old chief executive officer, said at the time. He didn’t say who purchased the coverage. An assistant to Buffett had no comment.
Ajit Jain, who runs one of Berkshire’s insurance units, sold the contract, Buffett told the business news channel in March. Berkshire has previously guaranteed against the potential cancellation of a college basketball tournament and a possible payout of $1 billion in a contest sponsored by PepsiCo Inc. The firm also sells coverage on natural disasters.
Jain “is known as the man to call when something both very large and unusual needs to be insured,” Buffett said in his annual letter to shareholders released Feb. 27.
“The odds of any one team out of 32 winning is very small, so you could determine the odds and see what the payoff would be,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. “From a numerical standpoint, it was probably in his favor to take this bet. I’m sure he’ll smile when he sees the results.”
Martin said Berkshire’s client could be any company that wanted to hedge against costs that would have been tied to a French victory.
Carrefour SA, Europe’s biggest retailer, had a promotion in which customers buying flat-screen televisions would have been reimbursed if France won the tournament, according to its website. Customers would have gotten half of the purchase refunded if the team made the final without winning the tournament. A spokeswoman for the Paris-based retailer declined to comment.
Jordan’s Furniture, a Massachusetts-based chain owned by Berkshire, repaid about 30,000 customers for purchases after the Boston Red Sox won baseball’s World Series in 2007. The firm had an insurance policy to cover costs of the promotion, CEO Eliot Tatelman said at the time.
Lloyd’s of London is also among insurers with coverage tied to soccer, CEO Richard Ward said today in an interview at Bloomberg headquarters in New York. Lloyd’s, the three century- old insurance market, has insured “a lot of the players” including former England soccer captain David Beckham, he said.
The World Cup is an international soccer competition that takes place every four years and is the most-watched sporting event.