Swiss Re Chairman Kielholz Says Reinsurer Will Pay Back Buffett

Swiss Reinsurance Co. Chairman Walter Kielholz said the world’s second-largest reinsurer plans to repay investments from Warren Buffett’s Berkshire Hathaway Inc. instead of allowing him to convert bonds into stock.

“We can’t give Buffett shares for 25 Swiss francs when they’re worth 45,” Kielholz told reporters at a dinner in Frankfurt yesterday. “Shareholders would shoot me, with hot cheese at the least,” he said.

The Swiss reinsurer last year received 3 billion francs ($2.9 billion) in the form of convertible bonds from Buffett after record losses amid the global financial crisis. The reinsurer plans to repay the capital, which is possible from March 2011, according to Kielholz.

Swiss Re fell 1.8 percent to 41.78 francs as of 11:36 a.m. in Zurich trading. The stock has dropped 16 percent this year, valuing the company at 15.5 billion francs. Larger rival Munich Re has a market value of 18.8 billion euros ($23.8 billion).

The company could face lawsuits from shareholders, especially from the U.S., if Berkshire received the shares at such a discount, Kielholz said. He doesn’t regret the decision to take the investment from Buffett despite the cost of the notes, which carry a 12 percent coupon, he said.

Banking regulation will spur mergers and acquisitions among insurers as banks sell insurance units because they’ll become too expensive to operate, Kielholz said. Still, Swiss Re doesn’t plan to buy primary insurance businesses and instead will focus on providing reinsurance to new owners of the assets, he said. Reinsurers help insurers such as Allianz SE and Axa SA shoulder risks for clients.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net