Warren Buffett knew this was going to happen when he spent CHF3bn on Swiss Re yesterday, right? From Moody’s:
Moody’s Downgrades Swiss Re Ratings (Senior to Aa3); Ratings on Review Down
Short-term ratings of P-1 affirmed.
London, 06 February 2009 — Moody’s Investors Service has downgraded the insurance financial strength (IFSR) and debt ratings of Swiss Reinsurance Company (Swiss Re) and associated companies. (IFSR and senior debt ratings to Aa3. See debt list below for more details.). The ratings have been placed on review for further possible downgrade. Short-term ratings of Prime-1 were affirmed.
Statement in full here. Snowball right in the face of Berkshire Hathaway here:
Moody’s notes the Group’s proposed capital preservation and capital raising measures including the payment of only a nominal dividend, a CHF3bn investment by Berkshire Hathaway via a convertible perpetual capital instrument, and a potential up to CHF2bn rights issue. However, the potential remains for further capital erosion in light of the nature of Swiss Re’s investment and legacy portfolios, the latter containing non-core activities which have been discontinued including structured credit default swaps and trading activities written within the former Financial Products division.
What was it Warren said about CDS?
Related links:
The Snowball I: Warren Buffett and the business of life – FT
The Snowball II: Warren Buffett and the business of life – FT
Life insurers: terrible bond investors – FT Alphaville