Buffet Makes An Investment In Swiss Re (SWCEF)

Warren Buffett is making approximately a $2.5 billion investment in Swiss Reinsurance's (OTC: SWCEY) effort to raise over $4 billion in new capital to guard against a large full-year net loss and to protect its credit rating. Despite, the Oracle of Omaha's investment, Swiss Reinsurance is getting killed today, down over 50%.

Swiss Reinsurance's capital raising comes as it looks to simplify its operations and get out of its problematic structured financial products business. Investors do not expect an immediate turnaround, saying the deteriorating bond market could further damage Swiss Re's balance sheet.

Berkshire Hathaway (NYSE: BRK.A) will invest around the above mentioned $2.5 billion and enter into a business deal with Swiss Re. This is Buffett's biggest commitment in Europe since he began looking for investments in the region. The investment will come through a bond with a 12% coupon that can be converted into shares at $21 a share after three years, potentially giving Buffett a 20% holding in the reinsurer.

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