The Oracle of Omaha - Warren Buffett Invests 3 billion SFR in Swiss Re

Swiss Re, the world's second biggest reinsurer, stumbled a little deeper into the embrace of its rival, Warren Buffett's Berkshire Hathaway, yesterday as it launched a SFr5bn (£2.9bn) attempt to repair its finances.

Warren Buffett has injected SFr3bn into Swiss Re which means that he may soon control 20% of the company. The new deal comes just a year after Berkshire Hathaway took a 3% stake in the company.

Asked if Berkshire Hathaway might take over Swiss Re, George Quinn CFO said there was "no poison pill" to prevent a takeover.

Swiss Re were 70% below their value a year ago. The company said losses for 2008 would be about SFr1bn.

Swiss Re which is second behind Munich Re in providing insurance to insurers – has been brought low by its operations in credit default swaps (CDS), the same business that AIG was in, which was nationalised by the US government. Swiss Re says it is closing the whole division.

The SFr3bn ($2.5 bn) investment from Berkshire Hathaway is in the form of a convertible note, which will pay 12% interest and is convertible into Swiss Re shares at SFr25 per share after 3 years.

Jacques Aigrain, CEO said Warren Buffett's decision to invest more cash in Swiss Re "is a testament to the strength of our franchise".

Warren Buffett said: "I'm very impressed by Jacques Aigrain and his management team."

Warren's wisdom: Cashing in on the crunch

Berkshire Hathaway's also handed over $300m to Harley-Davidson, which is also facing a cash crunch.

Warren Buffett is doing more than just provide cash of course. The Oracle of Omaha is trying to persuade others to invest too (for the long-term).