UPDATE 3-Swiss Re to repay costly Buffett loan early

* Q3 net profit $618 mln vs $437 mln forecast

* Sees $1 bln for loan repayment in Q4

* Excess capital well above AA rating standard

* P&C combined ratio 76.4 pct vs 90.6 pct forecast

* Shares up 6.3 pct, outperform European peers

(Adds shares, CFO quote, analyst comment, further detail)

By Jason Rhodes

ZURICH, Nov 4 (BestGrowthStock) – Swiss Re (RUKN.VX: ) said it would
repay a costly loan from U.S. billionaire Warren Buffett early,
as it had replenished its capital to comfortable levels since
taking a hit during the global credit crisis.

The world’s second-biggest reinsurer almost doubled
third-quarter profit (Read more your timing to make a profit.), comfortably beating analysts’ forecasts.

Swiss Re said on Thursday it would not be penalised for
bringing forward the repayment date on the $3.1 billion
convertible loan from Buffett-owned rival Berskshire Hathaway
(BRKa.N: ) from early 2011. But it would have to pay full interest
due including an adjustment for foreign exchange, leading to a
$1 billion charge in the fourth quarter.

Shares in Swiss Re were up 6.3 percent to 50.45 francs at
0948 GMT, clawing back ground lost this year and outperforming a
1.5 percent rise in the Stoxx 600 European insurance index
(.SXIP: ) and a 1.8 gain in the stock of bigger rival Munich Re
(MUVGn.DE: ).

“The good news in today’s announcement is the early
redemption of Berkshire, which in our view improves financial
flexibility and will reposition Swiss Re as a leading
independent reinsurance company,” said Vontobel analyst Stefan
Schuermann, upgrading the stock to ‘buy’ from ‘hold’ and hiking
his price target to 62 francs from 52 francs.

Swiss Re took out the loan, which carries a hefty 12 percent
coupon, with Buffett in February 2009 after taking hits from
risky assets during the credit crisis, putting its capital base
in jeopardy.

The company also has to pay Buffett a 20 percent repayment
premium, or 600 million francs.

Swiss Re Chief Financial Officer George Quinn said he could
not comment on whether Buffett was interested in adding to his 3
percent in the company.

Buffett raised his stake in Munich Re to above 10 percent
and planned to further expand the holding, Swiss Re’s rival said
in October. [ID:nLDE69I0JE]


Third-quarter net profit almost doubled to $618 million as
property and casualty reinsurance profit margins improved
markedly on below average natural catastrophe losses. Swiss Re’s
policy of only writing the most profitable business in a market
characterised by low prices also helped.

Analysts had forecast net profit of $437 million, on
average, in a Reuters poll.

Improved investment income also boosted asset management
earnings as Swiss Re removed expensive hedges, though the group
took a $195 million hit on forex movements.

Swiss Re was sticking to its target of 12 percent return on
equity over the reinsurance cycle, Quinn said.

“For us we have the benefit of the clarity and (repaying
Buffett) removes any residual uncertainty for shareholders and
achieves a very important goal,” he said.

Swiss Re said following the buyback of the Buffett
investment it still held significant excess capital above the
level it needed to regain the key ‘AA’ credit rating it lost in
the credit crisis.

Standard & Poor’s, which rates the company’s financial
strength ‘A+’ with a positive outlook, said in October that
Swiss Re’s capital was above that needed for the top ‘AAA’
rating and was expected to remain so even after the company
repaid Buffett.

Swiss Re was the first major reinsurer to report
third-quarter numbers, ahead of French company Scor (SCOR.PA: ) on
Nov. 5, and German groups Munich Re and Hannover Re (HNRGn.DE: )
on Nov. 9 and Nov. 11 respectively.
(Reporting by Jason Rhodes; Editing by Dan Lalor and Erica
($1 = 0.9775 Swiss franc)

UPDATE 3-Swiss Re to repay costly Buffett loan early