Buffett plays the suitor for a change
Warren Buffett often invites companies that want to be part of Berkshire Hathaway, his investment company, to get in touch.
“If you have a business that fits [our criteria], give me a call,” the legendary investor wrote in Berkshire’s most recent annual report. “Like a hopeful teenage girl, I’ll be waiting by the phone.”
When it came to striking the $7bn reinsurance deal with Lloyd’s, however, Mr Buffett played the suitor. Earlier this year he asked Ajit Jain, who oversees Berkshire’s reinsurance activities, whether it would be possible to explore a deal with Equitas, the unlisted company responsible for Lloyd’s liabilities before 1993.
The two men had discussed the possibility of a deal a few years ago but abandoned the idea after concluding the liabilities were still too hard to quantify. When Equitas celebrated its tenth anniversary in March [check], they decided to look at it again.
In an interview with the Financial Times, Mr Buffett says the decision to explore a deal is a reflection of Equitas’ success:
“Equitas has made a lot of progress in terms of resolving a great number of questions including in respect to liabilities,” he says. “It will be long after I am dead before we know the final answers on how it all works out. But it’s easier to make that assessment than it would have been five years ago.”
Until recently, the notion of anyone reinsuring Equitas would have been unthinkable. When it was set up in 1996 as part of the plan to rescue Lloyd’s, many believed it was doomed to failure. Through a combination of skillful management and good fortune, however, it had reduced its liabilities to ￡4.4bn by March 2006, while maintaining a surplus of ￡458m.
Yet for Lloyd’s names - the individuals who had traditionally supported the market and whose liabilities Equitas was set up to manage - the arrangement never provided complete relief.
If Equitas failed, the names would once again face unlimited claims on their assets. Indeed, every year the 28,000 names who are still alive have to provide their address to the UK’s Department of Trade and Industry, which has promised the US government to keep tabs on their whereabouts in case claimants need to track them down in future.
If Mr Buffett’s proposed deal is completed in its entirety, Equitas will ask the London High Court to transfer the names’ liabilities to Berkshire. Even after the first stage of the transaction - which provides a further $5.7bn of reinsurance to Equitas - Mr Buffett believes the names should be able to relax.
“There is a final adjudication that would put the formal stamp on [the transfer]. But $5.7bn is a lot of money to go through above the carried reserves, and as a name I would feel that the Equitas management had put this matter to bed.” Moreover, the deal will leave Equitas with reserves of about ￡150m. Some of this will be needed to cover legal fees, but some will also be returned to the names.
The possibility of a failure of Equitas has also loomed over Lloyd’s for much of the past decade. The insurance market has consistently denied any liability for claims arising before 1993. But Lloyd’s decision to pay ￡90m to Berkshire as part of the deal, and yesterday’s decision by Standard & Poor’s and Fitch to consider upgrading its credit ratings demonstrates the importance of Mr Buffett’s move. “If they have found a solution that ends the question of what to do with the pre-1993 Lloyd’s names, then that is worth paying for,” says one observer.
The agreement with Equitas caps a long association with Lloyd’s for Mr Buffett, who, as the owner of one of the world’s largest reinsurance companies, has always taken a keen interest in the market.
Two years ago Berkshire took a 25 per cent stake in a vehicle which was aiming to buy up smaller Lloyd’s underwriters.
The plan flopped, but few doubt that Mr Buffett and Mr Jain have sharp commercial noses. “The Berkshire team are without question one of the most authoritative teams in the world in this business, and they have the strongest balance sheet,” says Michael Wade, who spearheaded the failed consolidation.
Scott Moser, Equitas chief executive, says: “It’s a transfer of risk from people who shouldn’t be taking these risks to the leading people in the industry.”
Despite the significance of the deal for Lloyd’s names, there is no question that Berkshire’s deal with Equitas is motivated mainly by the opportunity to make a profit. “Berkshire will have worked out that they can make good money out of the deal,” one Lloyd’s veteran observes. “There is no sentiment involved.
But Mr Buffett insists the Equitas executives drove a hard bargain in reducing the assets that Berkshire is taking over by ￡172m. “In the end, it’s like any other insurance premium: the insurer never thinks he got enough and the insured always thinks he paid too much. That’s the nature of insurance.”
He acknowledges that Equitas has made great strides in managing liabilities such as exposure to US asbestos and pollution claims, some stretching back decades. But he also stresses the considerable uncertainties it still faces:
“When you are taking on a book with thousands of policies that were written over many years, it’s the surprises that worry you. And no amount of due diligence can give you 100 per cent assurance on that.”
One of these uncertainties is whether claimants who had previously reached settlements with Equitas will attempt to reopen their cases now that it is backed by Berkshire’s deeper pockets. Equitas executives say any such claims are “baseless”, but Mr Buffett acknowledges that Berkshire may find future negotiations more difficult.
“Particularly in the early days of Equitas I think that people, in making settlements with them may have been prompted to some extent by the many questions that were raised about Equitas at that time. So they had some advantage in early negotiations that we will not have.”
Presumably these are the types of calls Mr Buffett will be less eager to receive.
巴菲特“抱得美人归”？
对
于那些有意加入伯克夏-哈萨韦公司(Berkshire Hathaway)的企业，沃伦?巴菲特(Warren Buffett)经常邀请它们主动与自己联系。伯克夏-哈萨韦是巴菲特旗下的投资公司。
这位传奇投资者在伯克夏最新一期的年报中写道：“如果你有符合（我们标准）的公司，就给我打电话吧。我会像一个满怀希望的少女一样守在电话旁边。”
然而，当伯克夏与伦敦劳合社(Lloyd’s)达成70亿美元再保险交易时，76岁的巴菲特却扮演了追求者的角色。
“心仪”已久
今年早些时候，他问伯克夏负责再保险业务的阿吉特?贾殷(Ajit Jain)，有没有可能与Equitas做笔交易。Equitas是负责处理劳合社1993年以前债务的非上市公司。
这两人几年前曾经讨论过这一交易的可行性，但他们当时得出结论认为，Equitas的负债还很难量化，于是放弃了这个想法。
当Equitas今年6月公布了最新财务数据之后，他们决定再次考虑与之交易。
巴菲特在接受英国《金融时报》采访时表示，他决定与Equitas做交易，因为Equitas取得了成功。
他表示：“包括债务问题在内，Equitas在许多问题的解决上都取得了巨大进展。”
“要知道它将如何解决所有的问题，那可能要等到我死后很久才有结果，但现在对它进行评价，却比5年前要容易得多。”
就在不久之前，对Equitas进行再保险的想法还会让人感到不可思议。
1996年，当Equitas作为救助劳合社计划的一部分而成立的时候，许多人认为它注定会失败。然而，在巧妙管理和好运气的共同作用下，到2006年3月份，它已经把保险负债减至44亿英镑，同时保持着4.58亿英镑的盈余。
然而，对劳合社的承保人(Name)而言，这种安排永远不能提供完全的解脱。所谓承保人，是指那些传统上支撑劳合社这一保险组织的个人，当初成立Equitas就是为了处理他们的保险义务。
如果Equitas失败了，劳合社承保人将再次面临基于自有资产的无限赔偿责任。
实际上，仍然在世的2.8万名承保人每年不得不向英国贸工部(Department of Trade and Industry)提交自己的地址。英国贸工部已向美国政府承诺，将始终掌握他们的行踪，以备索赔者日后需要查找他们下落。
解决方案
如果巴菲特提议的交易顺利完成，Equitas将请求英国高等法院(High Court)把承保人的义务转移给伯克夏。
巴菲特认为，即便这笔交易只完成第一阶段（向Equitas再提供57亿美元的再保险），承保人也应该可以松口气了。
他表示：“我们会等待一个最终裁决，正式确定保险责任转移。但57亿美元是一大笔钱，足以解决Equitas的保险负债。如果我是一个承保人，我会觉得Equitas的管理层已经妥善解决了这个问题。”
此外，这笔交易将给Equitas留下大约1.5亿英镑的准备金。部分资金将用于支付法律费用，但有些资金将返还给承保人。
在过去10年的大部分时间里，Equitas失败的可能性一直笼罩在劳合社的头上。
劳合社始终否认对1993年以前产生的索赔负有赔偿责任。但作为交易的一部分，劳合社决定向伯克夏支付9000万英镑；此外，标准普尔(Standard & Poor's)和惠誉(Fitch)昨天决定，考虑调升劳合社的信用评级。这两点都表明了巴菲特行动的重要性。
一位观察人士表示：“如果他们找到了一个解决方案，能够解决劳合社1993年之前承保人的处置问题，那么劳合社就值得为这个解决方案掏钱。”
双方本周签订的协议加深了巴菲特与劳合社的渊源。巴菲特拥有全球最大的再保险公司之一，而且一直对劳合社抱有浓厚兴趣。
两年前，伯克夏收购了一家投资公司25%的股权，该投资公司旨在收购规模较小的劳合社承保人。
各取所需
尽管该计划以失败告终，但没有人怀疑巴菲特和贾殷敏锐的商业嗅觉。
保险业高管迈克尔?韦德(Michael Wade)表示：“伯克夏的团队无疑是全世界该领域中最具权威的团队之一，他们的资产负债表非常强劲。”韦德曾牵头负责那次失败的整合。
Equitas首席执行官斯科特?摩斯(Scott Moser)表示：“这是一次风险转移――从那些不应承担这些风险的人身上，转移到了业内顶尖人士的身上。”
尽管该笔交易对劳合社承保人具有重大意义，但毫无疑问的是，驱动伯克夏与Equitas达成交易的主要因素乃是盈利机会。
劳合社的一位资深观察人士说道：“伯克夏可能已经算出，他们可以从这笔交易中赚一大笔钱。”他补充说：“这里没有情感因素。”
但巴菲特坚称，Equitas的高管们进行了激烈的讨价还价，以减少伯克夏拿出的1.72亿英镑所能收购的资产。
“最终，它跟其它保险费一样：保险公司绝不会认为它拿到的已经足够，而参保人则认为他们支付的已太多。这就是保险的本质。”
他承认，Equitas在处理保险负债方面取得了重大进展（例如发生在美国的石棉和污染索赔，其中一些要追溯到数十年前）。
不确定性
但他也强调，该公司仍面临着巨大的不确定性。
“当你拿起一本账簿，里面是许多年累积起来的成千上万张保单，这时，你最担忧的是其中有一些意外。不管进行多少尽职调查，都不能使你100%确信，”巴菲特警告道。
其中一个不确定性是，之前与Equitas达成和解协议的索赔人，现在是否会要求重新谈判，因为现在有财力更加雄厚的伯克夏提供偿付支持。Equitas高管们表示，任何此种索赔都是“无根据的”。但巴菲特承认，伯克夏可能会发现，未来的谈判更加困难。
“我认为，那些人之所以与Equitas达成和解协议，一定程度上可能是被当时围绕Equitas的诸多质疑吓住了，尤其在Equitas成立之初。因此，Equitas在早期谈判中具备一些我们现在所不具备的优势。”
或许这些将是巴菲特不愿接到的那种电话。
