Posted on 26 Oct 2009
Warren Buffett's General Reinsurance Corp., the most profitable of the billionaire's insurance units, got a $9 million loan from Connecticut to keep the Stamford-based company in state for at least four more years.
The funding “ensures that a company based in our state since 1974 is not lost to a neighboring state,” Governor Jodi Rell said in an Oct. 20 statement. The 20-year, 2 percent loan requires General Re to keep an average of 820 workers in Connecticut through 2013, said Jim Watson, a spokesman for the state’s Department of Economic and Commercial Development.
Buffett, the second-richest American, oversees businesses ranging from jewelry to jet rentals from the Omaha, Nebraska headquarters of Berkshire Hathaway Inc. Buffett said this year he would cut jobs and close facilities at Berkshire units as the recession weighs on results. General Re, with more than 1,900 employees in 45 locations, earned $260 million on underwriting before taxes in this year’s first half.
“Gen Re had to make a decision -- stay in Stamford or relocate to Westchester County, New York -- and we were not going to lose those dependable jobs,” Rell said. “Smart, targeted loans and investments by the state will prevent” the loss of insurance-industry positions.
Buffett didn’t respond to a request for comment e-mailed to his assistant Carrie Kizer. Berkshire had about 246,000 employees at the end of 2008, 19 of whom worked at the company’s headquarters.
Berkshire, which Buffett built into a $150 billion company by investing in out-of-favor companies, reported its first quarterly loss since 2001 on slumping investments earlier this year. The company, which typically makes a quarter to half its profits from insurance, returned to profit in the second quarter with a $3.3 billion net income.
Geico Corp., Berkshire’s car insurer, made a deal with New York Governor David Paterson in August to receive tax credits valued by the state at about $1.5 million over five years as the company opens a new site and hires 300 people in Amherst. In September, NetJets Inc., Berkshire’s unprofitable plane-leasing unit, announced cuts of more than 300 jobs, or about 5 percent of the workforce.
The Connecticut loan is the first such deal between General Re and the state. It will be used for “fixtures and equipment” at the company’s new facility, Rell said.
Franklin Montross, the chief executive officer of General Re, said Oct. 1 that the recession is weighing in demand for coverage.
“It’s difficult right now with the economy being what it is,” Montross said during an interview in Ottawa. “If we can add some new clients, that would be great. But I think it’s going to be a difficult year to do that.”
Berkshire rose $1,200, or 1.2 percent, to $101,200 at 4:01 p.m. in New York Stock Exchange composite trading.