Reply #1: Today's Market WrapUp: INVESTED OR INDUCED? [View All]

BY ROB KIRBY

Since this is New Year’s Eve, let’s all hoist one for the Oracle of Omaha – shall we? On Friday the Oracle’s Berkshire Hathaway announced it was purchasing the reinsurance unit of ING (NRG) for 435.7 million in cash and also notified the free world that it expected to be granted a license Monday (today) to open a new bond insurance business – Berkshire Hathaway Assurance Corporation.

Maybe it’s just me but doesn’t this announcement – coming on a Friday with the expected granting of a license by regulators on Monday reek of shotgun marriage?

The folks over at the Financial Times seem to think so:

Bond insurers feel heat as Buffett enters sector
By Andrea Felsted in London and Aline van Duyn in New York
Published: December 28 2007 10:25

……Berkshire Hathaway Assurance Corporation , as first reported by the Wall Street Journal, will guarantee the bonds that cities, counties and states use to finance public infrastructure projects. The group will also look for opportunities to offer re-insurance to other insurers of municipal bonds.

BHAC hopes to win a triple-A credit rating and has pledged to maintain a capital ratio stronger than its rivals’. It plans to charge fees that reflect its financial strength and to avoid insuring structured products, including bonds backed by assets such as mortgages.

If MBIA and Ambac were to lose their triple-A ratings, it would send shock waves through the financial system, as many of the bonds they guarantee are owned by banks and other financial institutions.

http://www.financialsense.com/Market/wrapup.htm