Dear friend,

Fourteen percent ceding commission?

Hardly worth getting out of bed for, is it?

That’s all Swiss Re is getting out of its 20% quota share with Berkshire Hathaway, and apparently there’s no profit commission either.

Swiss Re made a disclosure, those excellent people at Keefe Bruyette and Woods (KBW) have been poring over it (I’ve got my own copy of the figures but forgive me if I defer to others’ better judgement in these matters!).

According to KBW, fourteen points gives a little bit of relief over Swiss Re’s 11.2% administrative expense ratio.

KBW sees this as “superficially charitable”.

But as a broker, I certainly don’t!

We all know Buffett drives a hard bargain, but to me this seems a little tight…

The quid pro quo?

KBW understands that Buffett is not getting any access to Swiss Re’s client data under the deal, and of course, the underwriting pen is still firmly gripped in Zurich.

So that puts paid to one of my early theories — that this was a prelude to a future possible takeover by BH for Swiss in a few years’ time.

It’s great to have disclosures like this —except that this one fails to answer the fundamental question:

Why?

I still don’t get it.