Buffett’s Final Word on Bond Insurers

Warren Buffett’s name often crops up when stocks and sectors fall out of favor. The rumors are usually wishful thinking, or amateurish attempts to move stocks around. This summer the rumor mill had Buffett buying homebuilders, but it did not turn out to be true.

Last month the rumor mill had Buffet making an investment in the large bond insurers, Ambac and MBIA.  But his move to start his own operation, Berkshire Hathaway Assurance, was expedited by regulators from New York and other states, and it seemed like the end of the story.  But apparently rumors over a Buffett bailout won’t die, and the Oracle of Omaha made an appearance on Fox Business this afternoon to clarify his position, and get in a plug for his newly formed entity:

“We could have some kind of insurance transaction with them but we will not be investing in them or any other bond insurer…We’ve got our own bond insurer…Berkshire Hathaway Assurance is already up and running in New York State and has already done a couple of deals.” Fox Biz

Buffett’s new operation will be starting with a clean slate and does not have the embedded legacy issues that Ambac and MBIA do. Although a recent Barron’s piece suggested the “runoff" value in MBIA, Inc. is between $30 to $40, the stock continues to swing violently from day to day as the Street works through the numbers, and Barron’s terminal value estimate looks aggressive, for now.

Still, while Buffett ruled out an investment in the bond insurers, he did not rule out some sort of “insurance transaction”. Once again, he is in a position of strength, while others panic. Vintage Buffett.

Buffett Tells FOX Business Not Interested in Ambac, MBIA
Fox Business

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