Warren Buffett's Berkshire Hathaway (BRK.A) Hits The $224 Million Florida Jackpot
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Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) won a $224 million bet that Florida would escape major damage from hurricanes this season. A few years ago, when hurricanes did hit the gulf coast, Berkshire's bets were not profitable that year.
Dennis MacKee, a spokesman for the Florida's State Board of Administration told Bloomberg the option agreement would have compelled Buffett to buy $4 billion of bonds to finance the storm recovery is set to expire today. Earlier Florida paid Buffett's Berkshire Hathaway $224 million in return for his commitment to buy the debt if needed.
Buffett has uncanny ability to make insurance bets based on probability, such as weather patterns, and likely was glad to step up to the plate when the state of Florida called upon him. Berkshire earns half its profit from its various insurance businesses.
Florida turned to Berkshire to erase doubts about the state’s ability to raise money after a hurricane.
Under the terms of the deal, Berkshire agreed to buy the debt if the state’s fund incurred $25 billion in losses by the end of '08. Berkshire would have collected 6.5% annual interest over the 30-year life of the bond.
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Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities.
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