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Buffett's Berkshire scores on Florida hurricane season bet

December 29, 2008 |  5:34 pm

In the battle of Berkshire Hathaway vs. Atlantic hurricane season in Florida, give Berkshire the win.

From Bloomberg News:

Billionaire Warren Buffett’s Berkshire Hathaway Inc. won a $224-million bet that Florida would escape major damage from hurricanes this year.

Smilingbuffett Florida’s option agreement that would have compelled Buffett to buy $4 billion of bonds to finance storm recovery will expire Wednesday, Dennis MacKee, a spokesman for the State Board of Administration, said in an interview today. The state earlier paid Buffett $224 million in return for his commitment to buy the debt if needed.

Florida turned to Berkshire to erase doubts about the state’s ability to raise money after a hurricane. The state sells coverage to homeowners and private companies at below-market rates, and plans to fund cash shortfalls in the bond market. Finding investors could be a "very challenging task," Fitch Ratings said in March.

This year’s hurricane season was among the five worst since 1944, Bloomberg noted, citing data from the National Oceanic and Atmospheric Administration. But damage from the storms was concentrated in Texas and Louisiana.

Berkshire shareholders have suffered like everyone else in this year’s devastating bear market, but their stock is holding up better than the market as a whole.

Berkshire’s Class A shares closed at $92,590 each today, down 34.6% year to date, compared with a 40.8% decline in the Standard & Poor’s 500 index.

Buffett's investors still are in the black over the last five years, a claim the average stock investor can't make: Berkshire has eked out a 1.9% average annualized total return in that period, compared with a 2.9% average annualized loss for the S&P 500.

-- Tom Petruno

Photo: Warren Buffett. Credit: Matt Sayles / Associated Press

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