Berkshire Says Regulators Are Studying Insurer Books
Berkshire Says Regulators Are Studying Insurer Books By RIVA D. ATLAS Published: August 8, 2005
Regulators are looking into the accounting of some Berkshire Hathaway insurance subsidiaries, the company reports in a regulatory filing, an indication that an investigation into insurance abuses centering on the American International Group may be widening.
Berkshire, a holding company controlled by the investor Warren E. Buffett, said in its quarterly filing late Friday that the government was looking at the accounting by some units for finite insurance contracts.
The company also said that Milan Vukelic, chief executive of a British affiliate of Berkshire's General Re subsidiary, had been let go.
Regulators, including the Securities and Exchange Commission, are interested in finite insurance because some companies may have used the deals to burnish their financial results or to produce income that can be used to bolster earnings during tough times.
A deal reached between General Re and A.I.G. in late 2000 has been the focus of scrutiny and led to the ouster in March of the chief executive of A.I.G., Maurice R. Greenberg. The $500 million transaction artificially bolstered A.I.G.'s reserves by $500 million in 2000 and 2001.
Mr. Greenberg has denied that A.I.G.'s overall accounting was improper. Two former General Re executives - Richard Napier, a senior vice president, and John Houldsworth, a chief executive at an Irish subsidiary - pleaded guilty in June to conspiring to file false financial reports intended to enhance financial results of A.I.G.
Berkshire said regulators continued to review General Re's role in the A.I.G. transaction. "Governmental authorities are also inquiring about the accounting by certain of Berkshire's insurance subsidiaries" for finite insurance dealings, the filing said. The company did not identify the divisions being examined.
Representatives of Berkshire were not immediately available yesterday. The company's Class A shares closed on Friday at $83,500, down $495. The shares have dropped 5 percent this year.
Mr. Vukelic, who had been chief executive of the Faraday Group, was previously put on administrative leave. The Financial Services Authority of Britain advised Faraday it was investigating Mr. Vukelic, who previously served as head of General Re's international finite insurance unit, Berkshire said.
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