With AIG ponying up it’s $10 billion sweetener last week, it’s worth looking back at the original terms of the its reinsurance deal with Berkshire Hathaway … The liabilities took like a $34 billion vertical slice of AIG’s P&C risk… BH gets $10 billion to invest… AIG pays the first $25 billion of claims… BH pays 80% of the claims thereafter, with a cap of $20 billion…In the base case, Buffett makes a $3 billion underwriting profit… In the deep downside case, Buffett makes money after he doubles the $10 billion… Another brilliant deal for Warren… Leslie Scism of the Wall Street Journal has the story: AIG, Berkshire Hathaway Strike Reinsurance Pact
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