Buffett: Interest Rates Will Help Insurers
NU Online News Service, May 3, 2:39 p.m. EDT?Berkshire Hathaway Chairman Warren Buffett forecast interest rates will go up this year and give insurers' investment income a boost. [@@]
However, the famed billionaire investor, in comments made at his company's annual shareholders meeting this weekend, said it isn't clear yet whether it will turn out to be "a sudden rise," as was the case in 1994, or more of a gradual change.
U.S. interest rates, still languishing near 40-year lows, contributed to a 5.4 percent decline in the yield on the property-casualty insurers' cash and invested assets last year, according to Insurance Services Office Inc. in Jersey City, N.J.
Mr. Buffett added that he would not expect the change in rates to be a smooth one, "but I'm not saying it can't go the other way. We're prepared for it not to be smooth."
He also observed that inflation in the United States is beginning to gather steam. "I think we're starting to see inflation heat up in this country."
Mr. Buffett also offered that as the U.S. deficit continues to climb, it could cause several disruptions in financial markets in the future and the U.S. currency could lose value because of the ballooning U.S. deficit.
Mr. Buffett has reportedly invested some $12 billion in five major foreign currencies, essentially betting that the dollar will fall against these currencies. Mr. Buffett hasn't disclosed which currencies he has invested in, however.
Mr. Buffett is the chairman of Omaha, Neb.-based Berkshire Hathaway Inc., whose subsidiaries include National Indemnity, GEICO Corporation and reinsurance giant General Re. Berkshire's non-insurance subsidiaries include businesses as diverse as Dairy Queen and Fruit of the Loom.
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