November 24, 2008 / 11:16 PM / 11 years ago

Buffett to disclose more on derivatives

Investor Warren Buffett listens to a question during a news conference in Madrid, May 21, 2008. REUTERS/Andrea Comas

NEW YORK (Reuters) - Warren Buffett will provide more information on how his company Berkshire Hathaway Inc computes losses on derivatives, after the U.S. Securities and Exchange Commission asked for better disclosure.

The billionaire investor will provide the improved disclosure in his annual letter to Berkshire shareholders, his assistant Jackie Wilson said. Buffett is expected to issue the letter to shareholders around the end of February.

Berkshire as of Sept 30 had a $6.73 billion paper liability on derivative contracts tied to equities.

The Omaha, Nebraska-based company has said it has contracts whose values depend on where four stock indexes, including the Standard & Poor’s 500 .SPX>, trade between 2019 and 2027. Berkshire has said it could theoretically owe as much as $37.04 billion on the contracts.

Worries about Berkshire’s ultimate exposure have been one reason that shares of the insurance and investment company have fallen 42 percent from their record high last Dec 11.

In June, the SEC had demanded that Berkshire produce “a more robust disclosure” of factors used to value the contracts. The regulator completed its review on Oct 7, four days after Berkshire said it did not need to buy equities underlying the contracts.

Berkshire obtained about $4.85 billion of upfront premiums on the contracts, a sum Buffett may invest as he wishes. The company has said it would have to post collateral of far below 1 percent of assets if Berkshire’s credit ratings were to fall. The company ended September with $281.7 billion of assets.

Class A shares of Berkshire closed Monday down $2,500 at $87,500 on the New York Stock Exchange. Their record high is $151,650.

Reporting by Jonathan Stempel; editing by Carol Bishopric

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