Australia/New Zealand - Berkshire invests in Australia's IAG; opens NZ office
Source: Asia Insurance Review | Aug 2015
Warren Buffet’s Berkshire Hathaway Group has bought a stake in Insurance Australia Group (IAG) for A$500 million ($388 million) as part of a strategic relationship with the insurer.
The partnership is underpinned by a 10-year 20% quota share arrangement across IAG’s consolidated insurance business, and an approximately 3.7% investment in IAG by Berkshire Hathaway via a share placement.
IAG Chairman Brian Schwartz said: “The Board is delighted to welcome Berkshire Hathaway as a strategic partner and shareholder. We believe the partnership is an endorsement of our strategy, the strong franchises we have created in the Asia Pacific region, and an acknowledgement of the complementary capabilities we can bring for our customers. We look forward to a long and mutually beneficial relationship.”
IAG and Berkshire Hathaway have had a successful reinsurance relationship since 2000. Under the expanded relationship, the two companies will work together exclusively to enhance their customer offerings.
Under the terms of the partnership, IAG will acquire Berkshire Hathaway’s local personal and SME business lines. In return, Berkshire Hathaway will acquire the renewal rights to IAG’s large-corporate property and liability insurance business in Australia. The rights to be transferred by IAG represent less than 1% of its annual gross written premium (GWP).
Mr Warren Buffett, Chairman and CEO of Berkshire Hathaway, said the quality and strength of the IAG business were pivotal to his company’s decision to enter the relationship.
“Our strategic partnership with IAG will help fast-track our entry into this region, and provides us with opportunities to leverage IAG’s extensive capabilities while also making our expertise available to IAG,” Mr Buffett said.
Meanwhile, Berkshire Hathaway also recently announced that it has received its licence from the Reserve Bank of New Zealand and is underwriting property and casualty insurance through its new office in Auckland.