Berkshire Hathaway has agreed to purchase 3.7% stake in Insurance Australia Group (IAG), for around $A500m ($388m).
Both firms have entered into a 10-year whole of account quota share arrangement, under which Berkshire Hathaway will receive 20% of IAG’s consolidated gross written premium (GWP) and pay 20% of claims.
IAG chairman Brian Schwartz said: "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."
As per terms of the partnership, IAG will acquire Berkshire Hathaway’s local personal and SME business lines, while Berkshire Hathaway will acquire the renewal rights to IAG’s large-corporate property and liability insurance business in Australia.
Berkshire Hathaway will not increase its shareholding in IAG above 14.9% for the period of the partnership agreement, under a standstill agreement.
Berkshire Hathaway chairman and CEO Warren Buffett said: "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."
IAG plans to expand its operations in six Asian countries, including India, Thailand, Malaysia, China, Vietnam and Indonesia.
In India, IAG intends to expand its presence by increasing stake in SBI General from 24% to 49%, based on recent legislative changes on foreign ownership in the country.
Image: Kiewit Tower, the location of Berkshire’s corporate offices in Omaha, Nebraska. Photo: courtesy of JonClee86.