Monthly Archives: January 2017

Berkshire Hathaway Specialty Insurance to Offer Reinsurance in Malaysia

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Berkshire Hathaway Specialty Insurance Company (BHSI) has received a license from Labuan FSA to provide non-life reinsurance to the Malaysian market.

The company also established a new office in Kuala Lumpur and named Gaithrie Nandrajog as Branch Manager and Koo Kang Wuu as Executive & Professional Lines and Business Development Manager in Malaysia.

After putting down roots in Singapore, Hong Kong, and Macau, we are pleased to further expand our operations in Asia and bring facultative reinsurance capacity and new products with the backing of our strong balance sheet to selected Malaysian insurance partners,” said Marc Breuil, President, Asia, BHSI. “With the opening of our Malaysian office, we continue to deepen our underwriting and claims capabilities in the region.”

Gaithrie, who will oversee BHSI’s new Malaysian reinsurance operation, holds a bachelor’s degree in law from the University of West England, Bristol. Koo holds an MBA from RMIT University plus a B. A. (Hons) from the University of Hertfordshire (UK). Both come to BHSI with more than a decade of experience in the Malaysian insurance industry.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Forest River Enters Luxury Bus Market

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Ready to take a flight on your private jet? Well, you can’t just roll out on the tarmac in any old shuttle bus. You need a shuttle bus with oodles of fine leather, USB ports for every seat, and LED mood lighting.

Berkshire Hathaway’s RV and bus manufacturer, Forest River, has added a luxury bus product line to its existing buses. The move comes because of feedback from its dealers. Forest River is the largest shuttle bus manufacturer in the United States, but didn’t have a specific luxury division.

The new luxury shuttle bus division has been dubbed Berkshire Coach, and will operate separately from Forest River’s Elkhart Coach, Glaval Bus, Starcraft Bus, and Startrans bus companies.

Berkshire Coach is building its shuttle buses at its recently acquired facility in Elkhart, Indiana. Formerly the Ameritrans Bus facility, it was acquired by Forest River in July 2016. Berkshire Coach currently has 25 employees and is projecting an expansion to 75 employees by the end of 2017.

According to Berkshire Coach, what sets the new luxury buses a part from the competition is the wide range of standard features, including Ultra Lux seating, roof-mounted, center aisle, ducted heating and air conditioning system, individual USB ports, seat belts, overhead Hadley Swan premium luggage racks and mood-setting LED lighting. The luxury cabin is further enhanced by wood-look composite flooring, suede finishes, frameless windows, panoramic skyview front window and 19” LED monitors located in the front of the coach.

David Wright, Senior General Manager at Forest River, states, “When we decided to launch a brand new division almost a year ago, we made the commitment to build America’s best luxury bus. After months of research and development and spending extensive time with our dealers and their customers, we are proud to introduce the Berkshire Ultra. Berkshire Coach’s intelligent luxury offers a product and experience that is unparalleled in the industry today.”

Troy Snyder, General Manager of Berkshire Coach, added, “We simplified the process for our customers and their dealers by making all luxury options standard equipment and backing it all with the most complete warranty in the industry. From Ultra Lux seating to individual USB ports at each seat, and everything inbetwe en, it all comes standard and is covered with the industry’s most comprehensive 5-year/100,000 mile warranty.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

GEICO Creates Virtual Assistant “Kate” to Answer Insurance Questions

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If you have an insurance question just ask Kate, GEICO’s new virtual assistant. Available through the GEICO Mobile app, you can ask Kate a question and she will respond with quick, personalized answers.

“Interactive voice assistant technology has altered the way customers interact with their mobile devices,” said Pete Meoli, GEICO mobile and digital experience director. “Kate is very intuitive and has been programmed to connect with policyholders at a deeper level.”

Kate is available 24/7 to policyholders and makes self-service easier by answering questions and helping with their policy needs. She has been programmed to know about insurance and can provide customers with specific policy information. Customers can also initiate conversations with Kate by typing or speaking to her.

Meoli notes that Kate has a personal side and will reveal details about herself if asked. “We wanted her to be friendly with a natural interaction,” said Meoli. “She is always learning from our customers and will be an integral part of enhancing their experiences with GEICO.”

Kate is currently available within the mobile app for iOS, with plans to introduce her to Android policyholders in early 2017.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

MiTek Acquires DIY Technologies

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Berkshire Hathaway’s MiTek Industries, Inc., a diversified, global business supplying a wide range of engineered products; proprietary business management and design software; and automated equipment to the construction and industrial markets, has acquired DIY Technologies. Terms of the acquisition were not announced.

Headquartered in Tucson, Arizona, DIY is a market leader in web-based design software for a wide range of home improvement and renovation projects.

“I am delighted with the acquisition of DIY, which has an enviable leadership position as a provider of on-line design software to the do-it-yourself, home improvement market. This acquisition is yet another extension of our leading position in technology serving the residential construction industry,” stated Tom Manenti, Chairman and CEO of MiTek. “DIY has established long-term relationships with some of the nation’s largest and most-respected retailers and building-products manufacturers. The combination of MiTek’s software and capital resources, along with DIY’s comprehensive web-based software, will provide unparalleled technology tools that will enhance our customers’ value proposition.”

“We are thrilled to welcome Michael Heisler and his team to the MiTek family and look forward to supporting their business model while expanding their software offerings and services, as we continue to grow DIY’s business,” Manenti commented.

Michael Heisler, CEO and founder of DIY added, “This acquisition is the culmination of more than ten years of successful partnering with MiTek. I am excited that DIY and all our employees have joined the MiTek and Berkshire Hathaway family. I have seen how MiTek truly ‘lives’ its core values, and because of this and its compelling vision of providing unrivaled, highly productive technology to the global residential and commercial construction industry, I know MiTek is the ideal home for DIY.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Richline Group Acquires International Jewelry Manufacturer

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Berkshire Hathaway’s Richline Group, a leading jewelry manufacturer and marketer, has acquired The Aaron Group. No terms of the acquisition were announced.

Since its founding as Samuel Aaron Jewelry in 1950, the Aaron Group has grown from its New York City roots to become a widely renowned, vertically integrated international jewelry manufacturer. Along the way, the Aaron Group has remained a true family business and, under the stewardship of third-generation leader Robert (Bobby) Kempler, has achieved stature as a major global force, with operations, factories, partnerships and hundreds of employees in New York, London, Mumbai, Hong Kong, and Guangzhou.

“We are extremely excited and energized about joining forces with The Aaron Group. The Aaron Group’s differentiated, prime-manufactured products will offer Richline’s retail partners a dramatic new range of options and increased value, while preserving the legacy of customer satisfaction that both companies prioritize,” said Dave Meleski, Richline Group’s President.

Richline’s CEO, Dennis Ulrich, said “this acquisition will allow The Aaron Group to continue as the leader of bridal, three-stone and fashion diamond and gemstone fine jewelry while leveraging Richline’s advanced capabilities across our entire jewelry value chain.”

Per Aaron Group President, Robert Kempler, “Richline Group support will enable The Aaron Group to grow faster, introduce new designs and collections more rapidly, and expand on our history of success by reaching a broader array of customers and markets. Our mutual goal is to anticipate, foster and drive positive change in our industry.”

About The Aaron Group

The Aaron Group is an international jewelry manufacturer with hundreds of employees in offices around the world. A firm believer in the power of jewelry to connect people, The Aaron Group has grown from its 1950 founding as a one-man shop to become globally recognized in the jewelry industry, with an unblemished reputation for quality, value, and commitment to the customer.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire to Sell Marine Insurance in Canada

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Berkshire Hathaway Specialty Insurance (BHSI) is introducing Inland and Ocean Marine Insurance in Canada and has named Gord Rider as Senior Marine Underwriter.

“We are pleased to welcome Gord to our team of marine specialists,” said John Evans, Vice President of Marine, BHSI. “With Gord at the helm, BHSI in Canada has launched ocean marine products — including ocean cargo, stock throughput and project cargo insurance — as well as a full line of inland marine products. All of these products come with BHSI’s hallmark clarity of coverage and formidable financial strength.”

Gord joins BHSI from Chubb Insurance Company of Canada, where he was most recently Senior Marine Underwriter. Before that, he was a Marine Underwriter at Chubb and at Coast Underwriters Ltd. He received a Bachelor of Commerce degree from Dalhousie University in Halifax.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

MiTek Industries Appoints New CEO

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Berkshire Hathaway’s MiTek Industries, Inc. has appointed Mark Thom as its new CEO. The current CEO, Tom Manenti, will assume the role of Executive Chairman for 2017. For now, Mr. Manenti will continue to report to Warren Buffett.

Mr. Thom has a rich background of executive leadership and achievement in management and sales. For 16 years, he led teams within the former Tyco Healthcare, a nearly $12 billion global manufacturer of medical and pharmaceutical products, where Mr. Thom received top honors as a sales person.

Thom began his career at Tyco Healthcare after graduation from Miami University and rose to the role of president of the Tyco’s Vascular Therapy division in 1998, just eight years after he left college. Soon after Tyco Healthcare acquired Mallinckrodt Medical, Mr. Thom was named president of Mallinckrodt’s Diagnostic Imaging business, and he was later named Group President, Tyco Healthcare in early 2003. In recent years he served as leadership consultant to the MiTek senior leadership team, where he learned the MiTek business and its culture.

Mr. Thom assumes the CEO role at MiTek at a fortuitous time for the Company. With notable acquisitions, diversification, and organic growth, MiTek has doubled in size since 2011, and has a strategic plan in place to double again over the next five years. His addition now provides leadership continuity as Mr. Manenti retires in January, 2018.

“The naming of Mark to the CEO position addresses one of my key business imperatives – Leadership Development and Succession Planning – a well-developed and widely used road map for MiTek leadership into the future,” said Tom Manenti, Chairman and CEO of MiTek. “More importantly, Mark is simply a top performer, in the very elite class of executives in multiple categories of corporate operations and effective leadership. I was thrilled when Mark accepted the CEO position. It was a banner day for MiTek worldwide!”

MiTek is a diversified, global business supplying a wide range of engineered products; proprietary business management and design software; and automated equipment to the construction and industrial markets.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

The Hartford Makes Major Asbestos Reinsurance Deal with Berkshire Hathaway

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Berkshire Hathaway’s National Indemnity Company will provide up to $1.5 billion in reinsurance coverage for insurer The Hartford to cover for asbestos liability losses.

Under the terms of the transaction, The Hartford will pay NICO a reinsurance premium of $650 million in exchange for an aggregate adverse development cover for A&E losses beyond Dec. 31, 2016, aggregate net carried reserves, up to a limit of $1.5 billion.

The reinsurance will cover adverse development on substantially all of the company’s A&E reserves, excluding those held by the company’s U.K. property and casualty run-off subsidiaries (under contract to be sold with a closing projected for the first quarter 2017), as well as other non-U.S. operations with less than $3 million in A&E reserves. NICO will provide a collateral trust account as security for NICO’s claim payment obligations to the Hartford Insurance Pool. Berkshire will guarantee certain payment and performance obligations of NICO. The Hartford will retain responsibility for claims handling and other administrative services, subject to certain conditions.

The Hartford expects to recognize an after-tax GAAP loss of $423 million in the fourth quarter of 2016 as a result of this transaction.

Over the longer term, ratings agency A.M. Best believes the reinsurance transaction is credit positive for The Hartford and its subsidiaries as it significantly reduces the uncertainty of the group’s legacy A&E liabilities and will enhance the group’s risk-adjusted capitalization. Near term, however, The Hartford’s ratings will not be affected as risk-adjusted capitalization was comfortably supportive of its ratings and the variability in performance due to the adverse development of the A&E liabilities was not viewed as a substantial negative credit factor.

Chief Financial Officer Beth Bombara of The Hartford notes the company is trying to reduce “uncertainty for investors and others about the ultimate cost of these policy liabilities.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Special Report: Surging RV Sales Sets Off Gold Rush for Indiana Manufacturing Facilities

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Back in 2008 the recreational vehicle market hit a wall, a big wall, with sales plunging a precipitous 30% that year, and the next year was just as bad.

For Forest River, which had the financial strength of Berkshire Hathaway behind it, it was a time pull in the belt, and also an opportunity to acquire a competitor in Coachman Industries.

In 2008, Coachman was just days from closing when it sold itself to Forest River for next to nothing.

“With this transaction, we secure the future for this proud brand, and the employees of our RV Group. This announcement will also end the speculation over whether Coachmen itself will survive these extraordinarily difficult times, and preserve the jobs of our employee base, in both our RV and Housing segments”, said Coachman’s CEO Richard Laver at the time.

Hitting Record Numbers

Now, RV sales are back to levels not seen since the 1980s. 2016 sales industry-wide surpassed already rosy projections with around 420,000 RVs sold, and next year is projected to be up another 5%.

The sales also mean profits. In 2008, Coachmen’s sales not only crashed 52%, but it lost money on every vehicle it built. Today, sales industry-wide are not only robust, but profitable. Another leading manufacturer, Thor industries, saw record first-quarter FY 2017 net income of $78.7 million.

Adding Capacity

The strong sales have set up a gold-rush-like hunt for new manufacturing sites as RV manufacturers work to boost capacity. The heart of the gold rush is in Indiana, where 111 of the U.S.’s 228 RV manufacturing plants are situated.

Berkshire Hathaway’s Forest River, competitor Thor Industries, and companies such as Drew Industries, a supplier of components for original equipment manufacturers of RVs and adjacent industries, are all scrambling to secure new production facilities.

The scramble for new facilities is filling plants that in some cases have been sitting idle for almost a decade.

New Plants, More Jobs

With the rush for more facilities comes more jobs.

In September 2016, Highland Ridge RV, a manufacturer of towable recreational vehicles, opened a new $5.7 million, 92,000-square-foot facility in Shipshewana that also added 65 jobs.

More recently, Forest River purchased a 100-acre-plus industrial site in the town of LaGrange. The move brings much needed activity to a facility that has been sitting empty for the past eight years, and jobs to the community of roughly 2,700 people. The plant will provide some 250 jobs in the first year, and as many as 450 by the end of 2018.

Forest River has not announced exactly what it will be building at the new facility, but part of its production line from its Topeka plant is expected to be relocated to the facility.

With Indiana’s unemployment rate at only 4.2% in November 2016, well below the national average of 4.6%, the RV renaissance is clearly having a positive impact on the state’s economy. And the heart of the RV manufacturing in the counties of Elkhart and LaGrange have unemployment rates of 3.3% and 3.2% respectively,

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkadia Secures $49.5 Million of Non-Recourse Construction Financing for Multifamily Project in Cleveland

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Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has arranged a $49.5 million loan for Centric Apartments, a new multifamily property in Cleveland.

Director Dan Geuther secured the construction loan from Related Fund Management. The deal was completed on December 20.

The borrower was Midwest Development Partners, LLC, based in Shaker Heights, Ohio. The non-recourse construction loan features a three-year, interest only initial term, with two one-year extension options.

“The project–which was several years in the making–will fill a major need in the University Circle market and complete the transformation of a site which is considered by many as the best multifamily location in the city,” said Geuther. “To have a sophisticated lending partner like Related committed to the project says a lot about the strength of the development team and the University Circle market.”

Centric Apartments will be located at 11601 Mayfield Road in University Circle, the city’s arts, educational and medical hub. The property, which is directly adjacent to the Little Italy-University Circle RTA light-rail station, will feature 272-units, 27,000 square feet of commercial space, a 360-space parking garage and two-thirds of an acre of public green space.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.