Berkshire Hathaway’s new minority stake in the Australian insurer Insurance Australia Group Limited (IAG) includes non-dilution rights that have been approved by the Australian Securities Exchange (ASX).
Under a waiver granted by ASX, IAG has agreed to give non-dilution rights to Berkshire’s wholly-owned National Indemnity Company (NICO), granting the company the right to buy shares at the same price as other investors if there is an issuance of securities.
In June of 2015, Berkshire through NICO paid A$500 million (US$387.8 million) for 3.7% of IAG.
Under the terms of the agreement, IAG agreed to give NICO 20% of IAG’s premiums in exchange for paying 20% of its claims over the next 10 years, a move that right off the bat brings NICO $1.78 billion of premium annually.
The IAG waiver was one of twelve waivers granted by ASX in the past year. Other companies receiving waivers included Aurelia Metals, Clancy Exploration, and Ensogo Limited.
© 2015 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.