(BRK.A), (BRK.B)
Berkshire Hathaway has agreed to acquire healthcare liability insurer PLICO, Inc.
The deal between Berkshire Hathaway’s MedPro Group (MedPro) and the Oklahoma State Medical Association (OSMA) will see Berkshire take over the Oklahoma City-based PLICO, which serves approximately 2200 healthcare providers in Oklahoma, and is the largest healthcare liability insurer in Oklahoma.
Founded in 1979, PLICO has annualized gross written premiums of about $30 million, and had a statutory surplus of over $60 million at year-end of 2014.
The “bolt-on” acquisition is only the second acquisition for MedPro since Berkshire Hathaway acquired it a decade ago.
“Joining Berkshire Hathaway’s MedPro Group emboldens PLICO’s expansion efforts by providing additional opportunities not available to us before,” said Carl Hook, M.D., President and CEO of PLICO. “MedPro shares our commitment to always put the insured first, and this transaction will give PLICO the unquestioned financial strength and additional product options to better serve local healthcare providers and entities without sacrificing our reputation for high-quality customer service and relational focus. Both PLICO and MedPro insureds will benefit greatly from our collaboration, which leverages the best combination of national resources with local expertise and service.”
PLICO is not currently rated by leading insurance rater, A.M. Best, but is expected to apply for financial strength ratings and be positioned to offer additional products and services.
Prior to the PLICO acquisition, Berkshire’s MedPro had $874 million in annual premiums and more than 140,000 customers.
Another Bolt-On Acquisition
Berkshire Hathaway has a two-track approach to acquisitions. One track is major acquisitions, such as the purchase of BNSF Railway, Heinz, and Van Tuyl Group, among others, which are multibillion dollar acquisitions that usually become new stand-alone companies under the Berkshire Hathaway umbrella. The other track is what Berkshire labels “bolt-on” acquisitions that add additional companies to Berkshire’s existing companies. While most of these bolt-on acquisitions are small, at least in relative terms of adding to a $360 billion company, they add up, and Berkshire does over $3 billion in total bolt-on acquisitions a year in the aggregate. These acquisitions, which have in recent years included companies such as Beveridge dispenser-maker Cornelius (added to the Marmon Group) and Meadowbrook Meat Company (added to McLane Company), as just two examples, continuously add significant market-share and new capabilities to Berkshire’s companies.
© 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.