Tag Archives: Insurance

Berkshire Hathaway Assumes Motor Accident Commission’s Back Book of Compulsory Third Party Claims

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Berkshire Hathaway is investing in South Australia, the conglomerate is taking over the Motor Accident Commission’s ‘back book’ of Compulsory Third Party (CTP) vehicle insurance claims.

The South Australia treasurer, Rob Lucas, said Berkshire Hathaway would establish operations in Adelaide as its Reinsurance Division takes over management of the Motor Accident Commission’s ‘back book’ of Compulsory Third Party (CTP) vehicle insurance claims.

Lucas said the move – to take effect from January 1, next year – was a natural consequence of the former Labor government’s decision in 2014 to privatize the provision of CTP vehicle insurance in SA and would put the state on the map with global investors.

“This is a significant coup for South Australia,’’ said Treasurer Lucas.

“Having an investment company of Berkshire Hathaway’s global standing come and set up in Adelaide not only speaks volumes for our sound business environment, but for the progressive leadership of the new Liberal government under Premier Steven Marshall.

“Berkshire Hathaway’s reinsurance arm, National Indemnity Company, is the only reinsurance company in the world with the same AA+ credit rating as South Australia, offering SA policy claimants security over future claims, as well as excellent value for taxpayers who no longer bear the risk of movements in investments and claims outcomes.

“For example, this year’s Mid-Year Budget Review will include a significant reduction in returns to the budget from MAC.

“Put simply, assets and liabilities from MAC will be transferred to Berkshire Hathaway’s National Indemnity Company, so that all the risks of managing MAC’s liabilities will be transferred to Berkshire Hathaway.

“Part of the arrangement will see $300 million of the reinsurance premium retained in South Australia – with at least $100 million retained for five years – for local funds management.

“The Government will consider a range of options to help implement a key election commitment to grow local funds management activity.”

Berkshire Hathaway CEO and Chairman Warren Buffett said he looked forward to the potential of growing his business in South Australia.

“We are thrilled to have agreed terms with South Australia to reinsure their auto liabilities, and we would love to find more opportunities to do business there,” Buffett said.

Berkshire Hathaway Inc. also has significant worldwide interests in energy, utilities, infrastructure, rail, retail and manufacture.

In October, the State Government announced it would wind down the Motor Accident Commission, a ‘natural consequence’ of the former Labor Government’s decision in 2014 to privatize the provision of CTP vehicle insurance in SA – which had been MAC’s core function.

MAC ceased writing new CTP insurance policies from July 1, 2016 but has remained responsible for managing a ‘back book’ of claims issued up to and including June 30, 2016.

The MAC Board has approved acceptance of the Berkshire Hathaway bid.

Background

The former Labor government, in September 2014, approved a new framework to assess unsolicited proposals to government.

Under this framework, and just prior to the state election, Berkshire Hathaway submitted an unsolicited proposal to the former Labor government to manage the ‘MAC back book’. This bid was only valid for an off-market exclusive transaction.

Treasury engaged respected financial advisory firm Moelis who concluded the proposal was unique and presented as value for money. Moelis recommended approval for the proposal and concluded Berkshire Hathaway’s history supported the conclusion that the Berkshire Hathaway bid was only valid for an off-market exclusive transaction.

The existing Allianz claims management contract will remain in place at least until its current expiry of June 30, 2019. Berkshire Hathaway will explore with Allianz long-term arrangements. Claimants will not experience any change in their claims management experience.

After the deal is concluded, budgeted returns from MAC to the budget will reduce by up to an estimated $68 million over the 3-year period from 2019-20.

Early next year, the Government intends to release most of the contractual documentation with some commercially confidential provisions redacted.

© 2018 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.

New York’s Top Medical Liability Insurer Now a Berkshire Hathaway Company

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MLMIC Insurance Company (formerly known as Medical Liability Mutual Insurance Company) (“MLMIC”), has completed a conversion from a property and casualty mutual insurance company to a property and casualty stock insurance company and its acquisition by National Indemnity Company, a subsidiary of Berkshire Hathaway.

As a subsidiary of Berkshire Hathaway, MLMIC will have enhanced capacity and financial strength to continue to serve New York State physicians, hospitals and dentists as it has for over 40 years. MLMIC remains the largest underwriter of medical professional liability insurance in New York and continues to be a New York‐focused medical malpractice writer regulated by New York State. It will be operated by the same Board of Directors and staff that have served the market well for several decades.

Warren Buffett, Berkshire Hathaway’s CEO stated, “MLMIC is a gem of a company that has protected New York’s physicians, mid‐level providers, hospitals and dentists like no other for over 40 years. We are delighted to add them to the Berkshire Hathaway family and enhance their capacity to serve these and other policyholders for many years to come.”

© 2018 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 Named a Top 5 Company for Women in IT

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GEICO has been recognized as one of the Top 5 Companies for Women Technologists by AnitaB.org, a global nonprofit agency that recognizes companies building workplaces where women can thrive.

Using a rigorous methodology that looks at representation, employee experience, programs and policies, AnitaB.org analyzed data from 80 companies. The five companies with the highest cumulative scores in their respective workforce size categories earned placement on the 2018 Top Companies for Women Technologists Top 5 lists. GEICO was recognized for companies with a technical workforce of between 1,000 and 10,000 employees.

Marie Motowylak, GEICO’s director of decision sciences and business transformation, said GEICO is both appreciative and motivated by the recognition.

“We are very proud of the efforts we have made to develop an inclusive environment with a keen focus on training, career-advancement and promotional opportunities for women into leadership roles,” she said. “More and more women are taking advantage of the many IT career opportunities at GEICO, and we will continue to create rewarding career paths for them.”

Even before this latest recognition, GEICO’s efforts to support women in IT had not gone unnoticed. Earlier this year, two of the company’s IT associates were recognized by the Washington, D.C.-based nonprofit Women in Technology, and last year, GEICO was the winner of AnitaB.org’s coveted Top Companies for Women Technologists award.

“IT at GEICO plays a central role in creating seamless, innovative and dynamic insurance experiences for our customers. The inclusiveness and the diversity of our team of technologists drives our innovation and makes us a stronger and better company,” said GEICO Executive Vice President and CIO Greg Kalinsky.

© 2018 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 Provides $2 Billion Loan to Seritage Growth Properties

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Seritage Growth Properties a national owner of 249 properties totaling over 39 million square feet of gross leasable area, announced today that the Company has entered into a $2.0 billion term loan facility (the “Term Loan Facility”) with Berkshire Hathaway Life Insurance Company of Nebraska.

“This new financing is a transformational step in the evolution of our Company, which we started three years ago, and positions us to further accelerate our role as a leading retail and mixed-use developer across the country,” said Benjamin Schall, President and Chief Executive Officer. “We very much appreciate Berkshire Hathaway’s confidence in our team and platform, and are energized by our growing opportunities to create lasting value for our shareholders, partners and local communities.”

The $2.0 billion Term Loan Facility, which matures on July 31, 2023, provides for an initial funding of $1.6 billion at closing (the “Initial Funding”) and includes a committed $400 million incremental funding facility (the “Incremental Funding Facility”). Funded amounts under the Term Loan Facility bear interest at a fixed annual rate of 7.00%, while amounts available under Incremental Funding Facility will be subject to a 1.00% annual fee until drawn.

The Company used a portion of the proceeds from the Initial Funding to fully repay its outstanding mortgage loan and unsecured term loan. Net proceeds from the Initial Funding, combined with existing balance sheet cash and the release of cash reserves held by the previous lender as of June 30, 2018, provide the Company with over $600 million of cash liquidity, in addition to access to the $400 million Incremental Funding Facility.

© 2018 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 to Hire 400 IT Professionals in Indianapolis

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GEICO is now hiring up to 400 software engineers, IT architects and analysts for the new IT Center of Excellence at its expanded site in Indianapolis, Indiana.

Career opportunities are available from entry to senior levels.

GEICO’s Center of Excellence seeks to develop innovative methods to better serve customers.

“We are excited about building a strong team that will play an essential role in helping GEICO create state-of-the-art cloud software applications,” said Katie Sauls, GEICO Indianapolis’ director of IT. “We are looking to hire those who can unleash creative ways to use tomorrow’s technology to lead the way to better customer interaction.”

GEICO IT received a prestigious 2017 Top Companies for Women Technologists Award from AnitaB.org for creating a “culture that revolves around promoting diversity and inclusion” and offering “programs for entry level technologists and management that provide ongoing training for continued professional growth.”

GEICO has been named as a “Top Workplace” by the Indianapolis Star for three consecutive years, and is ranked as the top global insurance group in the world based on revenue and as one of Fortune magazine’s “World’s Most Admired Companies.”

© 2018 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 to Add 500 Employees in Kansas at New Office

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GEICO announced at the ribbon-cutting event that opened its newest office in Lenexa, Kansas that it will add 500 associates during the next five years.

Joining GEICO Chairman Tony Nicely in making the announcement were Kansas Governor Jeff Colyer, M.D., Warren Buffett, chairman of Berkshire Hathaway, GEICO’s parent company, and U.S., state, county and local officials.

“Kansas’ business-friendly climate continues to attract innovative, pioneering companies like GEICO,” said Gov. Colyer. “We appreciate GEICO for recognizing Kansas as a state where financial services firms can be very successful. The 500 new jobs created by GEICO’s investment will be a tremendous boost for the Kansas economy, and we are looking forward to the future growth of this partnership.”

“We are very pleased that we’ll have this chance to become a part of the enterprising and highly thriving area in Lenexa and Kansas City,” said Tony Nicely. “When we began looking for a new office, everything we learned about the community made us eager to open a new operation here. We expect to have it up and running close to Labor Day.”

GEICO president Bill Roberts noted that GEICO will begin recruiting soon for sales and service positions in its

GEICO Insurance Agency (GIA) operations in Lenexa. Later the company will be hiring claims professionals.

© 2018 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.

Warren Buffett Realistic on Autonomous Cars Negative Impact on Auto Insurers

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With GEICO Insurance one of Berkshire Hathaway’s biggest assets and moneymakers, the impact of autonomous vehicles on insurance rates will play a big role on future profitability in the auto insurance sector.

Clearly, Warren Buffett is realistic that a world with safer cars will mean declining rates.

While noting that replacement parts of cars are far more expensive than years ago, ultimately Buffett sees a decline in rates due to fewer collisions.

“…A safer car is going to bring lower insurance rates,” Buffett said while appearing on CNBC’s Squawk Box the Monday after Berkshire’s annual meeting. “There’s one some– there’s– modest offset to that in that, in terms of collision activity– the damage is done to a car by in terms of a bumper or a side rearview mirror something. Costs far more now, it’s a much more complex product. So the damage per accident, not human damage, but physical damage to the car, that will probably go up substantially. But the number of accidents won’t– you won’t see widespread adoption unless they’re safer. And we want a safer car. So it’s net, it will be bad for the auto insurance industry over time if autonomous cars become a big part of the fleet.”

Buffett also noted that the exact timeframe that autonomous vehicles will have a big impact on rates is hard to know, as there will still be a lot of nonautonomous vehicles on the road for years to come.

“Well, it– we don’t know, I mean, what it’ll be. And you’ve got 260 million cars on the road. Let’s just say that 10% of the people took up– autonomous cars in a year. Now you’re talking about– a million eight outta the 18 million. And– there’s– a big life cycle to it and all that. But what does best for the consumer and is safer over time really will prevail– over time,” Buffett said.

Currently, GEICO insures more than 24 million vehicles in the United States.

© 2018 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 Hathaway Specialty Insurance Expands Insurance Offerings in Asia

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Berkshire Hathaway Specialty Insurance Company (BHSI) today introduced Executive First Private Company Portfolio and Executive First Nonprofit Organisation Portfolio policies in Asia.

“Our Private Company and Nonprofit Organisation Portfolio forms provide far-reaching, contemporary coverage backed by BHSI’s financial strength,” said Nero Shiu, Senior Manager, Executive & Professional Lines, BHSI in Hong Kong. “Both policies reflect our commitment to providing the simple, concise solutions customers need for multifaceted management liability risks in today’s world.”

The Private Company Portfolio extends coverage to both individuals and the entity and includes Directors & Officers Liability, Employment Practices Liability, and Employee Dishonesty coverages.

The Nonprofit Organisation Portfolio offers similar coverages, with the addition of Professional Indemnity protection to address the specific needs of a nonprofit organisation. Key features include pre-investigations cost coverage, court attendance coverage, and advancement of defence costs. Professional Indemnity protection includes coverage for corrective actions to help nonprofit organisations mitigate potential losses and avoid claims.

“Our new policies address the full range of claims private companies, nonprofit organisations, and their directors and officers may encounter today — from lawsuits arising from breach of compliance and disclosure requirements, to employee theft, to claims sparked by the acts of employees,” said Edwin Sim, Assistant Vice President, Executive & Professional Lines, BHSI in Singapore.

© 2018 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 Hathaway Specialty Insurance Expands Australia Operations

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Berkshire Hathaway Specialty Insurance (BHSI) is expanding its presence in Australia, opening a new office in Perth, Western Australia.

BHSI named Anthony Prindiville to lead its Casualty underwriting and Mark Shepard to lead the Property underwriting there.

“Expanding our footprint into Western Australia will enhance our ability to build lasting relationships with brokers and customers throughout the country,” said Chris Colahan, President, Australasia. “We are pleased to have Anthony and Mark at the helm as we build our local team in Perth. We look forward to developing a full suite of insurance products, risk management and claims services in this region.”

Like the BHSI offices in Sydney, Melbourne and Brisbane, BHSI’s Perth office will underwrite casualty, property, mining, energy, construction, power, marine, transport and logistics, healthcare liability, accident and health, and executive and professional lines for a broad range of business segments.

Anthony comes to BHSI with over 30 years of insurance industry experience, most recently as Global Distribution Manager at Chubb Insurance Australia Limited. He holds a Senior Associate designation from ANZIIF. Anthony joins Mark Shepard, Manager – Property, who commenced in BHSI’s Perth office in January.

Mark has been in the industry for over 16 years, most recently as Underwriting Manager – Property, Technical Lines and Energy at Chubb Insurance Australia Limited.

© 2018 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.

Commentary: Does Market Volatility Hurt Berkshire’s Insurance Business?

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Does the return of market volatility hurt Berkshire Hathaway’s insurance business?

Ratings agency A.M. Best thinks so.

In A.M. Best’s report. “Rising Volatility: Negative Implications for Insurers,” they note that equity market volatility historically has had severe negative implications for life insurers whose assets and liabilities correlate strongly with equity prices.

However, they note that de-risking in the form of decreased exposure to annuities, and new products such as managed volatility funds, have dampened the sensitivity.

The rating agency states that equity market volatility has been elevated since the spike in early February 2018, and with the announcement of steel and aluminum tariffs, the stock market will most likely experience more volatility than last year.

The VIX, dubbed the stock market’s “fear gauge,” was low throughout 2017 and touched an all-time low of 9.14 in November. It spiked to 37.32 on February 5, 2018. In comparison, its peak in 2017 was only 15.96.

A.M. Best views prolonged rising stock market volatility as a credit negative for U.S. insurers with significant equity exposure; in particular, stock market leverage for the property/casualty segment has crept up since the most-recent financial crisis and life insurers are still sensitive to equity markets though they have employed mechanisms to de-risk.

For property/casualty and health insurers, the sensitivity to the equity markets is proportional to their equity holdings in general and equity holdings leverage.

Best also notes that although changes in equity values affect the capital and surplus of all sectors, only the life/annuities segment sells products that are tied to the equity markets.

They do say that steps variable annuity writers took to de-risk their products since the late-2000s have proven effective in limiting earnings volatility; however, the de-risking measures, along with the increased investment fees associated with managed volatility funds, have made newer variable annuity products less attractive to consumers and is one reason among many other reasons that have caused a decline in sales.

© 2018 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.