Is there anything Warren Buffett likes more than insurance float? Probably not, if you look at the more than $100 billion in insurance float generated by Berkshire Hathaway’s GEICO and its other insurance companies.
Now there’s more float on the way with Berkshire Hathaway’s recently announced $4.1 billion acquisition of auto dealership group Van Tuyl Group.
The float comes because Van Tuyl Group owns Old United Casualty Company, which provides extended warranty services and other automotive protection plans to 1.6 million customers.
In addition, Van Tuyl Group also owns Old United Life Insurance Company, which sells credit Life, credit Accident and Health policies through the Van Tuyl Group’s automobile dealerships and other outside dealerships.
New Units Will Join Berkshire’s Existing Insurance Companies
Both the Old United Casualty Company, and the Old United Life Insurance Company, will be split off from the Van Tuyl Group, and will become part of Berkshire’s wholly-owned National Indemnity Company.
The Van Tuyl Group will be rechristened Berkshire Hathaway Automotive.
The Van Tuyl Group is the number one privately-held auto dealership group and is fifth nationally among total dealership groups. The company also serves as a management consulting company that recruits on behalf of a large number of independently owned automotive dealerships.
2013 revenues were nearly $9 billion from 78 independently operated dealerships with over 100 franchises covering Arizona, California, Florida, Georgia, Illinois, Indiana, Missouri, Nebraska, New Mexico and Texas.
The Van Tuyl Group was founded in 1955 by Cecil Van Tuyl with a single Kansas Chevrolet dealership. Joined by his son Larry in 1971, the company is now headed by Larry Van Tuyl, as the current Chief Executive Officer, and Jeff Rachor.
Rachor, who previously headed Fortune 500 auto dealer group Sonic Automotive, and did a stint as the head of auto parts retailer Pep Boys, will take over as Chief Executive Officer for Berkshire Hathaway Automotive. Larry Van Tuyl will continue to manage the company as chairman.
The acquisition is expected to close in the first quarter of 2015, after clearing regulatory hurdles and gaining approvals from auto manufactures.
© 2014 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.