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Insurance

Berkshire Has $70 Million That It Needs to Put To Work

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Berkshire Hathaway now has another $70 million that it needs to invest.

Seritage Growth Properties, a national owner and developer of 150 retail, residential and mixed-use properties, has announced that on September 30, 2022, it made a voluntary prepayment of $70 million toward its $1.6 billion term loan facility provided by Berkshire Hathaway Life Insurance Company of Nebraska.

With the prepayment, $1.27 billion of the term loan facility remains outstanding. The prepayment will also reduce Seritage’s total annual interest expense related to the term loan facility by approximately $4.9 million.

© 2022 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 a 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.

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Insurance

GenStar Launches Real Estate Professionals E&O Program with RPS Signature Programs

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Berkshire Hathaway’s GenStar’s Delegated Programs Unit announces the launch of its Real Estate Professionals E&O program with RPS Signature Programs, the program administration division of specialty insurance distributor Risk Placement Services.

GenStar President and CEO Marty Hacala commented, “GenStar has been in the business of insuring real estate companies for the past 20 years. Our longevity in this class of business demonstrates our commitment to supporting the insurance needs of real estate professionals by offering broad coverage including for services as a real estate agent/broker, property manager, auctioneer, short-term escrow agent, and real estate consultant.”

Adrienne Woodhull, RPS Area President, said, “We are pleased to expand our relationship with GenStar through this new E&O program, building upon the success of our E&O appraisers’ program, which we launched earlier this year.”

The Real Estate Professionals E&O coverage includes:

• Limits of up to $2 million
• Contingent Bodily Injury and Property Damage coverage
• Open House and Failure to Disclose Pollution/Environmental Hazards subject to policy limits, Fair Housing coverage
• Free Extended Reporting Period may be available
• Defense costs outside the limits of liability available
• Prior Acts coverage with proof of continuous coverage
• Free risk management assistance hotline for all insureds
• Broad definition of professional real estate business including: Real estate agent/broker, property manager, auctioneer, short-term escrow agent, and real estate consultant

The program is available in the District of Columbia and all states except AK, LA, NY and WV. The District of Columbia and all eligible states will be written on an admitted basis except for the State of California where it will be offered on a non-admitted basis.

Matt Brown, GenStar Senior VP, Delegated Division Manager, noted, “We are excited to build the Real Estate Professional business with RPS. Both organizations have expertise in this line of business. We believe GenStar can deliver a competitive solution that will provide broad insurance protection for real estate professionals.”

© 2022 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 a 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.

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Insurance

Berkshire Hathaway Insurer Uses AI Software to Determine Wildfire Fire Risk

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With devastation from wildfires growing every year, Berkshire Hathaway Homestate Companies is now using advanced software that analyzes a property that falls within a wildfire perimeter and predicts how likely is it to be destroyed.

A recent report from Aon found there were three separate wildfires in 2021 alone that generated economic losses beyond $1 billion, which outlines the growing importance of property-specific risk models for maintaining coverage in wildfire-prone states.

BHHC is using Zesty.ai’s wildfire model (Z-FIRE™) that combines vital property details and actual loss data with machine learning to produce a predictive risk score.

BHHC has expanded their partnership with Zesty.ai, extending the use of Zesty.ai’s AI-powered wildfire risk model, Z-FIRE™, to 12 states.

Z-FIRE™ will be used to inform both underwriting and rating decisions, and the partnership expansion comes at a critical time for the insurance industry.

“Unfortunately, wildfires are impacting communities well beyond the western U.S., and managing that risk requires advanced models that help us truly understand wildfire risk at the individual-property level. Zesty.ai’s model has outperformed our homegrown wildfire risk model,” said Brian Hall, Vice President – Products and Underwriting at Berkshire Hathaway Homestate Companies. “We started working with Zesty.ai last year and saw an immediate opportunity to leverage granular wildfire insights that allow us to confidently write policies that commensurate with a property’s true risk.”

Z-FIRE™ not only provides regional and property-specific risk scores but also an explanation of the specific risk factors affecting the property. Using artificial intelligence that has been trained on more than 1,500 wildfire events across more than 20 years of historical loss data, it considers property-level features that influence risk.

Topography, historical climate data and critical factors extracted from high-resolution imagery such as building materials and surrounding vegetation in multiple defensible spaces are taken into account. This empowers insurers with a true property-level risk score that effectively splits risk, while providing the flexibility to recognize mitigation efforts by homeowners and their respective communities.

“The Berkshire Hathaway Homestate Companies have always been known for taking a progressive, innovative approach to risk management, and as wildfires continue to reach new geographies we commend them for being proactive with their approach to rating and underwriting around wildfire risk,” said Attila Toth, Founder & CEO of Zesty.ai. “The broad adoption of Z-FIRE™, which is now used in rating and underwriting across the entire Western US, is a critical piece of hardening the insurance industry and their customers to defend against climate risks.”

© 2022 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 a 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.

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GEICO

GEICO Shutters All 38 California Offices

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GEICO has closed all 38 of its offices in California and laid off several hundred employees.

According to the insurer, the move will not impact its ability to write policies in the state.

“We continue to write policies in California, and we remain available through our direct channels for the more than 2.18 million California customers presently insured with us,” GEICO said in a Sacramento Bee article.

© 2022 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.

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Insurance

Berkshire Hathaway’s Trident Mortgage Company To Pay $22 Million for Deliberate Discrimination Against Minority Families

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The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) took action to end Berkshire Hathaway’s Trident Mortgage Company’s intentional discrimination against families living in majority-minority neighborhoods in the greater Philadelphia area.

The CFPB and DOJ allege Trident redlined majority-minority neighborhoods through its marketing, sales, and hiring actions. Specifically, Trident’s actions discouraged prospective applicants from applying for mortgage and refinance loans in the greater Philadelphia area’s majority-minority neighborhoods. If entered by the court, the settlement, among other things, would require Trident to pay a $4 million civil penalty to the CFPB to use for the CFPB’s victims’ relief fund. The Attorneys General of Pennsylvania, New Jersey, and Delaware also finalized concurrent actions.

“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” said CFPB Director Rohit Chopra. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”

“Last fall, I announced the Department’s Combatting Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country,” said Attorney General Merrick B. Garland. “As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color.”

“This settlement is a stark reminder that redlining is not a problem from a bygone era. Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws.”

Trident Mortgage Company is a limited partnership incorporated in Delaware. Trident is a wholly owned subsidiary of Fox & Roach LP, which is owned by Home Services of America, Inc. The ultimate holding company of Trident is Berkshire Hathaway, Inc.

Until it stopped accepting mortgage loan applications in 2021, Trident was a non-depository mortgage company operating in Delaware, Maryland, New Jersey, and Pennsylvania. Trident’s lending focus was first mortgage loans and refinancing home loans. Between 2015 and 2017, about 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (referred to as the Philadelphia MSA.) The Philadelphia MSA includes the cities of Philadelphia, PA, Camden, NJ, and Wilmington, DE, as well as Cecil County, MD.

The complaint describes how Trident redlined majority-minority neighborhoods in the Philadelphia MSA and actively discouraged applications from the people living in those neighborhoods. Trident’s self-defined market areas included majority-minority neighborhoods. However, Trident’s application data show it did not serve neighborhoods within its market areas equally. Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80% minority, more than half of the applications Trident generated were from white applicants.

Trident’s discriminatory actions, alleged by the CFPB and the DOJ, violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. The DOJ also alleged a violation of the Fair Housing Act. Specifically, the government’s investigation uncovered a wide range of problematic conduct by Trident, such as:

  • Distributing racist language and messages about certain neighborhoods: Trident’s loan officers, assistants, and other employees received and distributed e-mails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent on work e-mails included pejorative content specifically related to real estate properties’ locations and appraisals. The racist content also targeted the people living in majority-minority neighborhoods.
  • Avoiding sending its loan officers to market to majority-minority neighborhoods: Trident’s loan officers worked out of 53 different offices in the Philadelphia MSA, the locations of which were displayed on Trident’s website. Fifty-one of those offices were in majority-white neighborhoods. The other two offices were in neighborhoods with minority groups representing roughly 50% of the population. All 23 offices within the Philadelphia and Camden metropolitan areas that were within Trident’s lending area were in majority-white neighborhoods.
  • Developing marketing campaigns and advertisements that discouraged and ignored minority mortgage loan applicants: For example, between 2015 and May 2018, Trident conducted 15 direct mail marketing campaigns. All the individuals pictured in the campaigns’ marketing materials—both models and Trident employees—appeared to be white. These direct mail marketing campaigns would have discouraged applicants from majority-minority neighborhoods. Additionally, Trident targeted its marketing materials to majority-white neighborhoods. Trident’s open house flyers, for instance, were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods.

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 a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of

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Insurance

Berkshire’s Gen Re and Suffolk University Launch Strategic New Behavioral Economics Relationship

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Berkshire Hathaway’s Gen Re has looked to Suffolk University professors for their expertise in behavioral economics in a unique business relationship designed to benefit the reinsurer’s clients in the areas of underwriting, marketing, client engagement, customer service and more.

Behavioral economics draws from the fields of psychology and economics to better understand human behavior and decision-making when they deviate from strict rationality.

Over the past several years, Gen Re has conducted and shared results of several in-house behavioral economics studies focusing on key areas of interest to insurers. This research helped Gen Re’s reinsurance clients improve disclosure on insurance applications and personal history interviews, as well as explore other areas of interest such as policyholder communication, financial planning presentations, marketing materials and website design.

Expanding upon the Gen Re Research team’s existing efforts, the relationship with Suffolk University will provide:

• The ability for Gen Re clients to complete professor-developed and led behavioral economics training modules, extending from basic to advanced courses
• Broader outreach on the topic of behavioral economics and related applications in the insurance industry
• Speaking engagements with Suffolk University professors at Gen Re sponsored events

“Traditional economics is all about rational individuals, how they respond to prices, etc.,” explains Jonathan Haughton, professor of Economics at Suffolk University in Boston. “However, there are all sorts of cases where we don’t behave quite so rationally.”

Haughton and Suffolk Assistant Professor Lawrence De Geest both teach in the field of behavioral economics and are sharing their knowledge with Gen Re’s Research team. De Geest’s research examines the emergence of social norms and the effect of information on decision-making.

“All kinds of psychological factors outside of traditional economics play into people’s decision-making,” Haughton says. “For example, when it comes to health and medical disclosure, the way a question is framed in a questionnaire can make a big difference to what people choose to disclose. Loss aversion is another psychological factor that can affect economic decision-making. People are very averse to losing things to which they have become attached, so instead of saying, ‘Save $50 a month,’ you might say ‘Stop losing $50 a month. Don’t lose your ability to support your household.’”

Keith Brown, Senior Vice President and Head of Individual Life at Gen Re, says it’s important for insurers to pay attention to these important behavioral factors: “At a time of rapidly evolving underwriting approaches, uncertainty about future morbidity and mortality improvement, and increased insurer focus on client engagement, the behavioral economics training is being made available to Gen Re clients at an important industry inflection point.”

Suffolk University, located in the heart of downtown Boston, has a long history of partnering with industry to share relevant academic and business knowledge, research, and expertise.

“I am a big believer in faculty doing work with business, government and the non-profit sector outside of the academy,” Haughton says. “I think in the right proportion, it hugely benefits teaching and research.”

© 2022 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 a 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.

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GEICO

GEICO’s Executive Chairman Tony Nicely Retiring

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GEICO’s Executive Chairman Tony Nicely has announced he will retire from his role at the end of the year, concluding an illustrious 60-year career.

Prior to assuming his current position as executive chairman in 2018, Nicely served as chairman and CEO of GEICO for 25 years.

Nicely’s leadership ushered in the most impressive growth era in GEICO history and turned the company into one of the country’s most recognizable brands. The company surged ahead to become the nation’s second largest auto insurer, with nearly 17 million policyholders at the end of his tenure as chairman and CEO. Today, GEICO insures more than 18.6 million policyholders.

Under Nicely’s watch, GEICO’s associate population increased more than eight-fold to a family of some 40,000, working at 18 locations across the country.

During his time as chairman and CEO, GEICO also experienced one of its most critical milestones. In 1996, the company became a wholly owned subsidiary of Berkshire Hathaway after Berkshire Hathaway Chairman and CEO Warren Buffett announced the holding company would buy out the remaining 49% of shares it didn’t already own.

Nicely shared his expertise with the entire property/casualty insurance industry, serving on boards for the American Property Casualty Insurance Association, the Insurance Institute for Highway Safety and the Insurance Information Institute. He was also inducted into the Washington Business Hall of Fame for his achievements.

During Nicely’s tenure as GEICO chairman and CEO, Berkshire Hathaway Chairman and CEO Warren Buffett often commended Nicely for his distinguished leadership. Buffett wrote of Tony in his 2018 annual shareholder letter, “He is a model for everything a manager should be.”

In an earlier letter to shareholders, Buffett added, “If you have a new son or grandson in 2006, name him Tony,” after praising GEICO for having an exceptional year of growth and profitability.

Nicely came to GEICO in 1961 as an endorsement clerk in the company’s underwriting department. A teenager at the time, he initially viewed the opportunity as a short-term job so he could save money to attend college and pursue an engineering degree.

Nicely soon discovered a career at GEICO was his passion, and he was quickly promoted through several ranks in management before the Board of Directors elected him assistant vice president of underwriting at age 29.

Nicely went on to serve in executive roles with increasing responsibility before first assuming the role of CEO and later adding the title of chairman. His business expertise and humble leadership is largely responsible for shaping GEICO into the company it is today.

© 2021 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.

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GEICO Insurance

GEICO in Major Hiring Push in Georgia

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Berkshire Hathaway’s auto insurer GEICO hiring in Macon, Georgia. GEICO looks to hire nearly 500 new associates in claims, service, sales, salvage/title processing, emergency roadside help and other vital areas in Macon.

The company is also significantly increasing starting salaries across those positions.

The company’s Total Rewards benefits package includes health, dental and vision coverage, paid vacation and holidays, parental leave, and continuing education and tuition reimbursement.

Founded in 1936, GEICO is the second largest auto insurer in the U.S., covering more than 28 million vehicles in all 50 states and the District of Columbia.

GEICO employs more than 43,000 associates countrywide.

© 2021 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.

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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Offers Directors & Officers Liability and Professional Indemnity Policies in Ireland

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance has added to its customized suite of Directors & Officers (D&O) Liability and Professional Indemnity policies, for customers in Ireland.

The company has launched a new suite of Professional First coverages that includes Architects, Engineers & Consultants Professional Indemnity and Project Specific Professional Indemnity, Design & Construct Liability and Miscellaneous Professional Indemnity Insurance.

These new products expand BHSI’s capabilities in Ireland by offering primary solutions to customers in the Commercial Professional Indemnity space. In Ireland, BHSI already provides primary solutions via its Executive First Directors & Officers Liability Insurance for commercial customers and Professional First Asset Management Liability and Financial Institutions Civil Liability for financial institutions.

“Companies in the Irish market face growing and evolving management and professional indemnity exposures at the same time they are navigating challenging and uncertain insurance market conditions,” said Caoimhe Gormley, Executive & Professional Lines, Ireland. “BHSI is pleased to provide companies across Ireland with a wide range of new Executive & Professional Lines options backed by the certainty of stellar financial strength, our long-view underwriting, and the excellent service that comes with our CLAIMS IS OUR PRODUCT® philosophy.”

© 2021 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

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Berkshire Hathaway Specialty Insurance Insurance

Berkshire Hathaway Specialty Insurance Expands Casualty Capabilities to Energy & Technical Lines in the UK

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Berkshire Hathaway Specialty Insurance has launched Energy and Technical Lines Casualty products in the UK and established a dedicated London-based Energy & Technical Lines underwriting team.

The company’s UK Casualty Energy & Technical Lines team includes:

• Oliver Brown, Manager, Energy Casualty. He comes to BHSI with 20 years of experience in technical energy risks. He most recently spent 10 years at AXA XL as Class Underwriter, Energy Casualty.

• Penny Wang, Senior Energy Casualty Underwriter. She joins BHSI with 16 years of energy casualty experience, most recently as Senior Casualty Underwriter at Starr Companies.

• James Emson, who has been promoted to Casualty Manager, Technical Casualty, UK. He was previously Senior Casualty Underwriter, UK.

• Jack Erritt, Technical Casualty Underwriter, UK. He was most recently Energy Casualty Underwriter at AIG.

“We are pleased to expand our casualty capabilities with the deep technical risk expertise of our new team,” said Hilary Browne, Head of Casualty, UK & Europe. “Now BHSI can provide both technical Casualty and Property solutions, backed by stellar financial strength and service, to energy operations and other technical risks across the U.K.”

© 2021 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.