IAG and Berkshire Hathaway will trade staff as part of a landmark partnership deal between the two companies, announced yesterday.
As part of the $500m deal, the US-based Berkshire will pay $500 million for a 3.7% stake in IAG, along with paying 20% of IAG’s claims in exchange for taking 20% of its gross written premium.
As well as this, IAG will take over Berkshire’s local personal and SME lines, which were launched in April, while Berkshire will acquire renewal rights to IAG’s large corporate and property and liability insurance business in this country.
IAG Managing Director and CEO Mike Wilkins says the books involved in both instances are relatively small – less than 1% of total premium, in IAG’s case – but the move is calculated to play to the abilities of each business.
“It’s all about leveraging the strengths and capabilities of each organisation,” he says.
“We will take a number of employees from Berkshire Hathaway and there will probably be three or four people from our company who will go across.
“We’ve always had a very good relationship with Berkshire Hathaway and this is the next logical step.”
Berkshire Hathaway CEO Warren Buffett says the deal is just the latest iteration of a relationship that goes back 15 years.
“As the years have passed and I’ve gotten to know them better and they’ve gotten to know us better, we both found a great deal to admire in each other’s organisation,” he says.
“So very recently we decided to cast aside a commercial relationship and establish a very important and enduring partnership arrangement. Bringing these two companies together will benefit each company in many significant ways.”
Buffett says that although this is his first investment in an Australian company, he expects Berkshire Hathaway to be involved in the Australian insurance market for “decades and decades and decades”.
“Our first love, our long-time love, our future love has always been the insurance business,” he says.