Berkshire Hathaway buys insurer Alleghany for $11.6 billion
Berkshire Hathaway, whose founder is the famous financier Warren Buffett, concluded a deal with the insurance business Alleghany. The acquisition amounted to 11.6 billion dollars.
The purchase of Alleghany is one of the steps of Buffett’s strategy to strengthen Berkshire’s position in the insurance sector. According to the investor, the latter is included in the four major businesses that bring the most profit.
It should be noted that the cost of the deal is 25% higher than the book valuation of Alleghany, which was conducted at the end of last year. The deal is projected to close in the last quarter of 2022. Despite the fact that the parties have already agreed on all the details, the companies are waiting for the approval of various regulatory agencies, and this may be delayed. According to the rules, while the relevant checks are going on, Alleghany has 25 days during which it can find another buyer for the deal on more favorable terms.
The key business line of Alleghany is reinsurance and property-casualty insurance services. The company has subsidiaries, one of which is considered the leading in the world in the direction of reinsurance. The structure also includes companies dealing with wholesale specialty coverages, casualty, and surety insurance.
Alleghany was founded in 1929, and since then it has grown into a major company that provides a wide range of services in the insurance sector. In addition, the business is developing a corporate investment business. One of the subsidiaries operates in different regions of the world, including Australia, Europe, Asia, and Africa. There is also a division in the structure that deals with oil production. However, the main directions for Alleghany are insurance and reinsurance, which generate more than 70% of the company’s total revenue.
For Berkshire, the deal with Alleghany will be the largest since 2016, when the company bought Precision Castparts for $37.2 billion. According to the terms, the insurer will be paid $848 per share. Part of the purchase price will be taken from Berkshire’s cash reserves, which total about $150 billion.
Warren Buffett’s company last year bought a stake in insurance broker Aon for a total of $943 million. This deal was the only investment for 2021, but the insurance sector was chosen. Such a decision once again confirms the prospects of this area and its importance for Berkshire. The company continues to steadily increase its share in this market, considering it extremely promising and profitable for investment.