Insurance Australia Group Limited
(ASX:IAG) has entered a strategic share agreement with Berkshire Hathaway.
Warren Buffet has given IAG the tick of approval saying he had developed a great amount of respect for IAG after working with them over the past 15 years.
Under the initial 10-year 20 per cent quota share agreement Berkshire Hathaway will take a 3.7 per cent stake in IAG via a $500 million share placement.
IAG will take over Bershire’s local small and medium business lines whilst Berkshire will acquire the renewal rights to IAG’s large corporate property and liability insurance.
The deal reduces IAG’s earnings volatility and capital requirements and allows Berkshire Hathaway a fast tracked entry to the region.
IAG made a net profit of $642 million for the first half of the 2015 financial year.
