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Buffet Bets on Business Insurance ‘Big Time’

*from www.bloomberg.com, May 3, 2013 (To view original article click here.)

Take Away #1: Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), is planning an expansion in commercial insurance after hiring four executives from American International Group Inc. (AIG).

Key Facts and Figures:

  • “We would like to get into the commercial-insurance business very big time,” Buffett said yesterday.
  • “We hired them because they’re very good at the commercial insurance business,” said Buffett.
  • Peter Eastwood, CEO of AIG’s property-casualty operation in the Americas, was among executives joining Berkshire, along with other managers with commercial-insurance experience.
  • AIG named executives this week to fill some posts after the insurer’s shares dropped 3.3% on April 26, as the departures were reported.
  • Berkshire has units that provide auto coverage and reinsurance and hasn’t played a big role in providing business policies, Buffett said.

Take Away #2: Buffett, who’s also Berkshire’s CEO said he didn’t poach the executives from New York-based AIG.

Key Facts and Figures:

  • “They came to us, they’ve called,” Buffett said.
  • “In fact some of them have called for a long time, so we did not initiate any of that,” said Buffett.
  • Robert Schimek was promoted by AIG to lead the Americas property-casualty unit.
  • Alexander Baugh took over the global casualty business, replacing David Fields, who left with Eastwood.

Take Away #3: AIG has been scaling back from some capital-intensive coverage, as CEO Robert Benmosche seeks to boost profits after repaying a U.S. bailout.

Key Facts and Figures:

  • AIG agreed to pay Omaha-based Berkshire $1.65 billion in 2011 to assume risk tied to asbestos policies, in a deal that gave Buffett funds to invest.
  • AIG has “a strong bench of seasoned property-casualty experts with deep product and global expertise,” Peter Hancock, CEO of AIG’s property-casualty business said.
  • The insurer “will continue to win on merits in every market where we choose to compete,” said Hancock.

Take Away #4: The executive defections prompted the first question on a conference call AIG held today to discuss first-quarter results.

Key Facts and Figures:

  • Benmosche responded that AIG retained 94% of the top performers among the insurer’s senior management last year.
  • “I know you want to focus on four people in the property- casualty business,” Benmosche said.
  • “We’re going to lose people to competitors from time to time,” said Benmosche.

*To view original article from www.bloomberg.com click here.

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