> Warren Buffett Blog: National Indemnity strikes deal with Buffett

Thursday, July 24, 2014

National Indemnity strikes deal with Buffett

Last week Berkshire’s Omaha-based National Indemnity Co. agreed to take over as much as $6.5 billion in Liberty Mutual Holding Co.’s liabilities for insurance policies covering asbestos, environmental and workers’ compensation risks, in exchange for a premium of about $3 billion.

The transaction means National Indemnity, part of Berkshire’s insurance operation headed by Ajit Jain, would manage claims for damage that will stretch far into the future, and in the meantime use the $3 billion for other investments.

Berkshire made a similar agreement with American International Group in 2012, receiving $1.68 billion and taking over potential asbestos claims up to $3.5 billion.

For Liberty Mutual, based in Boston, the transfer of risk to Berkshire “eliminates a substantial source of uncertainty,” said Liberty Mutual Chairman and CEO David Long.

Berkshire will accept that uncertainty and, with its long-range financial view, expects to make a profit when all the claims end and investment results are added up.