Investors around the world keep a close eye on the goings-on of Warren Buffett and the multi-billionaire’s company Berkshire Hathaway Inc (NYSE:BRK.A)(NYSE:BRK.B). However, a deal between the investing great and home-grown insurance share Insurance Australia Group Ltd (ASX: IAG) has been under Aussiesâ noses for years.
The market has been reminded about a whole of account quota share (WAQS) agreement between S&P/ASX 200 Index (ASX: XJO) insurer IAG and Berkshire Hathaway subsidiary National Indemnity Company (NICO) today with news of its renewal. Though, other key deals between the pair have been scrapped.
The IAG share price is up 0.84% on the back of the announcement, trading at $4.80.
Letâs take a closer look at what agreements the pair have and havenât renewed.
IAG share price lifts on news of Buffett agreement
The IAG share price has climbed on Thursday after the company announced it renewed one of its previous agreements with Buffettâs Berkshire Hathaway.
The renewed WAQS agreement represents 20% of IAG’s WAQS program. It came into effect on 1 January 2023 and applies until 31 December 2029.
Quota share deals see an insurer â in this case IAG â offering a reinsurer â such as NICO â a portion of insurance premiums in exchange for paying out the same portion of claims â in this case, 20%.
IAG has now renewed 30% of the 32.5% WAQS with various reinsurers. Negotiations on the remaining portion are expected to be completed in the coming months.
Meanwhile, a strategic relationship agreement and equity ownership subscription agreement previously made with Berkshire Hathaway wonât continue.
IAG formed a strategic relationship with Buffettâs company in 2015. The billionaire said at the time:
I am 84 years old and this is my first investment in an Australian company. I’ve been very derelict, but it has been worth waiting for.
Back then, Berkshire Hathaway forked out $500 million for a 3.7% stake in IAG, paying $5.57 per share.
It also agreed its stake in the ASX 200 insurer would remain between 3.7% and 14.9%. Meaning the billionaire might now be free to sell his holding in the company.
IAG chief financial officer Michelle McPherson commented in todayâs release, saying:
The terms of the renewed agreement with Berkshire Hathawayâs NICO reflect the maturing of our partnership, and the removal of supporting subscription and strategic relationship agreements provides consistency with our other quota share partner arrangements.
The post What do IAG shares have in common with Warren Buffett? appeared first on The Motley Fool Australia.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Insurance Australia Group. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.