Warren Buffett’s Berkshire Hathaway Acquires ‘Mini Berkshire’ Insurer Alleghany for $11.6 Billion

Mandatory Credit: Photo by Nati Harnik/AP/Shutterstock (12853890a)Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles as he plays bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb.
Nati Harnik/AP/Shutterstock / Nati Harnik/AP/Shutterstock

Berkshire Hathaway announced it acquired insurer Alleghany Corp, for $11.6 billion on March 21, finally deploying some of its massive cash reserves.

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The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including approval by Alleghany stockholders and receipt of regulatory approvals, and Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway after closing, according to a press release.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years. Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon.” Warren Buffett, Berkshire Hathaway’s Chairman and Chief Executive Officer, said in the press release. 

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Warren Buffett’s Berkshire Hathaway reached a $700 billion market cap in the first week of January, despite his aggressive buyback strategy in 2021, as GOBankingRates previously reported.

Indeed, in the third quarter of 2021, approximately $7.6 billion was used to repurchase Berkshire shares — bringing the nine-month total to approximately $20.2 billion, according to the earnings report. In January, the Oracle of Omaha’s conglomerate sat on more than $149 billion in cash, cash equivalents and short-term Treasury bills, up from $144 billion in the previous quarter, as GOBankingRates reported.

Cathy Seifert, VP at CFRA Research, told GOBankingRates that Berkshire’s acquisition of Alleghany is likely to be one of its more seamless transactions, though it represents the first insurance/reinsurance transaction in quite some time. 

“Alleghany is often referred to as a “mini-Berkshire” because of its similar underwriting and investment strategies,” Seifert said. “Alleghany’s newly appointed CEO, Joe Brandon, is also a known entity in Berkshire circles since he used to be an executive at General Re — a Berkshire owned reinsurer — and has had a long business relationship with Berkshire.”

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Seifert added that CFRA views this transaction positively since it provides Alleghany with the capital support of a larger entity while increasing Berkshire’s presence in the insurance and reinsurance marketplace at a time when prospects for growth here are enhanced by a firm pricing environment and increased demand for risk transfer services.

She added that while there may be some overlap between Berkshire and Alleghany clients, CFRA doesn’t see this as material.

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“Alleghany shareholders will get cash and a nice premium to Friday’s closing price, but will not be getting Berkshire shares,” she added.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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