Berkshire Hathaway, the multinational conglomerate controlled by billionaire investor Warren Buffett, agreed to acquire Medical Liability Mutual Insurance Company (MLMIC), which is currently owned by its policy holders.
MLMIC is the largest underwriter of medical professional liability insurance in New York. The medical insurer decided to undergo a process called demutualization—converting from a policyholder-owned into a stock insurance company.
National Indemnity Company, a subsidiary of Berkshire Hathaway, will acquire MLMIC’s converted stock under the proposed demutualization, which is subject to the approval of policyholders and the New York State Department of Financial Services.
Buffett considers MLMIC a “gem”
MLMIC’s policyholder surplus (assets minus liabilities) was $1.8 billion as of December 31.
In a statement, Mr. Buffett said, “MLMIC is a gem of a company that has protected New York’s physicians, mid-level providers, hospitals and dentists like no other for over 40 years. We welcome the chance to add them to the Berkshire Hathaway family and enhance their capacity to serve these and other policyholders for many years to come.”
The deal is expected to be completed in the third quarter of 2017. Policyholders will receive a proportionate share of all the cash considerations paid by National Indemnity Company and they will no longer have an ownership interest in MLMIC after the completion of the transaction.
Becoming a member of Berkshire Hathaway
The Board of Directors of MLMIC believed that becoming a member of Berkshire Hathaway Group is in the best interest of policyholders because it will ensure the continuity of its medical professional liability insurance and other business.
Its affiliation to Berkshire Hathaway will improve its competitiveness, boost its financial strengthen, and flexibility to support the growth of existing product lines.
“We are delighted to partner with such a fine organization. MLMIC has always had strong standing and stability within the challenging New York insurance market, and the arrangement with Berkshire Hathaway will bring policyholders further peace of mind, knowing MLMIC will be able to offer an even higher level of financial security,” said MLMIC President Robert Menotti, MD.
Data from the National Association of Insurance Commissioners show that Berkshire Hathaway is the largest provider of medical professional liability insurance in the United States. The conglomerate is competing with American International Group (NYSE:AIG), CNA Financial Corp (NYSE: CNA) and The Doctors Company.