Sydney: Warren Buffett's Berkshire Hathaway will pay USD 380 million for a stake in Sydney-based Insurance Australia Group (IAG) as it seeks to expand in Asia, the companies said on Tuesday.
Under a 10-year strategic relationship, Berkshire will receive 20 percent of IAG's gross written premium and pay 20 percent of its claims. Berkshire will also take a 3.7 per cent stake in the group as the Australian firm pushes into Asia.
The news sent shares in IAG soaring 5.03 per cent in afternoon trade to 5.85 Australian dollars.
"Our strategic partnership with IAG will help fast-track our entry into this region, and provides us with opportunities to leverage IAG's extensive capabilities while also making our expertise available to IAG," Buffett said in a statement.
IAG chairman Brian Schwartz said the company was delighted to welcome Berkshire Hathaway as a strategic partner and shareholder.
"We believe the partnership is an endorsement of our strategy, the strong franchises we have created in the Asia Pacific region, and an acknowledgement of the complementary capabilities we can bring for our customers," he said.
IAG and Berkshire Hathaway have had a reinsurance relationship since 2000, and Buffett said he expected the partnership to be long-lasting.
"Even though this contract runs for 10 years I expect for decades and decades and decades to come that both companies will benefit in many ways that we can't even, perhaps, visualise now," Buffett said in a video message.
IAG has joint ventures and stakes in insurers across Asia, including in China, Vietnam, India, Malaysia and Thailand.
Under the deal, which will free up as much as 700 million dollars in capital for IAG over the next five years, the Australian company has the option to place a further five percent with Berkshire within 24 months.
