Berkshire Hathaway to Acquire Medical Liability Mutual Insurance Co., Strengthening Leadership in Medical Professional Liability Coverage

On July 19, VCBeat learned from multiple overseas media outlets that Berkshire Hathaway (BRK.A), led by billionaire investor and “Oracle of Omaha” Warren Buffett, has agreed to acquire New York-based medical insurer Medical Liability. This move will further strengthen its leadership position in the insurance sector dedicated to protecting physicians against litigation.

Medical Liability, established in 1975, is the largest medical professional liability insurer in New York, with over 40 years of experience in the insurance industry. Throughout New York State,Medical LiabilityWith nearly 16,000 physicians, 4,000 dentists, and dozens of hospitals. Its primary business is providing professional liability insurance for physicians, dentists, and healthcare professionals.

Commenting on the acquisition, Dr. Robert Menotti, President of Medical Liability Company, stated, “We are delighted to partner with such a distinguished institution. Medical Liability Company holds a prominent and unassailable position in the U.S. insurance market. With Berkshire Hathaway’s involvement, policyholders will benefit from forward-looking underwriting perspectives, while Medical Liability Company will be able to offer higher claims limits than ever before. Furthermore, Medical Liability Company will expand its business scope to include customized risk-sharing products, offerings aligned with current regulatory policies, group business, and large-account business.”

In a letter to policyholders, Menotti stated, “Berkshire Hathaway values our business, team, employees, and partners. Most importantly, Berkshire Hathaway approaches issues from the perspective of supporting the development of Medical Liability Company and continuing to serve policyholders.”

In a statement released on Monday, National Indemnity, a subsidiary of Berkshire Hathaway, announced that upon the completion of the acquisition, Medical Liability’s corporate structure would transition from a mutual insurance company owned by its policyholders to a stock-owned entity. The statement did not disclose the specific financial terms of the transaction. It further noted that as of December 31, 2015, the insurer’s policyholder surplus—a metric calculated as assets minus liabilities—stood at $1.8 billion.

The transaction is subject to regulatory and customer approvals and is expected to be completed in the third quarter of 2017.

“Medical Liabilityis a highly valuable company that has been protecting practitioners in New York State—including physicians, mid-level providers, hospitals, and dentists—for over 40 years. We warmly welcomeMedical Liability“Joining Berkshire Hathaway will enhance our ability to better serve the interests of policyholders during our future collaboration,” Buffett said in the statement. “Good things are worth waiting for.”

As of the end of 2015, Berkshire Hathaway owned a total of 11 insurance companies and 68 non-insurance subsidiaries worldwide, with a combined workforce of 361,000 employees. For many years, insurance has been Berkshire Hathaway’s core business, generating premium income that allows Warren Buffett to reinvest these funds before insurance claims are paid out.

As early as the 1960s, when Buffett began his acquisition spree, he had already entered the field of industrial investment, with insurance emerging as his most successful business.

In 1967, Buffett acquired the Omaha-based insurance company National Indemnity Company (NICO) for $8.6 million; at that time, the company’s book float (reserves formed by the time lag between receiving premiums and paying out claims) amounted to only $17 million.

Between 1976 and 1980, Buffett continuously increased his stake in the auto insurer GEICO, raising his ownership to 33%; subsequently, GEICO’s share buybacks further increased Buffett’s holding to 50%.

In 1995, Buffett ultimately reached an agreement with GEICO to fully acquire the company for $2.3 billion, increasing the group’s premium income from $3.4 billion to $6.4 billion;

In 1998, Buffett again acquired Gen Re, the largest reinsurer in the United States, at a premium; it accounted for two-thirds of the company’s premium income that year.

Other acquired insurance companies include Medical Protective Company, Applied Underwriters, U.S. Liability Insurance Company, Central States Indemnity Company, Kansas Bankers Surety, Cypress Insurance Company, and several insurers merged into Homestate Companies; these acquisitions have largely drivenBerkshire HathawayThe company's rapid growth in premium income.