| | What hath Bryne bought with Buffett's backing?
Quoting a message from the Insurance & Finance forum in the Q&A Database at Port4, at port4.com;
If anyone knows a good deal in the insurance business, it should be Jack Byrne. In 1974, he left the job as chief of life operations at Travelers to take charge of then failing GEICO. His presence attracted Warren Buffett to invest $4 million in half of GEICO's stock. Byrne turned GEICO around, and Berkshire Hathaway bought the rest. According to Forbes magazine, Buffett calls Jack Byrne "the Babe Ruth of insurance." (http://www.forbes.com/forbes/00/0724/6517098a2.htm )
In 1984, Amex Chair James Robinson called on Byrne to get Fireman's Fund out of a slump. By 1991, as a result of Bryne's stewardship, the business fetched $3 billion cash from Allianz. Byrne took his share of the profit and attempted retirement in Norwich, Vermont.
Since then, he's surfaced briefly, trying to buy both Travelers and Home Holdings, and got a stake in a bond insurer (FSA) before a second retirement attempt. But the recent slump in insurance company fortunes (and stock prices) have coaxed him into the game yet again, at age 67.
He's taken the reins of his old company and renamed it White Mountains Insurance Group (NYSE: WTM), redomiciled it in tax-haven Bermuda and found a buyer for its ailing mortgage insurer FSA. The FSA sale brings him $2.6 billion cash and substantial tax-loss carryforwards; capital to deploy when many small and medium sized U.S. insurers are selling below book value. Forbes reports that Byrne "hasn't seen such a buying opportunity since 1985."
What's Byrne buying today from White Mountains' headquarters in Hanover, New Hampshire? A P&C operation with $4 billion in annual premiums and a leading "dot-com" insurer with its own "straight-through, quote-to-claims" Web-based insurance operating system.
On September 25, White Mountains announced that it will acquire the U.S. P&C operations of Britain's CGNU group for $2.1 billion. CGNU, formed by the merger of CGU and UK life insurer Norwich Union, had hoped to get much more for the stake, but "The underlying price was a bigger discount than the market had expected," according to Reuters, which reported that the purchase price was 38% below the net asset value of the unit.
The asset purchase from CGNU adds $4 billion in annual car, home and commercial insurance premium to White Mountains' operations, quintupling its premium volume overnight. According to press reports, the purchase was funded with a $1 billion loan from a consortium of lenders, plus a $300 million equity investment from Berkshire Hathaway (NYSE: BRKa) that will give it rights to 22.6% of the holding company. National Indemnity, a Berkshire subsidiary will also reinsure much of the unit's long-tail liabilities, according to a Reuters report.
On October 10, White Mountains announced its acquisition of most of Esurance Inc., a leading Web-based provider of personal-lines insurance. According to an Esurance press release, it will continue to operate independently, with the financial backing of White Mountains.
Esurance sells and services personal auto insurance in 24 states over the Internet. A thread concerning Esurance and its competitor eCoverage is in the Insurance & Finance forum in the Q&A Database at Port4. ( port4.com ).
More information about Esurance is at: esurance.com.
A Yahoo! Financial profile of White Mountains is at: biz.yahoo.com
Q: What do you think Byrne is likely to do with these acquisitions?
Q: What does his investment say about the state of "cyberinsurance' today?
endquote
DougS
(no position in WTM) |
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