The Medical Liability Mutual Insurance Co. (MLMIC) will be bought by an unit of Berkshire Hathaway Inc. This move will lead to a further expansion of Warren Buffett’s business. The company protects healthcare professionals like doctors and dentists from lawsuits.
The MLMIC is the biggest underwriter dealing with medical professional liability insurance. It is a New York based company. After the completion of the deal, the company will transform from policyholder owned to stock business. The unit of Berkshire National Indemnity is based in Nebraska. As per a company statement, the policyholder surplus stood at $1.8 billion. This measures assets minus liabilities. It is expected that the deal will come to fruition during the 2017 third quarter. Completion depends on customer and regulatory approvals. Terms were not disclosed by either of the two parties.
In a statement, Buffett said that he regards MLMIC as a gem among companies which have protected the physicians, dentists, hospitals and mid-level providers of New York for more than 40 years. He added that good things can be waited for, if needed. For Berkshire, insurance has long been its business centerpiece as its operations generate “float”. This is the premium which Buffett could reinvest prior to paying claims. Even as the company depends on huge subsidiaries like Gen Re and Geico, the auto insurer, Buffett intermittently adds companies belonging to the niche markets.
Berkshire, in 2005, purchased Medical Protective Co, a medical malpractice insurer headquartered in Indiana. The company was more than a century old at that time. The Medical Protective Co. itself later purchased Princeton Insurance Co., an entity engaged in insuring New Jersey based health professionals from MLMIC. In 2015, Berkshire bought PLICO. The latter offers a similar coverage to medical professionals in Oklahoma.
According to Buffett, he was extremely happy with such purchases. The tycoon has, in 2006, termed malpractice insurance an ending point of multiple insurers. The MLMIC website posted a notification that it would convert from a policy holder held mutual company to a stock company. The website also stated that the affiliation by Berkshire will provide it with much more resources for paying claims and will help to underwrite a greater number of businesses. The MLMIC transaction was advised by Keefe, Bruyette & Woods. Wilkie Farr & Gallagher, the law firm has also advised MLMIC on this transaction. When asked for further comments, there was no immediate response from National Indemnity.