Dutch financial services conglomerate ING said it is selling its reinsurance unit, NRG N.V., to Berkshire Hathaway for approximately 300 million euros–about $433 million at current exchange rates, while New York officials said they are approving a license for Berkshire to open a bond insurance company.
ING said the sale is part of its strategy of focusing on its core insurance, banking and asset management businesses.
ING said it would take a loss of 100 million euros ($145 million), on the sale. Berkshire Hathaway didn't make a statement on its side of the deal.
NRG, formerly called Nederlandse Reassurantie Groep, has not written any new business since 1993. NRG's life reinsurance subsidiaries have been sold, and a number of the remaining insurance liabilities were successfully settled, ING said.
NRG was established in 1968 as Nederlandse Reassurantie Groep, as a result of the merger of the two main Dutch reinsurance companies at the time–Algemeene Herverzekering Maatschappij and Universeele Reassurantie Maatschappij.
ING became majority shareholder in 1974 and the sole owner in 1991, following the acquisition of Victory Reinsurance Company.
ING decided in 1993 to run off NRG, stopping the underwriting of new business. Since then, NRG's life reinsurance subsidiaries were sold and a number of the remaining insurance liabilities were successfully settled, the company said.
The transaction is subject to regulatory approval and is expected to close in the first half of 2008.
Berkshire Hathaway is also opening up a bond insurance company, the New York Insurance Department confirmed today.
In a statement, the department said it plans to complete licensing the Berkshire Hathaway company by either today or Monday–an expedited process, a department spokesman noted. The procedure usually takes three-to-nine months, but was completed in one month.
The new company will be named Berkshire Hathaway Assurance Corp., and will write bond insurance for municipal bonds.
"Having new entrants in the market to provide municipalities with options to enhance the credit of new bonds, or to potentially provide enhanced credit for outstanding downgraded bonds, is a very positive development," said New York Insurance Superintendent Eric Dinallo.
"That is why the department expedited the licensing of Berkshire Hathaway Assurance," he added. "We have been very supportive of capital-raising efforts by the existing financial guarantors, and have been working to facilitate any regulatory approvals needed."
Mr. Dinallo noted that "in that same vein, we will work with new entrants to ensure a vibrant competitive market. We welcome [Warren] Buffett," the chief executive officer of Berkshire, "and his organization to this marketplace."
Bond insurers have been under pressure since the subprime loan crisis began, and insurers revealed significant exposures to collateralized debt obligations. Some have been put under watch by ratings agencies, which could adversely affect their ratings and their ability to write municipal bonds–which must be done by "A"-rated carriers.
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