What's your first-choice Monopoly piece?
Everyone has their favourite.
Statistically speaking it is likely to be the Scottie dog. Despite being a relative imposter introduced in the 1950s, the canine was the top dog in a recent popular vote to choose a new, more contemporary charm.
Pieces have come and gone since the iconic property-themed board game hit the market in 1935, but one original has endured and remained popular for the past 80 years: the top hat.
Given first dibs, we think Warren Buffett would be a top hat kind of guy.
Buffett would have been about five when the game came out, so it is likely to have featured in his childhood.
He is also famously unbending in his habits, and so the emotional lure of a youthful familiar would make the formal dress headgear almost irresistible compared to other more up-to-date place markers.
In the insurance game of Monopoly Mr Buffett's top hat has just landed on Park Place and Boardwalk (or Park Lane and Mayfair for UK readers). He has bought the set and built hotels.
The seller is AIG and the real estate is worth $9.8bn. It takes two to tango and like in all transactions buyer and seller have varying motives.
AIG wants to free up capital and needs to divest non-core business and throw off dividends to keep its insatiable pack of activist investors fed.
It also needs to avoid bad news at all costs and after a few negative surprises any further adverse reserve developments would be heavily punished by investors. The deal will bring capital relief and near reserving certainty on day one, bit it comes at an upfront cost.
What does Berkshire get? Like in so many of its deals, if everything goes to plan it gets free money that it can invest for a very long time before it has to pay anything out.
The last $9bn of a $34bn stockpile is likely to be longer-tail, harder-fought business that takes decades to exit one's bank account, even if it develops negatively and produces paper losses well before that day comes.
This means that as it passes "go", the top hat will be flush enough to buy any unclaimed asset it lands on. The compounded income stream from the assets acquired should fund any adverse development many times over.
Buffett's already got a railroad and an electric company. Surely it's the water works next?
Anyone who doesn't believe in the power of financial services to unlock value should study this deal and it will change their minds.
It doesn't make an awful lot of sense if you look at it in conventional terms - but that is missing the point.
If AIG or any other standard insurance group bought a railroad
it would be downgraded on the spot and regulators would likely
intervene for the protection of policyholders. But Buffett has such
a big pot of capital at his disposal that his insurance entities
can execute deals like this whenever the terms are attractive
enough. No one else can do it.
When no other balance sheet will do, you simply don your Sunday best and head to Omaha via New Jersey, (aptly Atlantic City is home to the streets of the original Monopoly game).
Hats off to Buffett - neither the street repairs card nor income tax square can touch him now.
His takeover of the board is nearly complete.