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Berkshire buys Medical Protective

Less than a week after revealing it was close to an insurance acquisition, Berkshire Hathaway confirmed that it has agreed to purchasing General Electric’s medical professional liability insurer, Medical Protective Corporation.

Under the terms of the agreement – which is expected to close by the 30 June 2005 – Berkshire Hathaway subsidiary National Indemnity Company is expected to pay around $825mn for the company which provides coverage for US doctors and dentists.

As Warren Buffett hosted Berkshire Hathaway’s annual shareholder pilgrimage in Omaha on the 30 April, he indicated the investment giant was close to an insurance acquisition worth under $1bn.

Medical Protective - which underwrote $737mn in gross written premiums in 2004 – will continue to be headed by president and chief executive Tim Kenesey out of the company’s Fort Wayne headquarters.

Buffett remarked: “For more than 100 years, Medical Protective has been the 'gold standard' in protecting and defending the assets and reputations of healthcare providers. The Medical Protective team has successfully navigated through difficult insurance cycles by consistently delivering the nation's best defense for doctors and solid results for shareholders. Medical Protective will be a great addition to the Berkshire Hathaway group of businesses”.

Shares in General Electric, the world’s most valuable company by market capitalisation, rose slightly last week upon the announcement, despite news of a restatement. GE chief executive Jeff Immelt revealed the sale would lead to a $75mn after-tax gain on earnings.

Immelt explained that the sale was part of GE’s strategy of reducing the company’s “exposure to insurance”.

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