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Berkshire Hathaway close to $1bn insurance acquisition

Berkshire Hathaway is poised to make an insurance acquisition worth almost $1bn, investment titan Warren Buffett revealed at the weekend while hosting his company’s annual shareholders’ gathering.

Buffett told almost 20,000 attendees who converged on Omaha that the company is holding onto almost $45bn in cash and is struggling to find attractive acquisitions.

“We'd love to have one in the $5bn to $10bn range,” Buffett said. “At the moment we've got more money than brains, and we hope to do something about that,” he explained while remarking that the company will discuss paying a dividend for the first time in the company’s history.

Nevertheless, he commented: “We love the insurance business, it's been very good to us,” and added that an acquisition of up to $1bn in value should occur soon.

Indeed, much of Buffett’s time was spent commenting on the insurance industry, despite declining to discuss the investigations by New York attorney general Eliot Spitzer into a transaction between Berkshire Hathaway’s reinsurance arm General Re and AIG.

He defended the concept of finite reinsurance, explaining: “We're issuing finite insurance policies every day. And there's nothing wrong, in my view, at all with retroactive contracts.”

He did, however, add that a finite reinsurer could be culpable if it knew its products were being accounted for inappropriately. “It really gets down to whether there's knowing participation, I would say.”

Buffett – who was interviewed by Spitzer’s office on the 11 April - has denied having any detailed knowledge of the $500mn contract between General Re and AIG which US regulators continue to probe.

His right-hand man Charlie Munger also added that, despite the recent furore, AIG remains a great company. “Whatever comes along, people are going to find that a lot of what was done over the years was right at AIG.”

Despite a diverse range of holdings, Buffett pointed to strong insurance revenues as contributing an increase in Berkshire’s pre-tax earnings of around $400mn compared to last year. The firm will, however, declare a $310mn deficit in currency trading in betting against the dollar meaning investments will suffer around $120mn in all.

Berkshire can now boast the world’s two richest men on its board after the company’s shareholders voted on Microsoft founder Bill Gates. Gates and Buffett – who are friends – are both worth around $40bn.

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