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Buffett taps Lloyd's market
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November 1, 2000: 2:51 p.m. ET
Purchase of Marlborough provides access to U.K. insurance market
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NEW YORK (CNNfn) - Warren Buffett's Berkshire Hathaway Group agreed Wednesday to purchase Marlborough Underwriting Agency Ltd. from British insurer CGNU PLC, gaining a foothold in the Lloyd's of London insurance market.
The merger will expand Buffett's already expansive insurance portfolio, which includes Geico Corp. and General & Cologne Re Corp., although it will mark the billionaire investor's first foray into the Lloyd's market, a brokered insurance region consisting of more than 130 underwriting syndicates.
Terms of the agreement were not disclosed. However, Berkshire Hathaway (BRK.B: Research, Estimates) has agreed to assume all of Marlborough's business and liability. Marlborough underwrites insurance policies covering companies for a range of risks.
CGNU, the U.K.'s largest insurer, said the decision to exit the Lloyd's market business is intended to help refocus the company's general insurance operations on personal and small commercial lines of business.
The British insurance company just sealed an agreement in August to buy the remaining 49 percent interest in Marlborough it didn't already own from Blenheim Partnership
Buffett, CGNU becoming old friends
CGNU expects to take a £448 million after-tax charge for the third quarter in relation to the sale. The company also agreed to a reinsurance arrangement with Berkshire that will cover £1 billion in excess of CGNU's claims reserves of £1.2 billion.
"[These actions] will improve the quality of the group's future earnings by removing the uncertainties relating to London market risks and any further exposure to this business," CGNU CEO Bob Scott said.
CGNU has been looking to jettison non-core operations since the merger of British insurers CGU and Norwich Union.
In fact, this is the second time in six weeks that CGNU and Buffett have been involved in a deal. In late September, the British insurance company agreed to sell its U.S. property and casualty insurance operations to White Mountain Insurance Group for $2.1 billion in a deal partially financed by Buffett. 
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