Berkshire Hathaway Possibly Adding Insurance to the Empire



Warren Buffett, of Berkshire Hathaway, shows interest in adding RBS insurance arm to his stable.

Warren Buffett, of Berkshire Hathaway, shows interest in adding RBS insurance arm to his stable.

The insurance line of RBS is up for sale, and it may have caught the watchful eye of Warren Buffett.  Berkshire Hathaway, Buffett’s investment group, has apparently expressed interest in adding the insurance business to the investment empire.  RBS announced earlier in the week that any potential investors are more than welcome to take a look at the deal, which prompted the attention of Warren Buffett and his group.

RBS would prefer a flotation of the business, but it is believed that huge losses involving car accident claims, have increased the chances of a sale.

The UK government owns over 80 per cent of RBS and has to sell its insurance division, following a ruling by the European Commission.  The division benefited from a 54 billion pound bailout by the taxpayers.

A spokesperson of the bank mentioned there is a deadline of the end of 2013 to decide how the insurance arm will be disposed of.

Stephen Hester, RBS chief executive, has been forced to cut over 2000 jobs from the insurance division before it goes through any type of disposal.  The insurance division of the bank has been valued at 6 billion pounds.

According to several reports, there is small chance of a successful IPO as a means of disposal.  This is due to an increase in injury claims from traffic accidents, which resulted in a 36 per cent rise in payouts between January and June of this year.  This caused a loss of 231 million pounds for the business, compared with a 217 million pound profit for the same period last year.

Berkshire Hathaway is now among a line-up of potential bidders for the division.  Allstate, the American insurance company, has also expressed interest.

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