A few weeks ago, the Insurance Journal reported a possible sale of workers’ compensation specialist Applied Underwriters.. The California Department of Insurance was reviewing an application for the sale of the Calif.-based Berkshire Hathaway subsidiary.
However, the buyer was not identified.”Once the application is determined complete, portions of the file will be public and available to be shared,” said CDI spokeswoman Nancy Goldberg.
Friday, the New York Post reported that Berkshire Hathaway agreed to sell Applied Underwriters, to Bahamas-based United Insurance Co., which was recently part-owned by Aon, according to a filing late Thursday with the California Department of Insurance.
The New York Post claims that UIC is acquiring Berkshire’s 81-percent stake in the insurer, as well as the stakes owned by two other executives, according to the filing. Financial terms of the deal weren’t disclosed.
One of the largest sellers of workers’ compensation insurance in the US, Applied Underwriters has been accused of being a “reverse Ponzi scheme” in a pending civil suit filed in 2016 by ex-clients – an accusation the company has denied.
Regulators also are probing the company over allegations of bait-and-switch tactics. The company is under investigation by New York and New Jersey regulators for selling unregistered insurance products. The company has denied any wrongdoing.
While Berkshire has never disclosed exactly how much it paid for Applied, a 2007 report from SNL financial put the deal price at $339 million.
That deal was apparently so expensive that Deloitte, in a 2015 report, excluded it from insurance deals because it would “skew” the data.
Nevertheless, “It’s probably been a successful investment,” Meyer Shields, analyst at KBW, told The Post, estimating it could now be worth between $1 billion and $1.2 billion.
In 2015, Berkshire told the Omaha World-Herald that Applied Underwriters had assets of $2.7 billion. But getting sold off by Berkshire – and losing Buffett’s sterling reputation – could negatively affect the value, too, Shields added.
A consortium of insurers and hedge funds was previously reported to be interested in the company, according to a February report in Reuters. Berkshire confirmed later that month it was divesting from Applied — a rare instance of Buffett walking away from an investment.
But, Applied Underwriters spokesman Mark Veverka said.”The story published today in the NY Post regarding Applied Underwriters is grossly inaccurate and incomplete.” He declined to elaborate