Two of Berkshire Hathaway’s units just agreed to small deals on Thursday, which continues the current phase of their bolt on acquisitions, while Warren Buffett continues to hunt for the big acquisitions as usual.
Of the two deals, Berkshire Hathaway’s insurance company Columbia Insurance Co. is going to pay $285 million to buy a new life-insurance subsidiary from Hartford Financial Services Group.
Amid pressure from shareholders, Hartford has been working on overhauling its operations as a way to focus more narrowly on mutual funds operations, group benefits and property causality. It’s also working on shedding its non-core businesses due to shareholder pressure. This type of opportunity is precisely what executives trained by Buffett are looking to exploit.
The Dublin-based unit sold variable annuities in the United Kingdom between 2005 and 2009. In a release, Hartford said the price is “roughly equal” to its statutory surplus, which is the amount of money that it is required to hold back because of its claims.
Hartford took a $110 million lost during the second quarter because of the deal.
The Wall Street Journal wrote earlier in the week that annuities have become a thorn in the side of insurance companies, and this goes for Hartford as well. The main idea of an annuity is that it will protect retirement investments by still providing payouts even if the portfolio value shrinks. The payout need has been slamming many insurance companies, and Hartford is even telling customers to move their funds to bond accounts, and into non-stock investments. Hartford also told us in March that it is no longer going to sell this investment.
In other news, Oriental Trading Co. – a subsidiary of Berkshire Hathaway – has picked up MindWare Holdings Inc., the maker of “brainy toys for kids of all ages.”
Oriental trading is a mail order selling company of random items like rubber ducks, toys and party supplies. The purchase of this business is going to expand the company’s reach with educators.
Recently, Warren Buffett told investors that he was unhappy because he did not find a big acquisition during 2012, but he also lauded the acquisitiveness of his 70 other companies. Even though these deals are not going to move the needle all that much at Berkshire Hathaway, he is very happy to see that they were done.