Berkshire News Briefs - 7/28/16

Buffett Buys $1.8 Billion ‘Gem’ of a Medical Insurer in N.Y. (Bloomberg)

Berkshire Hathaway Inc. agreed to buy Medical Liability Mutual Insurance Co., extending Chairman Warren Buffett’s leadership in the business of protecting doctors against lawsuits.

The target company is the largest underwriter of medical professional liability insurance in New York and will convert from a policyholder-owned to a stock business, Omaha, Nebraska-based Berkshire’s National Indemnity unit said Monday in a statement that didn’t disclose terms. Policyholder surplus, a measure of assets minus liabilities, was $1.8 billion as of Dec. 31, according to the statement. The deal is expected to be completed in the third quarter of 2017, pending regulatory and customer approvals. [...]

Berkshire Hathaway Wants to Insure Your Doctor (Fool)

There are two broad types of insurance companies: stock insurers and mutual insurers. Stock insurers are institutions owned by investors seeking to earn a return on their investment. Mutual insurers are owned by their policyholders. Mutual insurers are to insurance what credit unions are to banking.

MLMIC is a mutual insurer. But Buffett's acquisition isn't just altruistic; Berkshire Hathaway is obviously buying MLMIC to make money. Thus, for the deal to go through, MLMIC will have to convert to a stock insurance company. Its policyholders will then receive a payout that MLMIC currently estimates to be roughly equal to premiums paid to the company during the 3-year period from July 2013 to July 2016. [...]

Buffett Says Earnings Guidance Can Lead to Corporate Malpractice (Bloomberg)

Warren Buffett, who is among business executives pushing for improved corporate governance, said that the practice of telling Wall Street what to expect from quarterly earnings can distort management’s priorities.

“Guidance can lead to a lot of malpractice,” the billionaire chairman of Berkshire Hathaway Inc. said Thursday on CNBC. “It doesn’t have to, but I think if the CEO goes out and says, ‘We’re going to earn $1.06 next quarter,’ I think that if they’re going to come in at $1.04, there’s a lot of attempts to find a couple extra pennies some places.” [...]

Lawsuit over Acme Brick retirement plans to move forward (Ft. Worth Star-Telegram)

A lawsuit challenging reduced retirement benefits at Acme Brick can move forward after a federal appeals court ruled that parent Berkshire Hathaway acted improperly.

The suit, filed in 2014 by Acme’s former chief financial officer Judy Hunter, who oversaw the plans, alleged that Berkshire, the Nebraska-based conglomerate run by billionaire Warren Buffett, used “strong-arm tactics” to force the Fort Worth-based brick company to reduce retirement plan benefits. [...]

There's Nothing 'Surprising' About Geico's New Campaign (Advertising Age)

Geico has tapped a big name for a spot in its newest campaign—Marco Polo, the Middle Ages explorer famous for traveling Asia. In a humorous ad that stays true to the insurer's quirky humor, an actor appears as Mr. Polo in an outdoor swimming pool as children play the popular Marco Polo discovery game. Mr. Polo continues to say "Si, scusi," as he believes the kids are looking for him. A voice-over says, "Playing Marco Polo with Marco Polo? Surprising. What's not surprising? How much money Amanda and Keith saved by switching to Geico," as the camera shows real-life Geico customers holding a sign asserting $645 in savings. Meanwhile, a llama noses around the pool. [...]

Berkshire Hathaway Takes on Texas' Three-Tier System (Wine Business)

In another potentially historic case, McLane Company Inc., which has sold food products in Texas sine since the 1980s through the AmeriServ and McLane Foodserice trademarks, has called into question Texas’ “One Share Rule,” by filing a complaint with the Texas Alcohol Control Board (TACB) in Austin. Its parent company, Berkshire Hathaway Inc., owns a two-percent share in Walmart and doesn’t believe that this is a justifiable reason for McLane not to be able to distribute alcoholic beverage in Texas. [...]

How Warren Buffett & Elon Musk Both Compete and Contrast on Energy (Fortune)

Musk and Buffett see the energy and transportation sectors changing in similar ways, and, over the past few years, their companies have increasingly competed with each other over both solar energy and electric cars. [...]

That two of the world’s savviest business minds seem to disagree over how key parts of how the clean energy sector will develop are reflects how the world’s energy transformation is still in its early days. Their opposing viewpoints about fossil fuels also highlight Musk’s entrepreneurial vision-driven spirit with Buffett’s down-to-earth profit-driven investment strategy. [...]

Warren Buffett's Latest Utility Challenge in Nevada (Fool)

When Nevada regulators agreed earlier this year to allow MGM Resorts, Wynn Resorts, and Las Vegas Sands to leave NV Energy, one of Berkshire Hathaway's largest utility assets, it opened a slew of problems for the utility. Not only could the utility lose 7% of its demand if all three casino companies left, but data company Switch has now also challenged why it wasn't allowed to leave the utility a year ago. [...]

Berkshire's Duracell to close South Carolina plant, affecting 430 workers (Reuters)

Duracell said it plans to close a battery-making plant in South Carolina that employs 430 people, making the announcement fewer than five months after being acquired by Warren Buffett's Berkshire Hathaway Inc.

The shutdown of the Lancaster, South Carolina, plant, which made AA batteries, will begin in March and should be completed by the middle of 2019, Duracell said in a statement dated Wednesday.

Duracell is consolidating its North American production of AA and AAA batteries into a plant in LaGrange, Georgia. [...]

Purchases by auction are not really Buffett's style (Omaha World-Herald)

Pardon us if it seems like Berkshire Hathaway Inc. may not be bidding to acquire Oncor Electric Delivery Co., the Texas electricity distribution company that is coming out of bankruptcy.

Sources are telling Texas newspapers that Berkshire Hathaway Energy is a bidder in a high-profile auction for the company after an earlier $18 billion purchase fell through. [...]

But Berkshire CEO Warren Buffett has been so adamantly opposed to auction-style purchases that it could be the Berkshire rumors are being floated to keep other buyers interested and bidding as much as possible. [...]