Warren Buffett, CEO of Berkshire Hathaway, has revealed what drove the company to its “strategic partnership” with IAG, which was announced yesterday.
The Oracle of Omaha told investors via video link that IAG offers a “very important and enduring relationship,” that will help establish Berkshire Hathaway in Australia and New Zealand.
“Berkshire is a large, very diversified company here in the United States but despite the fact that we are in a great many businesses, our first love, our long time love and our future love has always been the insurance business,” Buffett said of the investment.
Buffett noted that Berkshire Hathaway have been involved in the insurance business since 1967 where a stake of US$8 million has developed into a multi-national business worth over US$100 billion and that long-term development led the company to IAG.
“In the course of that business, 15 years ago or so, we entered our first commercial transaction with IAG and as the years have passed and we’ve gotten to know them better and they’ve gotten to know us better, we’ve both found a great deal to admire in each other’s organisations.
“Very recently, we decided to cast aside a commercial relationship and establish a very important and enduring partnership arrangement. IAG is a terrifically strong company with great strengths in many areas, Berkshire has got some strengths and we believe by bringing these two companies closer together as partners, that each company will benefit in a very substantial way.
Buffett was quick to note that while the original agreement stretches ten years, Berkshire Hathaway see the IAG investment as a long-term plan to develop business in the region.
“Even though this contract runs for ten years I expect for decades and decades and decades to come that both companies will benefit in many ways that we can’t even perhaps visualise right now, so I’m looking forward to it, our managers are looking forward to it, our shareholders are looking forward to this partnership and I can’t tell you how delighted I am to be with it.”
Managing director and CEO of IAG, Mike Wilkins, stressed that deal will see no great change in the strategy of IAG moving forward as the company continues to look to Asia as a key driver of new business.
“As you heard from Warren, both of us believe that this is a win-win partnership for our respective organisations,” Wilkins said.
“IAG’s strategy and our strategic priorities are essentially unchanged.
“It’s this strategy that Berkshire Hathaway are supporting as they enter into the strategic partnership with us. Our strong businesses in Australia and New Zealand represent the majority of the group and we don’t see that changing.
“These markets continue to contain growth opportunities for us, however we also see continuing opportunities in our target markets in Asia. For all of you, our ambitions in Asia are nothing new and we continue to see enormous potential in the region.”
Buffett, who Wilkins noted was involved throughout the deal process, said that his first Australian investment has been worth the wait.
“One small footnote, in fact it’s sort of a confession, I’m 84-years-old and this is my first investment in an Australian company… it’s been worth waiting for.
“We’ve now picked the best and we’ve entered into an area of the world where we have done some business before but now we are coming in with an ownership position and better late than never and... here we are in Australia and I’m delighted to be here.”
