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For the second time in a decade, Berkshire Hathaway Inc. is rapidly expanding its U.S. workers' compensation premium writings and pursuing an acquisition that reinforces its presence in the marketplace.
U.S. workers' comp direct premiums written as reported on the combined annual statements of National Indemnity Co. soared 154.2% in 2004, then 455.4% in 2005 as National Liability & Fire Insurance Co. and Redwood Fire and Casualty Insurance Co. dramatically increased business volumes. When Berkshire Hathaway acquired Applied Underwriters Inc. in May 2006 for $288.8 million, that deal served to accentuate what was a 63.9% increase in workers' comp direct premiums written produced by the company's existing P&C subsidiaries.
Berkshire Hathaway moved Aug. 19 to acquire GUARD Insurance Group Inc., and the pending transaction comes as the company has been growing its workers' comp business in recent periods at a double-digit clip. Wilkes-Barre, Pa.-based GUARD, operating through AmGUARD Insurance Co., NorGUARD Insurance Co., EastGUARD Insurance Co. and WestGUARD Insurance Co., specializes in small to midsized workers' comp risks. Clal Insurance Enterprises Holdings Ltd. acquired GUARD in 2007. The reported deal value for Berkshire Hathaway's proposed acquisition is $221 million.
Berkshire Hathaway's mid-2000s workers' comp growth was largely attributable to the company's efforts to fill a void in the California workers' comp market. The combination of the collapse of leading California workers' comp writers such as Fremont General Corp., Superior National Insurance Group, Reliance Group Holdings Inc., PAULA Financial and Frontier Insurance Group Inc. and the 2004 passage of workers' comp reform made the market an increasingly attractive place to do business for opportunistic private insurers willing to look beyond the state's checkered past.
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