In a joint bulletin General Electric and Berkshire Hathaway announced that GE Insurance Solutions has entered into a letter of intent for the sale of Medical Protective Corporation (MedPro), a professional liability insurer for physicians and dentists, to National Indemnity, a unit of Berkshire Hathaway.
The agreement provides for National Indemnity to acquire a 100 percent ownership of MedPro and its subsidiaries from GE Insurance Solutions. According to news reports, Berkshire will pay $825 million for the business. The transaction, which is subject to completion of a definitive agreement as well as regulatory approvals, is expected to close by June 30, 2005.
A.M. Best, which rates Medical protective as “A-” (Excellent) with a stable outlook, reacted by placing the ratings under review (See related article in Midwest).
Standard & Poor’s Ratings Services placed the company’s “A” counterparty credit and financial strength ratings on CreditWatch with positive implications. S&P said the CreditWatch reflects the announcement that Berkshire Hathaway Inc.(BRK), which it rates as “AAA.
S&P credit analyst Damien Magarelli observed that Berkshire “is expected to support MedPro from a capital management perspective, although at this point no definitive adjustments to reinsurance, capital contributions, or explicit support agreements have been provided. The result is that, although MedPro is expected to be managed largely on a standalone basis, the ratings on the company could be raised by one to three notches, reflecting potential support from BRK.”
In a separate bulletin S&P said that the MedPro sale would have no effect on the ratings of GE Insurance Solutions.
Berkshire Hathaway Chairman Warren Buffett commented: “For more than 100 years, Medical Protective has been the ‘gold standard’ in protecting and defending the assets and reputations of healthcare providers. The Medical Protective team has successfully navigated through difficult insurance cycles by consistently delivering the nation’s best defense for doctors and solid results for shareholders. Medical Protective will be a great addition to the Berkshire Hathaway group of businesses.”
GE Chairman and CEO Jeff Immelt responded: “We’re pleased to work with Berkshire Hathaway and place an excellent business with great owners. GE is taking another step in our plan to reduce our exposure to insurance while maximizing value for investors; Medical Protective is moving into a bright future.”
Ron Pressman, Chairman, President and CEO of GE Insurance Solutions stated: “This is a tremendous win for Medical Protective policyholders and the Medical Protective team. Berkshire Hathaway offers healthcare providers continuity in their medical professional liability coverage and will provide Medical Protective opportunities and capital for continued growth.”
Medical Protective is based in Ft. Wayne, Indiana and employs approximately 330 people, with 2004 gross written premiums of $737 million, serving 75,000 physicians and dentists. Tim Kenesey will remain as president and CEO of Medical Protective, the management team will remain in place, and its principal operations will remain in Ft. Wayne, Indiana where it was founded in 1899.
Commenting on the acquisition by Berkshire, Kenesey indicated: “Medical Protective and our dedicated colleagues across the country have grown and developed during the seven years of GE ownership. We look forward to continued profitable growth under the ownership of Berkshire Hathaway. We see this as a positive step for our doctors and our other healthcare providers, our agents and our Medical Protective colleagues.”
Was this article valuable?
Here are more articles you may enjoy.