Berkshire Hathaway Sale of Applied Underwriters Said Due to ‘Channel Conflict’

By | February 27, 2019

In a rare move, Berkshire Hathaway is selling one of its companies, leading workers’ compensation specialist Applied Underwriters, in order to avoid conflict with its other workers’ compensation businesses.

“Berkshire has a number of workers’ compensation companies, and there was channel conflict between them,” Jeffrey Silver, Applied Underwriters’ general counsel, told the Wall Street Journal. “This sale will eliminate that inherent competition that occurred between the Berkshire-owned entities.”

Silver confirmed the reason with Insurance Journal, while also noting that Berkshire has doubled its own workers’ compensation writings, excluding Applied Underwriters, since 2012.

Asked if there is any reason agents, brokers or customers of Applied Underwriters should be concerned about the move, Silver replied, “Absolutely not. It will be business as usual for Applied.”

It will be business as usual for Applied.

Berkshire Hathaway Chairman Warren Buffett told CNBC that Applied Underwriters is a smaller firm that has to compete against two larger insurance companies Berkshire owns that also sell workers’ compensation coverage.

The potential sale was first reported last week.

Applied Underwriters provides workers’ compensation coverage and services or small and medium-sized enterprises.

Berkshire’s own workers’ compensation providers include Homestate and GUARD that sell through agents and brokers and biBerk and Berkshire Hathaway Direct that sell direct to businesses. Berkshire Direct recently announced it will this summer be launching a new policy called THREE that bundles all small business coverages including workers’ compensation into a three page document.

Warren Buffett’s Berkshire bought a majority stake (81 percent) in Applied and its subsidiaries in 2006.

Silver said the sale is expected to close in the third quarter but declined to provide any information about the the buyer or buyers.

Applied Underwriters’ subsidiaries include California Insurance Co., Continental Indemnity Co., Pennsylvania Insurance Co., Illinois insurance Co. and Texas Insurance Co. that are collectively known as North American Casualty Co.

Founded in 1994 by Sidney R. Ferenc and Steven Menzies, Applied Underwriters is headquartered in Foster City, California and has an operations center in Omaha, Nebraska.

Topics Workers' Compensation Underwriting Berkshire Hathaway

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Latest Comments

  • February 28, 2019 at 3:45 pm
    retired risk manager says:
    Agent: I remember those days well. Didn't want to mention because it is an inside the park story. I thought New York had made carriers get rid of profit sharing, because agent... read more
  • February 28, 2019 at 11:36 am
    Agent says:
    retired, some carriers do the same thing when calculating profit sharing. The agent could be rolling along all year long with a good L/R and suddenly find themselves just ove... read more
  • February 27, 2019 at 5:04 pm
    retired risk manager says:
    Craig: You have only touched the surface of what is wrong with this type of product. Back in the day, we used to call this type of policy a dividend policy. Have a good loss r... read more

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