Berkshire Hathaway, the US conglomerate led by Warren Buffett, is set to acquire a 2.49% stake in Japanese insurer Tokio Marine for approximately $1.8bn (Y287.4bn) as part of a newly formed “strategic partnership”.
Tokio Marine will sell around 48.2 million treasury shares to National Indemnity Company (NICO), Berkshire’s primary reinsurance subsidiary.
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To avoid diluting current shareholders, Tokio Marine will repurchase up to Y287.4bn of its own shares.
NICO may increase its stake in the future, mainly through the open market, but cannot exceed 9.9% without approval from Tokio Marine’s board.
The agreement covers equity investment, reinsurance collaboration and joint work on mergers and acquisitions.
Berkshire Hathaway insurance operations vice-chairman Ajit Jain said: “We are pleased to build a long-term collaborative relationship with TMHD [Tokio Marine Holdings], which has a strong underwriting franchise and an exceptional management team. We expect this strategic partnership to create compelling long-term opportunities for both organisations.”
As part of the alliance, NICO will join Tokio Marine’s reinsurance panel and take on some risk through a Whole Account Quota Share arrangement.
The companies plan to expand this arrangement over time in line with their partnership.
According to the agreement, this should increase the stability and resilience of Tokio Marine’s reinsurance programme, particularly regarding natural catastrophe exposures.
The two companies also intend to work together on international investment opportunities and joint acquisitions.
The partnership is structured to combine NICO’s capital resources with Tokio Marine’s experience in acquisitions.
TMHD Group CEO Masahiro Koike said: “We are delighted to establish a strategic partnership with Berkshire Hathaway, one of the world’s leading investors, whose corporate culture and values closely align with ours.
“This strategic partnership represents a major step forward in advancing our insurance business and delivering sustainable value creation by combining the strengths of both organisations. Through disciplined management, we remain fully committed to enhancing corporate value over the long term.”
Last year, Bloomberg reported that Tokio Marine plans to allocate more than Y1.53tn for acquisitions to strengthen its overseas business, citing unit co-head Brad Irick as the source.
