Berkshire Hathaway founder Warren Buffett purchases Motor Accident Commission insurance book

One of the world’s wealthiest men, Warren Buffett, is looking for more business opportunities in South Australia after swooping in to acquire the insurance book of the Motor Accident Commission — but will there be any benefit to taxpayers?

• Bidder pays $US1m for Warren Buffett lunch

The “Oracle of Omaha”, Warren Buffett, is looking for more business opportunities in South Australia after swooping in to acquire the insurance book of the Motor Accident Commission.

Mr Buffett’s company, the famed Berkshire Hathaway, made an unsolicited, and successful, bid to the government to take over management of the “back book” of compulsory third party vehicle insurance claims.

The deal will not deliver a windfall to the government, but does remove a potential liability from the “tail” of insurance claims left over as the MAC is wound down.

Budgeted, but not guaranteed, returns from the MAC to the State Government of $68 million over three years from 2019-20 will now not eventuate.

Mr Buffett is a celebrity in investment circles for his long-term, value approach to investing which has delivered shareholders strong returns.

An article on investing website The Motley Fool in April this year calculated that over 50 years, Berkshire Hathaway had delivered a compound annual return of more than 20 per cent. or a total gain of more than two million per cent.

Warren Buffett has bought the Motor Accident Commission’s insurance book.

Mr Buffett’s personal wealth is estimated at $US86.5 billion and one Berkshire Hathaway Class A Share is valued at $US311,999.

Treasurer Rob Lucas said it was a “significant coup” for the state, and the government intends to release most of the contractual documentation early next year, with some commercial details struck out.

Mr Lucas said after receiving the bid, the government engaged financial advisory firm Moelis to look at it, and they concluded it was “unique and presented as value for money’’.

The MAC is being wound down — a process started by the previous government which began privatising the insurance arm of the MAC in 2014, then announced it would sell its assets, then estimated to be worth as much as $2 billion, three years ago.

Mr Lucas said Berkshire Hathaway would set up an office in SA and, as it had vast investments in areas such as energy and infrastructure, there would be the possibility to work together more in the future.

“Having an investment company of Berkshire Hathaway’s global standing come and set up in

Adelaide not only speaks volumes for our sound business environment, but for the progressive

leadership of the new Liberal government under Premier Steven Marshall,’’ he said.

“Berkshire Hathaway’s reinsurance arm, National Indemnity Company, is the only reinsurance

company in the world with the same AA+ credit rating as South Australia, offering SA policy

claimants security over future claims, as well as excellent value for taxpayers who no longer bear the risk of movements in investments and claims outcomes.

“Put simply, assets and liabilities from MAC will be transferred to Berkshire Hathaway’s National Indemnity Company, so that all the risks of managing MAC’s liabilities will be transferred to Berkshire Hathaway.’’

As part of the deal, $100 million in MAC funds will still be managed by the State Government for five years, which Mr Lucas said could be used as the basis to foster a bigger funds management industry in the state.

Mr Buffett said he looked forward to the potential to grow his business in SA.

“We are thrilled to have agreed terms with South Australia to reinsure their auto liabilities,

and we would love to find more opportunities to do business there,’’ said Mr Buffett.

The current Liberal Government announced in October the MAC would cease to exist from July next year, saving $2-$3 million per year.

SA Police and other agencies are expected to pick up the MAC’s duties from July next year, including road safety campaigns and partnerships

This deal will transfer MAC’s remaining assets and liabilities to Berkshire Hathaway, which will be responsible for claims payments from January 1. There is expected to be no impact on claimants.