Buffett signs deal with VHI to save taxpayers €90m
Berkshire Hathaway to provide €700m health claims cover
STATE-owned VHI has done a deal with the world's most successful investor, in a move that should save taxpayers up to €90m.
Warren Buffett, who has a fortune estimated at $53bn (€40bn) by Forbes, is understood to have personally signed the multi-million euro contract that effected the deal.
It is the first time the investor with the midas touch has done a deal in Ireland. The so-called "Sage of Omaha" is notorious for being reluctant to invest outside of the US.
Mr Buffett's insurance giant, Berkshire Hathaway, will provide re-insurance cover for up to €700m worth of claims risks of the VHI.
The VHI has not had a re-insurance arrangement in place up to now – effectively laying off some of its risk with a larger insurance company. Some of the risks on premiums and claims being made by VHI customers will now move over to Berkshire Hathaway. This means VHI will need less money from the State, the Irish Independent has learned.
If the health insurer is to meet a deadline agreed with the European Commission of being regulated by the Central Bank, the Government will have to make a commitment on investing up to €100m in the VHI by the end of the year.
This is because the Central Bank is demanding that the VHI beefs up its reserves before will regulate it, and the European Commission is demanding that it meet the same rules applied to other insurers.
The deal means that the taxpayers will now have to be put between €80m and €90m less into the VHI.
The €700m deal is the biggest re-insurance contract signed by a general or health insurer anywhere in Europe this year.
The agreement lasts for one year but there will now be attempts to extend that. If a deal can be secured over a three-year period it will have a huge impact by lessening the amount of reserves the VHI needs from the taxpayer to meet Central Bank requirements.
VHI chief executive John O'Dwyer told the Irish Independent: "The VHI is working towards getting authorisation from the Central Bank and a key milestone in that plan is our partnership with Berkshire Hathaway."
Mr Buffett is chairman, president and CEO of Berkshire Hathaway, a conglomerate with a market capitalisation of $290bn.
The third wealthiest person in the world, the 83-year-old is committed to giving away his fortune as fast as he can. Most of it is going to the Bill Gates charitable foundation.
In 2006 he gave away $31bn – the largest charitable donation in history.
He famously lives in the same house he bought in Omaha, Nebraska, in the 1950s.
His basic salary is just $100,000, and he has pledged not to be over generous to his three children.
Slightly eccentric, his favourite meal is a burger washed down with Cherry Coke.
VHI Healthcare recorded an after-tax surplus of €54.3m last year, it said last month.
This included a once-off gain of €38.2m related to the end of retirement benefits for staff, giving a remaining surplus of €16m for the year.
However, the State-owned insurer recorded a loss of €7.2m on its core health insurance business. This was offset by profits made in its dental, travel and international business.
Total premium income was up 9pc to €1.43bn, as rising individual premiums more than made up for a 50,000 fall in customer numbers.