Warren Buffet buys annuities

Warren Buffett's Berkshire Hathaway Inc has recently acquired the Hartford Financial Services Group, U.K variable annuity business, having recently provided reinsurance to Cigna in the US for two of their old variable annuity businesses.

Friday, January 10th 2014, 9:16AM

by Ralph Stewart

Billionaire Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) agreed to take onHartford Financial Services Group Inc. (HIG)’s U.K. variable-annuity business, adding $1.75 billion in assets under management. Berkshire will pay $285 million in cash for Hartford Life International Ltd., which sold the annuities from 2005 to 2009, according to a statement today from Hartford, which is based in the Connecticut city of the same name. The deal will cut second-quarter earnings by about $110 million, Hartford said.

Buffett, 82, has assumed obligation from insurers seeking to cut risk or narrow their focus. In February, Cigna Corp. agreed to give the Omaha, Nebraska-based company $2.2 billion to take on liabilities tied to retirement products. The deals add risks from market fluctuation and give Buffett funds to invest.

“We are always ready to trade increased volatility in reported earnings in the short run for greater gains in net worth in the long run,” Buffett said in a 2008 letter, referring to the company’s strategies in catastrophe insurance businesses and derivatives.

Ralph Stewart is a director of NZ Income.

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