States Reviewing Proposed Sale of Workers’ Comp Specialist Applied Underwriters
A possible sale of workers’ compensation specialist Applied Underwriters looks to be a step closer to reality.
The California Department of Insurance is reviewing an application for the sale of the Calif.-based Berkshire Hathaway subsidiary.
CDI officials confirmed with Insurance Journal on Tuesday that an application from Applied is under review internally.
“Once the application is determined complete, portions of the file will be public and available to be shared,” said CDI spokeswoman Nancy Goldberg.
A person familiar with Applied and the process of selling the company said similar applications have been submitted to insurance departments in other states where it’s required to do so.
“I can confirm an application is being reviewed by the various state regulatory bodies,” said the person, who asked not to be named.
An Applied spokesperson said the company would not be commenting during the application process.
The effort to sell Applied appears to have started earlier this year due to a channel conflict. That was made known when Berkshire Hathaway Chairman Warren Buffett told CNBC that Applied is a smaller firm that has to compete against two larger insurance companies Berkshire owns that also sell workers’ comp coverage. Applied provides workers’ comp and services to small and medium-sized enterprises.
Jeffrey Silver, Applied Underwriters’ general counsel, confirmed the reason with Insurance Journal in February, while also noting that Berkshire has doubled its own workers’ compensation writings, excluding Applied Underwriters, since 2012.
“This sale will eliminate that inherent competition that occurred between the Berkshire-owned entities,” Silver said at that time.
He also said the sale was expected to close in the third quarter but offered no information on a buyer or buyers.
Applied 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.
Applied ran afoul of the CDI two years ago, reaching a settlement agreement in June 2017 over “bait and switch marketing tactics,” according to a statement from the state’s insurance commissioner at the time.
Berkshire Hathaway acquired Applied in May 2006, and currently owns roughly 81 percent of the company.
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.
Berkshire (BRK.A) shares were up 1.1 percent to $308,884.62, and BRK.B shares were up 1.2 percent to $205.96 near the end of trading on Tuesday on the New York Stock Exchange.
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