Berkshire Hathaway To Buy Auto Insurer

Expanding on what began as a $7,000 investment in Geico Corp. 44 years ago, investor Warren Buffett will spend $2.3 billion to buy out the insurer’s other shareholders in his biggest takeover yet.

Buffett’s investment company, Berkshire Hathaway Inc., owns 51 percent of the nation’s largest direct auto insurer. To buy the rest, Berkshire Hathaway said Friday it will pay $70 a share, a hefty 25 percent more than Geico’s closing price the day before.

In the late 1970s, Omaha-based Berkshire Hathaway invested about $46 million in Geico and has increased its stake over the years.

Geico is worth $2.3 billion because of its low-cost but highly profitable operations, Buffett said. The insurer, based in Washington D.C., sells auto policies nationally through toll-free telephone numbers to mostly low-risk consumers, many of whom are government employees.

Under the plan, Geico will become a subsidiary of Berkshire Hathaway but its current managers will run it as a separate business.