MidAmerican Energy Holdings, a subsidiary of Berkshire Hathaway, announced on May 29, 2013, the acquisition of NV Energy, Inc. (NYSE:NVE) for $10.1 billion. According to MidAmerican, NV Energy, Inc. (NYSE:NVE) is a company with similar values, outstanding assets, and an excellent management team. It will operate under its current name as a subsidiary of MidAmerican.
The deal is expected to be completed in the first quarter of 2014 after the approval of NV Energy, Inc. (NYSE:NVE)’s shareholders and federal regulators. MidAmerican Energy currently provides electric and natural gas service to 7 million customers worldwide. Upon completion of the deal, MidAmerican will have assets of around $66 billion and an increased customer base of 8.4 million.
Improved combined ratio and end to litigation
American International Group Inc (NYSE:AIG) reported property and casualty segment operating income of $1.6 billion against the estimated $1.2 billion and a combined ratio of 97.3% in the first quarter ending March, 2013. It is the first time that this ratio has dropped below 100 since the third quarter of 2010. A combined ratio below 100 is positive, as it indicates that the company is receiving more premiums than it is paying out in claims. The improvement in ratio is due to the low level of catastrophe loss of $39 million and reserve development of $52 million. The catastrophe loss was $194 million less than estimates due to improved weather conditions in the current quarter.
Combined ratio for 2013 is estimated at 101.8% and 101% in 2014. On excluding-catastrophe losses, the ratio will be 99.5% in 2013 and 98.4% in 2014. The reason behind this estimation is adverse reserve development that is expected to increase to $403 million in 2013 and $565 million in 2014. Such improvement with better underwriting, premium price increase, and improved business mix will raise property and casualty operating income to $5.2 billion in 2013 and $6.2 billion in 2014.
American International Group Inc (NYSE:AIG) has dropped litigation against The Federal Reserve Bank of New York. The case was whether the insurer retained the right to sue over losses on residential mortgage-backed securities after the 2008 bailout. Dismissal of this case on May 7, 2013, will bring $7 billion cash to it, which is expected to be used for capital management and general purposes.
Conclusion:
Apple Inc. (NASDAQ:AAPL)’s aggressive capital allocation program and plan to announce a low-price iPhone is positive step to compete in the challenging smartphone market.
Berkshire Hathaway Inc. (NYSE:BRK.A)’s revenue growth in the non-insurance business and its plan for the acquisition of NV Energy, Inc. (NYSE:NVE) provides prospects for long-term growth.
Improvement in the property and casualty combined ratio and settlement of litigation will set tone for a long-term growth for American International Group Inc (NYSE:AIG) investors.
So, I recommend buying all three stocks.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends American International Group, Apple, and Berkshire Hathaway. The Motley Fool owns shares of American International Group, Apple, and Berkshire Hathaway and has the following options: Long Jan 2014 $25 Calls on American International Group. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Top Holdings of D.E. Shaw Worth Buying originally appeared on Fool.com is written by Shweta Dubey.
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