OMAHA, Neb. (AP) – Billionaire Warren Buffett’s Berkshire Hathaway Inc. has agreed to trade its 16.3 percent stake in White Mountains Insurance Group for two subsidiaries and $751 million.

Berkshire Hathaway has been an investor in White Mountains since 2001 and the Omaha, Neb.-based company currently owns 1.7 million White Mountains shares.

In addition to the cash, Berkshire will get Commercial Casualty Insurance Co. and International American Group. Those two companies had gross assets of about $435 million and about $58 million of shareholder’s equity.

White Mountains CEO Ray Barrette said Berkshire’s 2001 investment in White Mountains helped the company buy CGU, which was renamed One Beacon Insurance Group. The purchase of CGU’s property and casualty insurance business helped White Mountains expand beyond reinsurance.

“White Mountains is now a larger, more diversified business, competing actively in many areas with Berkshire Hathaway,” Barrette said. “This is a graceful, value-enhancing way to go our separate ways.”

Berkshire already owns several major insurance companies, including Geico and reinsurance giant General Re.

Both of the businesses Berkshire will acquire are operating in runoff mode, so they are only managing existing insurance policies until they are paid off and the company closes. They are not writing new policies.

The International American Group includes American Centennial Insurance Co. and British Insurance Co. of Cayman.

A Berkshire Hathaway spokeswoman said Monday that no company executive would be immediately available to comment.

The deal is expected to close in the third quarter of 2008. The terms of the deal value Berkshire’s White Mountains stock at $836 million, or $485 per share, based on the closing price when the deal was agreed to.

Berkshire paid $369 million for the stock in White Mountains, which sells car insurance through its Esurance division and offers reinsurance through White Mountains Re.

Shares of White Mountains stock fell $19.12, or 4 percent, to $458.88 in afternoon trading Monday. Berkshire Hathaway’s Class A shares slipped $2,405, or 1.8 percent, to $131,400.

White Mountains will be left with about 8.8 million shares outstanding after the deal. White Mountains’ corporate headquarters are in Hamilton, Bermuda, but its main executive office is in Hanover, N.H.

The two companies structured the deal so that neither one expects to record a taxable gain on the transaction. Regulators will have to approve the deal before it can close.

Besides insurance companies, Berkshire owns clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

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On the Net:

Berkshire Hathaway Inc.: www.berkshirehathaway.com

White Mountains Insurance Group, Ltd.: www.whitemountains.com

AP-ES-03-10-08 1609EDT