AIG ( AIG ) agreed to pay $9.8 billion for reinsurance coverage from Warren Buffett 's Berkshire Hathaway ( BRK.A ), resolving a long-standing concern about the adequacy of the bailed-out insurer's reserves. "This decisive step enables us to focus firmly on the future and build on the progress we've made in transforming AIG," CEO Peter Hancock said today in a statement. "The agreement supports our stated strategy and gives us additional risk capacity to serve our clients and return capital to shareholders." The purchase from Berkshire subsidiary National Indemnity Co. comes as Hancock streamlines AIG through asset sales and returns more capital to shareholders amid pressure from activists Carl Icahn and John Paulson. The policy carries annual interest of 4% from January 2016 through the payment date on June 30. Cathy Seifert, an analyst with CFRA Research, raised her 12-month price target by $3, to $75, following the announcement.