Warren Buffett’s Berkshire Hathaway Inc. is backing a $1 billion prize offered by Quicken Loans Inc. if a contestant predicts the winner of each game in the National Collegiate Athletic Association’s men’s basketball tournament.

The prize would be paid in 40 annual installments of $25 million and split among multiple winners if there is more than one perfect entrant, the Detroit-based lender said today in a statement. The winner has the option of a single payment of $500 million.

Berkshire has specialized in unusual insurance risks for decades, protecting clients against big losses in return for premium payments. The Omaha, Nebraska-based company won a bet in 2010 on the World Cup after France was eliminated from the tournament in South Africa. Berkshire has previously guaranteed against the potential payout of $1 billion in an event sponsored by PepsiCo Inc.

“We’ve seen a lot of contests offering a million dollars for putting together a good bracket, which got us thinking, what is the perfect bracket worth?” Quicken Loans Chief Marketing Officer Jay Farner said in the statement. “We decided a billion dollars seems right for such an impressive feat.”

Buffett suggested the $1 billion contest to Quicken Loans founder Dan Gilbert when the Berkshire chairman was in Detroit late last year for an economic-development event with Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein, Farner said in an interview.

Reinsurance Executive

Gilbert has previously worked with Buffett on philanthropy, not on a business venture, Farner said. Ajit Jain, Buffett’s reinsurance lieutenant, was involved in the deal, according to Farner.

The 68-team, single-elimination tournament begins in March. Submissions will be limited to one per household and capped at 10 million entrants, according to the statement.

Aaron Emerson, a spokesman for Quicken Loans, declined to say how much the company paid for the policy. He said the tournament excludes the play-in games, which narrow the field to 64 teams.

The odds of picking every winner correctly in a 64-team bracket are less than 1 in 9 quintillion, according to Jeff Bergen, a math professor at DePaul University in Chicago. Even with some basketball knowledge, that only improves to about 1 in 128 billion, he said.

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