Equities

Berkshire Unveils $6.7B Chubb Stake, Boosts Stock 9%

Berkshire Hathaway invests $6.7 billion in Chubb, signaling strong confidence in the insurance sector.

By Bill Bullington

5/15, 19:08 EDT
Apple Inc.
Chubb Limited
article-main-img

Key Takeaway

  • Berkshire Hathaway reveals a $6.7 billion stake in Chubb Ltd., driving Chubb's stock up over 9% in after-hours trading.
  • Amidst portfolio adjustments, including trimming its Apple stake, Berkshire's cash reserves hit a record $189 billion.
  • The investment underscores Buffett's confidence in the insurance sector and boosts investor confidence in both Berkshire and Chubb.

Berkshire's Strategic Investment

Warren Buffett's Berkshire Hathaway Inc. has unveiled a substantial $6.7 billion stake in Chubb Ltd., a leading insurer, as per regulatory filings disclosed on Wednesday. This move highlights Buffett's ongoing interest in the financial services sector, particularly in insurance. Berkshire Hathaway, known for its diversified investment portfolio, has been accumulating this stake since 2023, under the radar with the Securities and Exchange Commission's (SEC) approval for confidentiality. This strategic investment in Chubb, which boasts a market capitalization of over $100 billion, underscores Berkshire's confidence in the insurance industry, despite the inherent risks associated with it. Chubb's stock reacted positively to the news, surging more than 9% in after-hours trading.

Adjustments in Berkshire's Portfolio

In recent times, Berkshire Hathaway has been adjusting its investment portfolio, notably trimming its stake in Apple Inc. to $135.4 billion by the end of the first quarter. These adjustments come amidst various challenges faced by Apple, including antitrust fines and operational hurdles. Despite these changes, Buffett has expressed continued support for Apple, indicating it will remain Berkshire's largest investment barring significant shifts. Concurrently, Berkshire's cash reserves have reached a record $189 billion as of March's end, with Buffett suggesting it could hit $200 billion by the end of the current quarter. These portfolio adjustments reflect Berkshire's strategic realignment and Buffett's nuanced approach to investment, balancing long-standing holdings with new opportunities in the financial sector.

Chubb's Market Response and Industry Position

The disclosure of Berkshire's stake in Chubb led to a notable increase in Chubb's stock, with a 9.9% rise in after-hours trading. This market response is a testament to investor confidence in Berkshire's investment choices and Buffett's reputation for value identification within the insurance industry. Chubb, as one of the largest property-casualty insurers globally, operates in 54 countries and has been involved in significant insurance claims, including the recent payout related to the collapse of Baltimore’s Francis Scott Key Bridge. The company's robust performance and strategic positioning in the market, coupled with Berkshire's backing, have contributed to its shares gaining approximately 12% year to date.

Management Quotes

  • Evan Greenberg, CEO of Chubb:

    "Chubb — which provides products such as home, car and liability insurance — has grown into one of the largest insurance companies globally."

  • Warren Buffett, Berkshire Hathaway:

    "The revelation of Berkshire’s stake in Chubb comes as the conglomerate braces for a post-Buffett era. At the company’s annual meeting earlier this month, Buffett laid out a sweeping role for Greg Abel, who will have the final decision on the firm’s investments."