Buffett's Berkshire Buys $6.7B Chubb Stake, Sparks Surge

Berkshire Hathaway invests $6.7 billion in Chubb, marking a strategic expansion into the property-casualty insurance sector.

By Bill Bullington

5/16, 01:34 EDT
Chubb Limited

Key Takeaway

  • Berkshire Hathaway invests $6.7 billion in Chubb Ltd., causing an over 8% surge in Chubb's stock in after-hours trading.
  • The investment, representing 2% of Berkshire's portfolio, signals Buffett's continued interest in the insurance sector.
  • Speculation arises on whether Berkshire will further increase its stake or pursue an outright acquisition of Chubb.

Berkshire's Strategic Move

Warren Buffett's Berkshire Hathaway Inc. has disclosed a significant $6.7 billion stake in Chubb Ltd., a leading property-casualty insurer. This revelation came through a regulatory filing with the Securities and Exchange Commission, showcasing Berkshire's holdings as of March 31. The stake, comprising over 25.9 million shares, marks a notable addition to Berkshire's portfolio, accounting for 2% of its total. Chubb's stock responded positively, surging more than 8% in after-hours trading upon the news. This move by Berkshire Hathaway highlights Warren Buffett's ongoing interest in the financial services sector, particularly within the insurance industry.

Market Implications

The disclosure of Berkshire Hathaway's stake in Chubb has stirred speculation among investors and analysts. Cathy Seifert, an analyst at CFRA, noted the potential for Berkshire to either maintain its equity stake in Chubb or pursue an outright acquisition, given the complementary nature of their business mixes. This speculation has contributed to a positive outlook on Chubb's shares, which have already rallied 12% year to date. Berkshire's investment is seen as a strategic move, giving it exposure to one of the best-performing financial sector subgroups at a below-peer valuation.

Industry Context

Chubb Ltd. stands as one of the largest property-casualty insurers globally, with operations in 54 countries. The company, led by CEO Evan Greenberg, has a significant presence in various insurance markets, including cyber attacks and marine shipping. Notably, Chubb was involved in insuring Baltimore’s Francis Scott Key Bridge, which recently faced a collapse, with a pending payout of $350 million to the state of Maryland. Berkshire Hathaway's investment in Chubb aligns with Buffett's history of engaging deeply with the insurance sector, leveraging the "float" generated by insurance operations for further investments.

Street Views

  • Cathy Seifert, CFRA (Neutral on Chubb):

    "Chubb shares are likely to rise Thursday morning as investors react to this news and speculate whether Berkshire will keep an equity stake in CB or pursue an outright acquisition... We can’t speculate whether Berkshire would pursue an outright acquisition of CB, but we note their business mixes are highly complementary."