Berkshire reveals US$6.72bil Chubb stake

NEW YORK: Warren Buffett’s Berkshire Hathaway has revealed a new US$6.72bil stake in the insurer Chubb, confirming months of speculation that it had made a big new investment.

Berkshire owned 25.92 million Chubb shares as of March 31, according to a regulatory filing detailing Berkshire’s US-listed holdings as of that date.

The disclosure sent Chubb’s share price to a record high in after-hours trading, rising 6.3% to US$268.96.

Shares often rise when Berkshire reveals new holdings, reflecting what investors believe is Buffett’s seal of approval.

“Chubb is an attractive equity investment for Berkshire because it operates in a business Berkshire knows well: property-casualty insurance,” Cathy Seifert, a CFRA Research analyst who covers Berkshire, said in an email.

Seifert would not speculate whether Berkshire might buy all of Chubb, but said Chubb’s focus on commercial lines specialty coverage and high-end homeowners’ protection would be a “good fit” in Berkshire’s insurance and reinsurance portfolio.

Berkshire ended March with US$189bil of cash and equivalents.

At Berkshire’s annual meeting on May 4, Buffett said the cash stake could reach US$200bil by June, and that cash looked “quite attractive” relative to high-priced stocks and in light of “what’s going on in the world”.

Chubb and Berkshire did not immediately respond to requests for comment.

Berkshire began buying Chubb in last year’s third quarter, and had obtained US Securities and Exchange Commission (SEC) permission to temporarily keep its purchases confidential.

Buffett occasionally requests such permission to keep investors from piggybacking on him before he’s done buying.

In recent years, Berkshire obtained similar SEC permission for its investment in Chevron and former investments in Exxon Mobil, IBM and Verizon.

The Chubb investment was revealed 10 days after Berkshire unexpectedly disclosed it had sold about 115 million Apple shares in the first quarter.

That reduced its holdings in the iPhone maker to US$135.4bil, or 40% of its US$335.9bil equity portfolio.

Apple accounted for most of the US$20bil in stock that Berkshire sold in the first quarter.

Berkshire also pared holdings of several other stocks, including Louisiana Pacific and Sirius XM, and exited its investment in computer maker HP. It bought just US$2.7bil of stocks in the quarter.

Wednesday’s filing does not identify which investments were made by Buffett or his portfolio managers Todd Combs and Ted Weschler. Buffett, 93, has run Berkshire since 1965.

The conglomerate also owns dozens of businesses including the Geico car insurer, BNSF railroad, energy and industrial companies, and consumer brands such as Benjamin Moore, Dairy Queen, Duracell, Fruit of the Loom and See’s Candies. — Reuters