The palace intrigue around Warren Buffett’s multi-billion dollar secret Berkshire Hathaway investment has finally been put to the sword, with the swish of a 13F filings with the US markets regulator, SEC (Securities and Exchange Commission), revealing a ginormous position in Chubb.
Although you’ll have locked a door or garden shed or cat prison with a Chubb padlock, the company is in fact among the world’s biggest publicly traded property-casualty insurers.
Keen eyed fans of shipping disasters will recognise the name which has been in the headlines over in the States this year because of this – presented here by Fox 10 in delicious “frame-by-frame” detail…
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Yep. Chubb’s been in the headlines of late as the woebegone insurer of that great big collapsed (Francis Scott) Key Bridge in Baltimore.
Buffett is arguably the world’s most famous investor, and his investment moves are closely followed. Each quarter, the company he runs, Berkshire Hathaway, discloses its current holdings to shareholders, but that’s not been entirely true these last quarters and there’s been much wringing of hands and gnashing of teeth over what surprises the Oracle has in store.
Berkshire’s SEC filing also showed that it sold off its position in Hewlett Packard (HP) in the first quarter. The company also cut its flagship position in Apple in the first months of 2024.
But the missing position over the last few quarters has literally been eating analysts up from the inside.
JUST IN: Warren Buffett has bought Chubb, $CB.
This is his “secret” and “confidential” stock that he asked the SEC not to disclose.
— unusual_whales (@unusual_whales) May 15, 2024
Turns out the Oracle of Omaha is already up to his chin in Chubb.
As per the regulatory filing made public after the market closed Wednesday, Berkshire Hathaway’s stake in the insurer was worth US$6.7 billion at the end of March.
Berkshire is big for insurance.
Warren’s been effusive in the past about the insurance role insurers play in the BH’s portfolio.
They’ve long owned US auto insuring giant Geico and a swag of other insurers.
Buffett told shareholders in his most recent letter:
“Enough about problems: Our insurance business performed exceptionally well last year, setting records in sales, float and underwriting profits. Property-casualty insurance (“P/C”) provides the core of Berkshire’s well-being and growth. We have been in the business for 57 years and despite our nearly 5,000-fold increase in volume – from $17 million to $83 billion – we have much room to grow.”
Chubb’s shares are naturally higher on after-hours trading in New Tork following Berkshire’s disclosure.
Up 12% this year – ahead of the rampant S&P 500’s 11% – the stock’s jumped nearly 7% in extended trading
Via Getty
Something had to be going on when the conglomerate’s stonking hoard of cash hoard clocked about US$190bn over the last few months, up from almost $168 billion in the fourth quarter.
The 93-year-old Oracle of Omaha told the Berkshire gathering last Saturday that he’d be fine to see the mountain of money hit US$200 billion by Q4.
“I think it’s a fair assumption that [cash holdings] will probably be about $200 billion at the end of this quarter,” Buffett told investors.
“We’d love to spend it, but we won’t spend it unless we think they’re doing something that has very little risk and can make us a lot of money.”
The extra dosh follows the culling of 13% of Berkshire’s huge stake in Apple (APPL).
Chubb: What you need to know
Firstly, Chubb operates as a holding company, which offers commercial and personal property and casualty insurance, personal accident and accident and health (A&H), reinsurance, and life insurance. A very broad bunch of insurance stuff.
Secondly. it was founded in 1882 and is HQ is in Zurich, Switzerland.
This is where it makes money:
North America Commercial Property and Casualty (P&C) Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance.
The North America Commercial P&C Insurance segment that includes the business written by Chubb divisions that provide P&C insurance and services to large, middle market and small commercial businesses in the U.S., Canada, and Bermuda.
The North America Personal P&C Insurance segment offers affluent and high net worth individuals and families with homeowners, high value automobile and collector cars, valuable articles, personal and excess liability, travel insurance, and recreational marine insurance and services.
The North America Agricultural Insurance segment is involved in comprehensive multiple peril crop insurance (MPCI) and crop-hail insurance, and Chubb agribusiness.
The Overseas General Insurance segment caters for both commercial and consumer P&C insurance and services in countries and territories outside of North America where the company operates.
The Global Reinsurance segment covers reinsurance business. The Life Insurance segment focuses on its international life operations.
Via Chubb
Needless to say, the brokers and analysts are broadly upbeat.
And likely to be more so after yesterday:
Via Barron’s
And here’s Chubb’s Q1, dropped on 23rd April
Net income was $2.14 billion, up 13.3%, and core operating income was $2.22 billion, up 20.3%.
Net income and core operating income were impacted modestly by two one-time items: an incremental deferred tax benefit of $55 million, or $0.14 per share, related to the Bermuda tax law enacted in December 2023, partially offset by a contribution to the Chubb Charitable Foundation of $30 million ($24 million after-tax), or $0.06 per share.
Global P&C net premiums written, which excludes Agriculture, were up 13.3%, with commercial insurance up 11.1% and consumer insurance up 19.3%. North America was up 10.1%, including growth of 12.3% in personal insurance and 9.4% in commercial insurance. Overseas General was up 17.5%, with growth of 27.1% in consumer insurance and 12.2% in commercial insurance; Asia, Latin America, and Europe were up 34.7%, 17.5%, and 8.6%, respectively.
P&C underwriting income was $1.40 billion, up 15.4%, with a combined ratio of 86.0%. P&C current accident year underwriting income excluding catastrophe losses was $1.63 billion, up 10.3%, with a combined ratio of 83.7%.
Life Insurance net premiums written were $1.63 billion, up 26.3%, and segment income was $268 million, up 9.8%. Life Insurance net premiums written and deposits collected were $2.23 billion, up 39.4%.
Pre-tax net investment income was $1.39 billion, up 25.7%, and adjusted net investment income was $1.48 billion, up 23.5%.
Annualized return on equity (ROE) was 14.3%. Annualized core operating return on tangible equity (ROTE) was 21.9% and annualized core operating ROE was 13.7%.
Cheap as Chubb
By the numbers, well, the stock looks pretty cheap.
Chubb $CB
ROE: 16%
PE: 11x
PB: 1.7x
Fairfax $FFH.to
ROE: 22
PE: 7x
PB:1.1x $CB is 4x the cap and 5x the vol, so that makes sense, but I think the real play here is just his desire to get cheap float. With higher rates, a whole new generation is going to learn of its magic. pic.twitter.com/eL1NqyO0jf
— Trevor Scott . AI (@TidefallCapital) May 15, 2024
CB traded earlier this week at 11.3 times its projected earnings over the next 12 months, compared with 20.6 times for the S&P 500 and 15.3 times for its financial sector peers.
Chubb: 1 year chart and volumes
Buffett: A five course meal
Up until last week when Berkshire Hathaway reported its first-quarter 2024 figures, it seemed that the conglomerate’s stock portfolio remained laser-focussed on a five dish buffet.
The top five holdings in Berkshire’s portfolio unchanged in the first three months of 2024, although its mega Apple stake did get pipped by some 13% over Q1, marking the 2nd straight quarter in which the Oracle culled his stake.
However, Apple remains by far Berkshire’s largest and centrepiece holding.
At the end of March, Berkshire still boasted circa $135bn worth of Apple stock, suggesting a stash of some 790m shares, all up.
Apple has been puny by its own high standards this year, dropping around 5% in volatile trade.
Other major Berkshire stakes are thusly:
The US$34.5bn position in American Express.
The US$39bn in Bank of America.
The $24.5bn stake in Coca-Cola stock
The $19.4 billion in Chevron shares.
These five positions made up three-quarters of Berkshire Hathaway’s stock portfolio.
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