min read
· Posted on
May 20, 2024

Warren Buffet's mystery $6.7 billion USD investment is finally revealed to be...drumroll...Chubb Insurance

Berkshire has invested $6.7 billion USD position in Chubb Insurance.

What's the key learning?

  • Insurers can invest the money or the "float" in the ‘in-between time’ for their own benefit… like in other companies such as Coca Cola and American Express.
  • Buffet’s really got a thing for insurance businesses because of its ‘float’, as seen with Berkshire's investments with big insurance companies.
  • The announcement about the mystery Chubb Insurance came after Buffet sold off some shares in Apple, which turned out to be a significant investment.

👉 Background: Warren Buffett, at 93 years young, is one of the most famous investors in the world. He started investing under the Berkshire Hathaway name with his mate Charlie Munger who passed away at 99 this year.

👉 What happened: Berkshire Hathaway had been mysteriously investing a business - but keeping it confidential. Now, it has been revealed that Berkshire has invested $6.7 billion USD position in Chubb Insurance.

👉 What else: After the investment announcement, the share price in Chubb Insurance jumped by more than 8%. And this isn't Buffet's first insurance rodeo. In fact, it seems like Buffet's got a thing for insurance businesses, likely because of their 'float'.

What's the key learning?

💡Some industries are inherently positioned for success, thanks to their unique financial structures that increase their profit potential.

💡In the insurance industry for example, insurers collect premiums from customers now, while claims are paid out later… or more likely never. This is called the 'float'. it effectively acts as a free loan for the insurer.

💡This idea of the ‘float’ is why Berkshire Hathaway has significant investments in 4 large insurers: Berkshire Hathaway Reinsurance, Geico, General Reinsurance and now Chubb Insurance. It's float across these businesses has grown to over $164 billion USD.

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