A giant investment: Insurance sector has huge potential… like…

Technology: In a year marked by strategic divestitures, Warren Buffett’s investment vehicle, Berkshire Hathaway, surprised Wall Street by making a bold bet on Chubb Ltd. Cutting back on giants like Apple and Bank of America to amass unprecedented cash reserves, Buffett found immense potential in the resolute but often overlooked insurance sector.

Berkshire Hathaway has been accumulating shares in American-Swiss insurance powerhouse Chubb over the past few quarters. The acquisition began with 8.1 million shares in Q3 2023 and grew aggressively, taking the total to 27 million shares, worth about $7.7 billion. Now accounting for 2.6% of Berkshire’s entire portfolio, Chubb is a testament to Buffett’s belief in the enduring appeal of the insurance industry.

Why insurance, why Chubb?

Buffett’s affinity for insurance companies is no secret. With holdings in iconic firms like GEICO and Gen Re, insurance is a big part of Berkshire’s success story. These businesses generate significant cash flow (“float”) that can be reinvested before policy claims occur, providing a strategic advantage.

Chubb itself is the epitome of resilience and growth. As the largest publicly traded property, casualty, and health insurer, Chubb has consistently expanded its revenue and earnings, weathering economic storms without sacrificing profitability. Since its 2016 transformation via merger, Chubb has recorded an impressive compound annual growth rate.

Achieving Steady Wealth with Chubb

While Chubb may not promise explosive growth, its solid performance and consistent returns make it a gem for long-term investors. Over the past eight years, Chubb has appreciated significantly, rewarding patient shareholders with commendable dividends and a strong total return.