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In a surprising turn of events, Warren Buffett’s Berkshire Hathaway (BRK.A)(BRK.B) has been quietly amassing shares of Chubb Limited (CB), a leading property and casualty insurance provider. The revelation, unveiled after an SEC disclosure exemption expired, highlights an intriguing strategic move by the Oracle of Omaha: investing heavily in a direct competitor to Berkshire’s own insurance empire.
A Stealthy Acquisition Strategy
Buffett began purchasing Chubb shares in the third quarter of 2023, a time when Berkshire’s portfolio strategy was otherwise marked by significant reductions in holdings like Bank of America (BAC) and Apple (AAPL). The Chubb investment stood out not only for its scale but also for its secrecy, as Berkshire was permitted to accumulate the stake away from public scrutiny.
The secrecy was strategic. Chubb operates in the same markets as Berkshire’s diverse insurance businesses, ranging from property and casualty to reinsurance. By keeping the purchases hidden, Buffett avoided tipping off competitors or prematurely driving up Chubb’s stock price.
Growing Into a Major Holding
Since initiating the position, Buffett has steadily increased Berkshire’s stake in Chubb. As of the most recent quarter, Berkshire owns over 27 million shares of Chubb, valued at nearly $8 billion, making it one of the largest positions in its portfolio.
This persistent buying comes as Buffett has otherwise been trimming stakes in major companies like Apple, which still constitutes over 26% of Berkshire’s holdings but has been partially sold off. Meanwhile, Chubb has grown to nearly 3% of the portfolio—a significant share for a company that was absent just over a year ago.
Why Buffett Loves Chubb
Chubb’s appeal lies in its disciplined underwriting and profitability. In an industry where many insurers see combined ratios hover near 100%—barely breaking even on premium collection versus claims payouts—Chubb boasts a combined ratio below 90%. This means Chubb retains $0.10 or more in profit for every dollar of premiums, a remarkable feat in a competitive landscape.
This strict underwriting policy aligns with Buffett’s philosophy of investing in companies with durable competitive advantages. By avoiding risky policies and maintaining conservative practices, Chubb has ensured steady profitability even in challenging market conditions.
Could Chubb Be an Acquisition Target?
The timing of this purchase, along with Berkshire’s record $325 billion cash reserve, has fueled speculation that Buffett may consider acquiring Chubb outright. While a full acquisition would be unprecedented in size—Chubb’s market cap stands at $116 billion—it remains a possibility.
Buffett has previously described cash as a “wasting asset,” that “earns virtually nothing” when compared to other opportunities. However, in this high-interest rate environment, it's clear Buffett has grown more fond of cash after accumulating larger cash reserves than the market cap of many S&P 500 companies. Similarly, Buffett has long held the position that investing in companies simply for the purpose of investing goes against the Berkshire Hathaway mantra. Buffett has compared investing to a game of baseball, except you can wait forever until you get the right pitch. Investing in a company like Chubb would offer a productive outlet for Berkshire’s capital. The insurer’s stable cash flows and conservative business model would complement Berkshire’s existing operations, creating potential synergies within its insurance empire.
However, several challenges would accompany such a move. Antitrust concerns could arise, given Berkshire’s existing dominance in the insurance sector. Additionally, the sheer scale of the acquisition would require significant resources, potentially impacting Berkshire’s ability to pursue other opportunities. Conversely, Buffett could simply continue buying up a substantial stake allowing him to get increased exposure to the lucrative insurance business.
Why the Secrecy?
The confidentiality surrounding the Chubb purchases underscores the competitive dynamic between the two companies. While Berkshire’s insurance businesses operate across numerous segments, including health and reinsurance, Chubb focuses exclusively on property and casualty—a narrower but lucrative niche. Publicly disclosing the purchases early might have invited scrutiny or competitive pushback.
Buffett’s strategy of secrecy isn’t new. In the past, Berkshire has obtained similar exemptions when quietly acquiring stakes in companies it eventually bought outright, such as Burlington Northern Santa Fe and Precision Castparts. Similarly, Buffett was granted secrecy when buying stakes in Chevron and Verizon.
A Rare Bet in a Market of Uncertainty
Buffett’s buying spree in Chubb also comes during a period of market uncertainty, where Berkshire has been cautious about other investments. As high valuations deter many equity purchases, Chubb represents a safe harbor, combining Buffett’s preference for strong fundamentals with his confidence in the insurance industry.
With Chubb’s stellar track record, disciplined underwriting, and alignment with Berkshire’s broader insurance strategy, it’s clear why Buffett finds the company attractive. Whether this leads to a full acquisition remains to be seen, but for now, Chubb has quietly become one of Berkshire’s most notable bets—showing once again that Buffett’s best moves often happen behind the scenes.
