{"id":232871,"date":"2010-01-26T13:40:00","date_gmt":"2010-01-26T18:40:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-8941399510311817095"},"modified":"2010-01-26T13:44:12","modified_gmt":"2010-01-26T18:44:12","slug":"reuters-warren-buffett-holds-1-billion-stake-in-munich-re","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/232871","title":{"rendered":"REUTERS: Warren Buffett holds $1 billion stake in Munich Re"},"content":{"rendered":"

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Jonathan Gould<\/div>\n
FRANKFURT<\/div>\n
Tue Jan 26, 2010 12:30pm EST<\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/div>\n

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FRANKFURT (Reuters) – U.S. investor Warren Buffett has built a $1 billion stake in Munich Re, adding to his array of insurance holdings and boosting shares in the world’s biggest reinsurer.<\/p>\n

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Munich Re said on Tuesday Buffett’s shareholding rose just above the mandatory reporting threshold on January 18 and amounted to 3.045 percent of the voting rights on that date.<\/p>\n

Analysts said Buffett probably saw Munich Re simply as a good buy in an undervalued sector. The stock has gained 1.7 percent over the last 18 months, compared with a 21 percent decline in the DJ Stoxx European insurance index .<\/p>\n

“It appears to be a portfolio investment for Buffett rather than a strategic one,” JP Morgan analyst Michael Huttner said.<\/p>\n

JP Morgan in a research note last week said the insurance sector looked cheap at about 1.0 times book value, compared with a historical valuation of 1.4 times, adding tighter insurer solvency rules due to come into effect in the next three years were a major worry for investors.<\/p>\n

Munich Re stands to be a big winner from the new rules because of its ability to generate excess capital and grow its business, particularly with mutual insurers, JP Morgan said.<\/p>\n

Munich Re has resumed share buybacks and is expected to deliver a 2009 net profit of 2.36 billion euros ($3.3 billion) according to Thomson Reuters StarMine.<\/p>\n

Industry observers said Buffett’s move was a vote of confidence in reinsurers, which make their money by selling cover for big risks such as hurricanes and earthquakes to insurance companies.<\/p>\n

PLAYING THE FIELD<\/p>\n

The billionaire investor is already a major player in the world’s reinsurance market with his Berkshire Hathaway Inc unit, the world’s third-biggest reinsurer.<\/p>\n

He also pumped 3 billion Swiss francs ($2.9 billion) into the world’s No. 2 reinsurer, Swiss Re, at the height of the financial crisis after the Swiss group wrote down billions on illiquid assets.<\/p>\n

Swiss Re last week said it had agreed to transfer a U.S. life reinsurance contract to Buffett for 1.3 billion Swiss francs, allowing it to reinvest capital more profitably elsewhere.<\/p>\n

Swiss Re shares have fallen 30 percent over the last 18 months.<\/p>\n

Munich Re shares turned positive on news of the Buffett purchase, rising by as much as 2 percent before paring gains to close up 1.2 percent at 109.80 euros. The DJ Stoxx index of European insurance shares rose 0.4 percent.<\/p>\n

The stake was worth around 740 million euros ($1 billion), according to a Reuters calculation.<\/p>\n

“We rejoice at every investor as evidence of our sustainable strategy,” a Munich Re spokeswoman said.<\/p>\n

Rumors that Buffett was buying stock had boosted Munich Re shares on Friday.<\/p>\n

Berkshire is the largest U.S.-based company by market value not included in the S&P 500 because the highly priced shares trade on thin volume.<\/p>\n

Data from Thomson Reuters StarMine, which weights analysts’ forecasts according to their track record, shows Munich Re trading at 8.6 times 12-month forward earnings, a slight premium to Swiss Re’s multiple of 8.1<\/p>\n

(Editing by Rupert Winchester and David Holmes)<\/p>\n

($1=1.041 Swiss Franc)<\/p>\n

($1=.7097 Euro)
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