Warren Buffett Chubb Stock: $6.7 Billion Bet

Warren Buffett's Berkshire Hathaway secretly purchased Chubb stock, causing a 7.5% jump. With $182 billion in cash, could Buffett buy all of Chubb?

Warren Buffett's company recently made a significant purchase, as revealed in a 13F filing. The chairman had obtained conditional approval to keep the acquisition under wraps for two quarters. However, once the stake was disclosed, the stock of CB surged by 7.5% overnight. The stock opened for trading at $269 per share, with a market capitalization exceeding $102 billion. In contrast, Berkshire's "A" shares saw a modest 0.6% increase, while the more affordable "B" shares opened at $413 each.

This acquisition marks a return to Berkshire's roots as an insurance company. The conglomerate owns names in the insurance sector such as GEICO and General Reinsurance (Gen Re). In 2022, Berkshire acquired Allegheny for $11.6 billion. In recent years, the company has been shifting its focus towards finance stocks like American Express and Bank of America, while reducing stakes in consumer companies like HP and Apple.

Berkshire's new strategy has proven successful on Wall Street, with its stock climbing 27% over the past year and nearly 14% in 2024. Insurers have managed to maintain profitability by passing on costs to consumers, contributing to inflation. Critics have accused the industry of price gouging, but insurers refute these claims.

Chubb, the company in question, gained attention in March for underwriting former President Trump's $92 million appeal bond in the E. Jean Carroll case. CEO Evan Greenberg is the son of the renowned Maurice Greenberg, who was the CEO of American International Group during the 2008 financial crisis. Chubb was built around Ace Limited, an insurer that acquired the original Chubb for $29.5 billion and adopted its name in 2016.

With Berkshire sitting on $182 billion in cash by the end of the first quarter, speculation arises about a potential acquisition of Chubb by Buffett. Despite expressing a desire to deploy the cash, Buffett deems a large acquisition as unlikely.

The news of Berkshire's investment in Chubb may prompt small investors to take a closer look at insurance stocks. Many investors follow Buffett's lead and emulate his strategic moves in their own investment portfolios.