Chubb CEO Evan Greenberg talks about the impact of climate change on insurance premiums on “The Craman Countdown.”
When news spread among investors that Warren Buffett’s Berkshire Hathaway had added Chubb to its portfolio in May, the insurance company became a new big name stock.
The 25.9 million shares, worth $6.72 billion, boosted the stock price to an all-time high, where it is currently trading just below that level. Chubb placed 9th His other major holdings include Coca-Cola, Apple and American Express.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| CB | Chubb Corporation | 254.08 | -1.49 | -0.58% |
| KO | Coca-Cola | 63.33 | +0.18 | +0.29% |
| AAPL | Apple. | 221.55 | +1.28 | +0.58% |
| AXP | American Express Co., Ltd. | 235.71 | -0.26 | -0.11% |
Buffett hasn’t revealed why he buys or sells particular stocks, but his past comments give an idea of what he’s looking for, including companies he sees as “moats” that competitors can’t catch or access.
Warren Buffett likes “moats” and elephant-sized acquisitions
“In business, I want an economic castle protected by an unbreakable moat.” Buffett wrote in his 1995 letter to shareholders:At the time, he expressed gratitude to insurance company Geico for holding the title.
His love of the insurance industry is nothing new — he owns Geico, which is headed by an affable green reptile, General Lee. So what does the Oracle of Omaha see in Chubb?
In this photo illustration, the Geico logo appears on a smartphone. (Photo illustration: Rafael Henrique/SOPA Images/LightRocket via Getty Images / Getty Images)
Is that the company’s 1.4% annual dividend? Not at all, says CEO Evan Greenberg, son of the legendary 99-year-old former AIG CEO and insurance industry pioneer Hank Greenberg.
“The fact is, our stock has a low dividend yield. I’m not buying it for the dividend. It’s about 1.4 percent. I’m not buying it for the dividend,” Greenberg explained in an interview on “The Craman Countdown” last month.
Greenberg suggests that what Buffett is probably seeing is a steady upswing for insurance companies many years down the line.
Double-digit revenue growth
“We are in fact a growth company. We’ve seen double-digit earnings growth over the last few years and we expect to see continued strong earnings growth going forward,” Greenberg said, highlighting the company’s multiple revenue streams in the U.S. and internationally.
On September 19, 2017, at the Forbes Media 100th Anniversary Celebration held at Pier 60 in New York City, Warren Buffett appeared on stage alongside 24 other philanthropists and influential businessmen featured on Forbes magazine’s “100 Greatest Business Minds” list. (Daniel Zucnik/WireImage/Getty Images)
Multiple sources of income, investment assets
“We are diversifying and our property and casualty insurance and underwriting business is one source of revenue. Our investment assets are at their highest levels in decades with interest rates rising, so that’s another source of revenue,” he said.
Between The company’s first quarterPretax investment income increased more than 25 percent to $1.39 billion, while adjusted net investment income increased 23 percent to $1.48 billion.
Life insurance business in the United States and Asia
And then there’s Chubb’s main business.
“We are expanding our life insurance business in Asia. We are a global company with over 40 percent of our business outside the U.S. We are the largest commercial insurer in the U.S. and 20 percent of our business is in Asia,” he said.
Chubb shares have risen more than 13% this year, slightly below the 15%-plus gain in the S&P 500. Berkshire Hathaway is Chubb’s largest shareholder, and Greenberg is the second-largest, according to ThomsonOne.
The insurer is scheduled to release its quarterly results on July 24.
