Berkshire Slashes Stake in Munich Re

(BRK.A), (BRK.B)

For the past four months, Berkshire Hathaway’s leadership has been expressing its displeasure with the state of the reinsurance market. Now, reinsurer Munich Re has reported that Berkshire has cut its stake in the company from roughly 12% down to 9%.

“It’s a business whose prospects have turned for the worse and there’s not much we can do about it,” Warren Buffett said at the 2015 Berkshire Hathaway annual meeting.

“The reinsurance business not as good as it once was and is unlikely to get better,” Charlie Munger added. “Money has come in, not because they want to be in reinsurance, but because it’s an uncorrelated asset class. We’re in it for the long haul.”

Buffett’s and Munger’s words were in line with those of Ajit Jain, who is the head of Berkshire Hathaway Reinsurance.

“What was a very lucrative business is no longer a very lucrative business going forward,” Jain said in July in The Wall Street Journal.

Berkshire originally disclosed a stake in Munich Re in January 2010, when it reported a 3.045% stake in the German reinsurer.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.