Warren Buffett’s purchase of a 6.4% stake in Chubb makes perfect sense as the insurer checks all the boxes of the Oracle of Omaha’s investment criteria, according to Deutsche Bank. “We believe that Chubb is an ideal fit for Warren Buffett’s investment philosophy, characterized by high-quality business with strong [returns on equity], a robust economic moat, a proven track record of compounding returns, and a distinguished management team,” Deutsche Bank analyst Cave Montazeri wrote in a note to clients. Buffett’s Berkshire Hathaway unveiled a $6.7 billion stake in Zurich-based Chubb in a new regulatory filing, ending months of speculation over the identity of the secret stock pick. Berkshire had asked for confidential treatment from the Securities and Exchange Commission to keep the stake under wraps for two quarters. The property and casualty insurer became Berkshire’s ninth-biggest holding at the end of March. Shares of Chubb jumped nearly 8% in premarket trading Thursday following the news of Berkshire’s stake. Deutsche Bank said Chubb has a disciplined approach to underwriting and capital allocation and, in the near term, should benefit from earned pricing above loss costs, strong investment income and growth in its international operations. “Chubb has been one of the best-performing insurance stocks in the U.S. over the past 20 years, thanks to its long-term track record of creating value for shareholders, growing book value per share plus dividends at 10% per annum,” Montazeri said. CB ALL mountain Chubb Deutsche Bank has a buy rating on Chubb and a 12-month price target of $278, implying a 10% gain from Wednesday’s close of $252.97. Evercore ISI believes that Buffett’s purchase gives the industry a boost of confidence due to his deep knowledge and experience in the insurance business. The Omaha-based Berkshire has always had an enormous footprint in the insurance industry, from its crown jewel Geico, an auto insurer, to reinsurance giant General Re along with a host of home and life insurance services. The conglomerate also bought insurance company Alleghany Corp. for $11.6 billion in 2022 . “We think it is a slight positive signal that Berkshire is making such a large investment at this point in the cycle, especially given its unique knowledge of [property and casualty] industry dynamics as it is one of the largest commercial P & C insurers,” Evercore ISI said in a note. — CNBC’s Michael Bloom contributed reporting.
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