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버크셔해서웨이가 최근 공개한 Chubb(CB) 대규모 지분(약 70억 달러, 지분 6% 이상)을 분석. Chubb는 복합 손해보험사로 합산비율(86%)과 자기자본이익률 개선이 강점이며, 고금리 환경에서 보험 플로트 수익이 커졌다고 설명. 다만 주가가 장부가 대비 약 1.8배로 역사적 고점 수준이라 현재 가격은 매력이 낮다고 판단. 진행자는 Fairfax(FFH)를 개인 주요 보유 종목으로 들고 있다고 밝힘.
다듬은 글
for several quarters Warren Buffett's Berkshire hathway had been filing that they've been confidentially purchasing billions of dollars in a mystery stock then just this past week it was revealed which company he was buying and that company is chub Chubb the tier is CB this is now a top 10 position for the Burkshire hathway portfolio in this video we're going to talk about what does chub even do is it you know worthwhile for investors to consider piggybacking off of what you know Buffett saw what did Buffett even see here with chub you know going into a little bit greater detail my own preferred investment versus chub so I'm going to talk about a little bit about my own personal portfolio as well and so this is now a around A7 billion do bet for Berkshire hathway and it represents over 6% of the company so you do have this you know the potential for activism of hey it it crosses a 5% threshold you know will he be you know making a bigger move on it personally I would be surprised especially at the current level so what does chub even do I go to AI ticker chat just for quick summaries of the businesses you know quickly understanding that chub is a global insurance company you're talking about Commercial insur Insurance personal agriculture reinsurance that means they're helping insure the insurance companies they have life insurance there a lot of different pieces here and it's a global insurance company the reason why this is so important to understand when you have a global insurance company is if you're you're focused just on one you know Market let's say you're focused on Florida and you're writing just one line of insurance focusing on hurricanes well if you get a monster hurricane you know that hits Florida hopefully it doesn't happen then your business is in great trouble so when you have something that's Diversified across many different product lines like they are and then you have Geographic diversification you know around 50% of their business is outside the United States around 50% is in the United States you're talking about a a business that's in literally dozens of countries you you're less likely to have a destabilizing risk you're you're even less likely to have a destabilizing event when you have multiple super cat or catastrophes happen because it's spread out across so much now this is now one of the largest insurance companies out there and and to give you some context cuz some people you know say what what help me even understand what this is doing like agriculture what what's agriculture insurance so that's actually crop insurance and Farm and Ranch related to Agra business so there's there's a lot of sub specialty lines you know where where you say oh I I want to protect this you know that you a lot of people traditionally are are familiar with like home insurance and auto insurance but for a lot of businesses there's a lot of different forms of risk that you want to remove from yourself maybe it's some sort of work stoppage maybe it's workers compensation maybe it's you know what happens if if something happens to my property or my plant or my vehicle so there's lots of lots of different types of you know Insurance lines and you could see that it it is pretty well Diversified they have the large property and Cas casualty you Middle Market so small companies PNC you have personal lines you have agriculture reinsurance a lot of different products and then it goes into even further detail maybe you want to talk about cyber or you want to you know protect against some so if there's a crimer related event directors and officers so if you if you have a directors and officers you know with an organization they're going to want to have some sort of liability protection that hey they don't get sued if you know the company goes off the rails okay so what's what's that insurance you know looking like and so there's just lots and lots and lots of different types of risks that ultimately companies large and small want to push off to the insurance companies and the insurance companies it's on them and you know this is a list of just the property the the Commercial Property and Casualty examples of some of the things that they cover um you know railroad liability insurance you know a lot of different things that this is a market where they're trying to assess okay what's the odds that you know this is unprofitable for for us and so this means you have not only a you know a a global business so that way you're you're less exposed to Any Given one risk this also means that you employ hundreds of thousands of risk assessors which they do to you know size up uh one you know did this risk actually happen you know if if if a claim let's say occurs after someone you know signed up for for an insurance policy like okay how do you make sure it's not fraud so you have a part of your team that'll size that up okay this was a legit you know this isn't just them looking for some sort of insurance payment and you also have the you know the the actual under writing we are saying what are the odds that this turns into a claim and you know it's it's funny reading enough about Warren Buffett and some of their historical insurance contracts uh there was previously I I think it was Mike Tyson uh wanted an insurance policy and so this this is just sharing example of how they think about uh Insurance like how do you how do you make sure it's some sort of fair policy where Mike I think Mike Tyson wanted some sort of life insurance policy and the way the contract was structured is that for each fight that he would have the payout would drop significantly and so that way the the risk that Burkshire was taking on sort of dropped you know the the longer his boxing career went on so you know it's it's a lot of this is just sort of problem solving a lot of this is understanding sort of what are the base rates for events to happen you know like okay you know Earth let's say super catastrophe earthquakes happen every hundred years is the market pricing in that it's a one in a 100 Year event or or is the market pricing in that it's a one in2 year event because if the Market's pricing in is closer to 1 in2 then it's a lot you know it could be a lot more interesting in terms of making money from that actual type of event and so you know you're looking at chub and this is just a monster of an insurance company this is one of the largest insurance companies of the world12 billion in premiums net premiums are written in the first quarter alone and there were made an 86% combined ratio on their Property and Casualty Insurance line that's the majority of their business $10.6 billion of their premiums written out of the 12 billion and so that means you know the the 86% rate so that means after the policy holders had their claims paid out after the admin costs of you know running the insurance expense after all that you're effectively talking about a 14% margin uh you know pre-tax margin for the insurance claims and it'll Jump Around it'll move move around but that's going to be one of the key parts for why I think Buffett is interested in chub so let's let's go through the different you know angles for what he saw here with chub I think one aspect is that he looked at chub relative to some of the other large insurance companies and he sees that this purple line is chub this orange line is the peers including AIG and I'll talk about AIG in just a second and you can see that for several years chub's combined ratio so that means their costs for in for effectively providing insurance both from a policy claim perspective as well as administrative cost perspective is consistently lower than the peers so when you when you do this this means you're one you're possibly leaner and two it means you're probably more conservative in terms of how you're underwriting business or at least you're it's more it's it's better managed that's what this data would suggest okay and you know Berkshire hathway is a super large insurance company one of the largest in the world so he knows what quality it looks like I think another key aspect is if you look over a similar time period the return on equity for chub has gone from you know effectively High single digits to Mid teens level a big part of this return on equity for this business is due to the fact that as an insurance company when you when you have a customer say hey I I have this risk I want to offload it to you you go okay you give me this premium I'll cover you in case there's an issues so they give you a premium the insurance company now has this thing called float they're sitting on all these premiums and there's a risk that they might have to pay that out so they're sitting on these premiums by and large with an 86% combined ratio they're they're able to keep 14% of that but a lot of it's going back out in terms of expenses a lot of it's going back out as claims so it's not like you can invest that float for super long haul like I'm going to put that all in equities all in you know GameStop you can't do that you know regulatory says like hey you can't put it all in in stocks so you have to hold a large you know liquid portfolio often times uh in some sort of bonds uh sometimes you know stocks or or mostly short dated bonds maybe a couple of years well we've had a period now where interest rates are much higher you know you can now get 4.8% Plus on your cash see the link for interactive brokers below that's you know where you're getting 4.8% on cash so as rates have moved higher if you have a company like chub that has tens of billions of dollars of in terms of Investment Portfolio you know now what you're talking about is a much higher yield that they can get so now you're talking about an environment where just because interest rates are higher the return on equity for this companies also higher so I think you're also in this new environment of a higher return on Equity really more like a return to normal for what insurance companies can do in terms of their margins so I think that's a key aspect and waren Buffett certainly appreciat float in in terms of you know in a higher interest rate environment I think another aspect is actually the management Evan Greenberg is the chairman and SE and the Chief Executive Officer of uh chub and he has the insurance Gene clearly because he's the son of marus Greenberg who was one of the top dogs at AIG now you might think oh my gosh like doesn't that mean like chub's going to explode he's the he moris Greenberg was like one of the builders AIG no no no he he was kicked out of AIG I think in 2005 be several years before the effectively AIG was writing all the subprime you know uh default uh swaps I think of what is uh credit default swaps that ultimately blew them up so he arguably would have caught a lot of that because he had been hyper vigilent during his multi-decade career uh that's a that's a whole other story I I think this is actually Testament that Warren Buffett believes in management and thinks man if anything he knows you know from his family and I think his one of his siblings used to be the head of one of the largest Insurance Brokers so you know you you have it in his family through and through so I think th those are sort of the key aspects that I believe Warren Buffett is considering so is it worth it for you to consider looking a chub after all Warren Buffett has just made a sizable purchase well first of all in full disclosure this is not Financial advice I don't own stock in chub I owned stock in Fairfax which I'll talk about in just a second and also just last week Robin a premium member of unrivaled investing commented this is a direct quote I'm an extremely happy customer of unrivaled the information Services you provide to me are invaluable this follows another subscriber posting on how I'm currently ahead of my investing goals to retire at age 45 thanks to unrivaled investing consider unrivaled Investing For compelling and investment ideas come check it out I do expect to be raising prices later this summer in the you know the month ahead so now is the time to lock in the favorable rates and as regular subscribers know the the not only do you keep keep this channel going but you're also grandfathered into the favorable rates as well when you lock it up so looking at chub looking at the historic valuation this is Price to Book value and that's a super important metric you know when you're looking at some companies it's important to look at free cash flow some people look at price to sales you know typically when you're looking at a company that's not yet profitable for insurance companies you're generally looking at the equity and the market cap the market cap relative to the shareholders Equity because that shareholders Equity because of regulations because of you know what you're allowed to invest in you know you're you're looking at okay how much of a return can you get on that equity and you know it's currently trading around 1.8 times Price to Book for chup and you can also see you know that's historically at the High end of the valuation here so that I think that's part of the reason so the first thing I think that's part of the reason why birkshire hathway in this quarterly report they said they had the confidential treatment on chub through the end of May uh that that was an agreement that they had with the SEC but that they were showing it to us now um I think the reason why is because Warren Buffett's no longer buying at these prices and I don't think he's interested in buying at these prices so I think that is the first point but I think closer to one times Book value could be a lot more interesting now the rough math you know for for something like that is it it doesn't actually mean that this is terrible like there there's a reason why he's not selling it um is or I don't think he is is that if you have let's say you know they it's able to maintain somewhere between a 10 15% return on Equity over time if the valuation just stays the same that means your investment compounds at 10 to 15% per year let's let's assume the 15% return on Equity gets returned 100% to you as a shareholder well that means at 1.8 times you know 15% return on equity and you're paying 1.8 times that means you're effectively getting around an 8% yield that can go to you each year that's not that bad like really relative to to a lot of other things it's not bad the challenge is that if you have some sort of situation where the return on Equity let's say is you know and then you see some sort of valuation compression in the future work goes from 1.8 to 1.5 or 1.3 times so that is the like that that's the scenario that that would hurt you as a shareholder and that that happens with with all types of stocks where you have to balance the fundamental growth with with the the actual valuation potentially coming in or expanding you know ideally you want to find something where you have the free cash flow you have the fundamentals and you have valuation they're all expanding that's that's sort of like the dream setup now I already mentioned that I that I own Fairfax Financial that's my own personal insurance play and you can sort of see why I've done actually two separate videos on this and I I'm I'm glad to refresh you know my my own numbers on this uh just so that way I could see okay well what's Buffett doing versus what am I personally interested in so chub has grown their gross premiums in terms of their insurance business from around $40 billion to around $60 billion over the last few years so around 50% growth and the book value per share because you can't just look at the equity in the business because they might buy back stock which they're doing has grown around 30 40% 30 40% so 50% growth in premiums 34% growth in book value per share in contrast Fairfax has taken market share growing their gross premiums by nearly double over the same period and their book value per share is increased by more than 100% meanwhile while so I'd say the execution here in at least for the last few years goes to Fairfax on both the premiums and the book value per share Book value includes because you might say well wait a second you know what's the risk that they're just you know they're growing you know their their premiums too fast and they're you know it's going to result in losses for them well that would get Incorporated in this book value per share figure because then you'd start seeing the losses and then it wouldn't be growing as quickly so here it is on both I'd argue the key metrics you know and you could argue maybe the we should be looking at net premiums as opposed to gross premiums Either Way Fairfax is taking share and outperforming on the book value per share on so on the fundamentals goes to Fairfax and then on evaluation chub is at 1.8 times versus Fairfax around 1.1 times that's adjusted for for a couple of small things um but you know you you adjusted it's you know 1.2 times so I I would put this in the in terms of the thesis thinking about Fairfax and thinking about chub and the general Marketplace like Buffett a few years ago bought alagen I think it was around 20 billion purchase I could be wrong give or take give or take 1010 billion uh he bought that around 1.3 times priced to book so chub he was probably doing the same formula buying around 1 .3 times and so that's you know sort of my formula of like hey if you see the super investors of the world buying insurance companies uh or buying stakes in insurance companies that are well-run that have you know that and that's that's the key to this is you you can't just say like hey it's this this is great you know I'm gonna buy this insurance company because it looks cheap yeah if you're writing bad policies it doesn't matter how cheap it is because you can still blow up so that's that's the other aspect is that oh but Fairfax so far is doing very well in terms of how they're conservatively managing it so I I wanted to share a little bit about my own personal portfolio on this because Fairfax is one of my top Holdings and you can see why sort of with you know going through this logic here of on a fundamentals and valuation basis it seems to be crushing it and it's also we're in a new environment I'd say return to normal hopefully we're interest rates are unlikely to go back to zero and so for those companies that are forced to hold large you know Investment Portfolio is oftentimes tied to fixed income this is a much much better environment than they've been for much of the last two decades so I hope this video talking about chub why I'm not you know I'm not really sold on it right now and why I why I do personally own Fairfax and sort of the educational understanding of what's going on in the industry has been helpful for you if so please make a thanks so much for watching unrivaled investing
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