Berkshire Hathaway to Offer Non-Life Insurance in Singapore
Berkshire Hathaway Inc. (BRK.A) (BRK.B) has received a license to operate as a non-life insurer in Singapore as per sources. The news led to a 0.7% increase in its share price on Dec 8. The stock also hit its 52-week high of $152.94 in the same trading session. The following trading day, however, saw the stock losing nearly 1% due to a decline in broader indices.
Berkshire Hathaway’s U.S. commercial insurance business – Berkshire Hathaway Specialty Insurance – established last year, will operate in Singapore. Berkshire Hathaway Specialty Insurance underwrites property, casualty, professional and executive liability insurance and programs.
Berkshire Hathaway was aspiring to expand in the Asia region and had hired two senior executives from American International Group Inc.'s (AIG) Asia operations in Aug 2014 to fulfill its aim.
Berkshire Hathaway Specialty Insurance has also applied for licenses to regulators in Sydney, Hong Kong and Europe, as it seeks to expand its operations and go beyond its core reinsurance operations. The company is quietly expanding its insurance operations, in order to capitalize on a fast-growing market that is believed to be underserved by existing insurers. Though insurance majors such as Prudential Financial Inc. (PRU) and MetLife, Inc. (MET) are operating in the region, changing demographics present further scope for new entrants.
Berkshire Hathaway’s insurance operation has been the biggest generator or surplus funds or moat, which has been successfully invested by its CEO and chairman Warren Buffett. This has in turn created huge value for the company and its stake holders.
The expansion of the company to international markets comes at a perfect time when it is being predicted that the segment will see mediocre results in its insurance business on the home front.
This necessitates the company to target high-growth international regions in the insurance market to offset domestic operating results and invest some of the extra cash in work.
Berkshire Hathaway carries a Zacks Rank # 2 (Buy).
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