Warren Buffett Likes Munich Re

Warren Buffett Increases Stake in Munich Re.

Warren Buffett has increased his stake in Munich Re to 5.2% and, according to the Telegraph, he is buying as much as 15% of the German re-insurance company. He apparently actually has over 8% in “secret” accounts and is still buying stock each day as he moves towads a target of 15%.

Munich Re said on 19 January that Warren Buffett holds options which could increase his voting rights in the company to 5.029%. Buffett already held 3.084% in the company.

The figures show that Warren Buffett was Munich Re's largest investor on January 19, with a $1bn stake. BlackRock which reported in December holds 4.58%.

According to analysts, demand for reinsurance by primary insurers will necessarily increase as a result of Solvency II capital requirements for the insurance sector.

Clarification of the rules is awaited for mid-2010 and it is believed that reinsurers will benefit due to the increase in demand.

Hester Plumridge of the Wall Street Journal says preliminary full-year results from Munich Re. suggest Mr. Buffett is right to be optimistic, as it beat market expectations with net income up 62% from the previous year.

She also points out that the sector is trading at 8.5 times forward earnings, as cheap as it has ever been, a point which hasn't escaped the notice of Warren Buffett.

Munich Re plans to pay a 2009 dividend of €5.75 per share (€5.50 in 2008). They haven't released all its Q4 figures. These will be presented along with 2009 earnings on March 10.

With regard to Warren Buffett's holding Jorg Schneider CFO of Munich Re said that they do not consider him a competitor and "don't consider his investment a hostile investment," saying that Berkshire Hathaway Inc. has a reinsurance business of its own.

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