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Berkshire Hathaway exited investments in Munich Re, Swiss Re over industry's tougher outlook

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Berkshire Hathaway exited investments in Munich Re, Swiss Re over industry's tougher outlook

BerkshireHathaway Inc. exited its stakes in global reinsurers and after souring on theprospects of the reinsurance industry, Chairman, President and CEO WarrenBuffett said April 30.

The conglomerate determined that the industry had becomemarkedly less attractive as demand for reinsurance products waned at the sametime that the market saw a rush of new entrants. The heightened competition,combined with the impact on investment portfolios of persistently low interestrates, has pressured the financial results for reinsurers around the world.

"I think the business of the reinsurance companiesgenerally is less attractive for the next 10 years than it has been for thelast 10 years," Buffett said during Berkshire's annual shareholdersmeeting. "It is no fun running a traditional reinsurance company andhaving money come in, particularly in Europe."

Berkshire had maintained a roughly 10% ownership of MunichRe and a 3% stake in Swiss Re prior to selling its entire investments in both,he said. Munich Re had reported in late 2015 that Berkshire slashed its staketo 4.6%, from 9.7%. Buffett added that the exits were not a judgment of thecompanies themselves but more a "mildly negative judgment" on theindustry's broader financial dynamics.

Berkshire also runs its own reinsurance operations, whichBuffett has warned will face tougher conditions. But he said at the annualmeeting that his business is a bit more insulated from broader marketdifficulties because it is part of a much larger and diversified corporation.

"We do have considerably more flexibility,"Buffett said. "We have an extra string to our bow that the rest of theindustry doesn't have."