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Berkshire Hathaway has agreed to invest $1.8bn in Tokio Marine as the new chief executive at the US conglomerate expands a bet on Japan kicked off by Warren Buffett.
As part of a wide-ranging deal announced on Monday, a subsidiary of Berkshire will buy a 2.5 per cent strategic stake in Tokio Marine, one of the “big three” Japanese non-life insurers.
The US company will reinsure a percentage of all the business done by the Japanese group and the two groups said they would “collaborate on global strategic investment opportunities, including M&A”.
The move to invest in Tokio Marine marks a new Japan venture for Berkshire and may give the wider Tokyo market a lift.
It comes six years after Buffett, the legendary investor who led Berkshire for decades, bought into trading houses such as Mitsubishi Corporation, Itochu and Mitsui.
Berkshire, which also has a large stake in US insurer Chubb, has agreed “not to acquire more than 9.9 per cent” of outstanding Tokio Marine shares without agreement from the Japanese company’s board of directors.
According to people briefed on the deal, Berkshire and Tokio Marine will use their combined firepower to hunt for global deals. There are no particular targets identified as of yet.
The two companies have agreed that for five years neither will pursue similar strategic agreements with other Japanese non-life insurers. Berkshire will continue to reinsure other Japanese customers as usual.
Berkshire is going through its own period of upheaval after Greg Abel took over as chief executive from Buffett at the start of the year.
The company earlier this month started buying its own shares for the first time in almost two years as Abel looks to deploy a record cash pile of nearly $400bn.
Berkshire, which spans insurance, railways and industrial businesses, has made its investment in Tokio Marine and the trading houses through the same vehicle: the National Indemnity Company.
Buffett has lavished praise on the Japanese trading houses for their strong allocation of capital across a smorgasbord of sectors and as beneficiaries from geopolitical tensions between the US and China.
He initially bought small stakes, first disclosed in 2020, and last year negotiated the removal of a 10 per cent cap on Berkshire’s ownership.
Trading house executives had been nervous Abel might waver on Berkshire’s vow to hold their stocks for decades, which could diminish the Buffett halo effect on their share prices.
But Abel assuaged those worries by signalling support for the holdings in his inaugural annual shareholder letter issued last month.
In that same letter, Berkshire warned of headwinds facing the insurance sector that probably meant it would “write less property and casualty business for a period of time”.
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