UPDATE 2-Investor Buffett builds $1 bln stake in Munich Re

* Buffett takes 3 pct stake in world’s biggest reinsurer

* Move follows market rumours on Friday

* Munich Re shares turn positive on news

(Adds company, analyst comment, background)

By Jonathan Gould

FRANKFURT, Jan 26 (BestGrowthStock) – U.S. investor Warren Buffett
has built a $1 billion stake in Munich Re (MUVGn.DE: ), boosting
his insurance holdings by taking a 3 percent stake in the
world’s biggest reinsurer.

Munich Re said Buffett’s shareholding rose just above the
mandatory reporting threshold on Jan. 18 and amounted to 3.045
percent of voting rights on that date.

Analysts said Buffett’s stake was more likely financial than
strategic because insurance companies, which buy protection for
themselves from reinsurers, would shy away from giving too much
business to allied reinsurance suppliers.

Buffett is already a major player in the world’s reinsurance
market with his Berkshire Hathaway Inc (BRKa.N: )(BRKb.N: ) unit,
the world’s third-biggest reinsurer.

The billionaire investment icon also pumped 3 billion Swiss
francs ($2.9 billion) into the world’s No. 2 reinsurer, Swiss Re
(RUKN.VX: ), at the height of the financial crisis after the Swiss
group wrote down billions on illiquid assets. [ID:nL5719257]

BIG WINNER

Munich Re stands to be a big winner from regulatory changes
coming into force in the industry because of its ability to
generate excess capital and grow its business, investment bank
JP Morgan said, factors which add to the allure of the stock for
an investor like Buffett.

“It appears to be a portfolio investment for Buffett rather
than a strategic one,” JP Morgan analyst Michael Huttner said.

Munich Re’s share turned positive on the news, rising by as
much as 2 percent, before paring gains to ease 0.1 percent at
108.40 euros by 1028 GMT. The DJ Stoxx index of European
insurance shares fell 1.1 percent (.SXIP: ).

The stake was worth around 740 million euros ($1 billion),
according to a Reuters calculation.

“We rejoice at every investor as evidence of our sustainable
strategy,” a Munich Re spokeswoman said.

Rumours that Buffett was buying stock had boosted Munich
Re’s share on Friday.

Berkshire is the largest U.S.-based company by market value
not included in the S&P 500 because the highly priced shares
traded on thin volume.

Data from Thomson Reuters StarMine, which weights analysts’
forecasts according to their track record, shows Munich Re
trading at 8.6 times 12-month forward earnings, a slight premium
to Swiss Re’s multiple of 8.1

Investing Analysis

(Editing by Rupert Winchester)

UPDATE 2-Investor Buffett builds $1 bln stake in Munich Re