Berkshire Hathaway was granted a license to operate as a non-life insurer in Singapore per various sources. On December 8, this news led to an increase in share prices by 0.7%. The Class B shares also hit their 52-week high during that same trading session to reach $152.94 per share. On the very next trading day, the stock dropped by 1% because of a broader indices decline.
The US commercial insurance business for Berkshire Hathaway, known as Berkshire Hathaway Specialty Insurance, was established last year and is going to operate in Singapore. It underwrites professional, casualty, property and executive liability insurance and other programs.
Berkshire Hathaway had aspirations to expand in the region of Asia and hired two of AIG’s senior executives from their Asia operations in August 2014 in order to fulfill this desire.
Berkshire Hathaway Specialty Insurance has even applied to regulators for licenses in Europe, Sydney and Hong Kong, as the company looks to expand its operations and go far beyond the core reinsurance business. The company is expanding quietly, and boosting its insurance operations as a way to capitalize in markets that many believe existing insurers have underserved. Though MetLife and Prudential Financial do operate in this region, the changing demographics provide more opportunities for new entrants into the market.
The insurance operations at Berkshire Hathaway have been the largest generator of surplus funds for the company, which chairman and CEO Warren Buffett has used successfully for his investments. This in turn has created incredible value for the shareholders and the company itself.
The company expansion into these international markets comes at a great time because many are predicting that the insurance business will see mediocre results at home.
Because of this, Berkshire Hathaway has to target international regions that offer high growth in the insurance market as a way to offset operating results on the domestic front, plus it can use some of the extra cash and put it to work.