Andrew Bary
Berkshire Hathaway has formed a strategic alliance with one of the world's best-run property and casualty insurers.
Tokio Marine Holdings, formed in 1879, is the class of the Japanese non-life insurance market with the highest returns and price/book value among the three companies that dominate the property and casualty market in Japan -- a business focused mostly on automobile and fire insurance.
Berkshire agreed to take a 2.5% stake in Tokio Marine for about $1.8 billion and form a strategic alliance with the Japanese company through National Indemnity, a Berkshire reinsurer and one of Berkshire's leading P&C insurance units, Tokio Marine said early Monday. Berkshire will participate in a quota share with Tokio Marine, absorbing some of the risk in the company's insurance portfolio.
Tokio Marine's market value of $80 billion is more than double that of No. 2 and 3 domestic players, MS&AD Insurance Group and Sompo Holdings, which both have market capitalizations under $40 billion. The three companies control about 90% of the Japanese underwriting market.
Tokio Marine has the best returns among the three with a return on equity of about 20% and it trades for about twice book value, against closer to book for the other two companies. It amounts to the closest thing in Japan to Chubb, the well-run leader in the U.S. P&C market.
Tokio Marine is a top 10 non-life insurer by market value globally behind companies such as Chubb, Progressive, and Allianz.
Unlike Berkshire's move to purchase a group of five Japanese trading companies in 2019, Tokio Marine is not bargain priced.
It trades for about twice book value, although its shares are cheaper based on earnings with a multiple of about 11 based on projected profits in the company's fiscal year ending in March. Tokio Marine's shares, at around 5,900 yen, have doubled over the past three years. The shares yield about 3% .
American investors cheered the Berkshire vote of confidence in Tokio Marine. The company's U.S. listed shares (TKMOY) rose 12.6% to $41.50.
Berkshire and Tokio Marine said they would form a strategic partnership but no specific initiatives were spelled out. "The two companies will collaborate on global strategic investment opportunities, including M&A, executing joint investments to drive sustained business expansion," Tokio Marine said in a statement.
In a client note, KBW analyst David Threadgold wrote that the alliance "seems to change little" financially for Tokio Marine. "Strategically, the partnership may help mitigate reinsurance volatility and give Tokio Marine some additional M&A firepower."
Investor Chris Davis, the chairman of the investment firm Davis Selected Advisors and a Berkshire board member, appeared on the Barron's Live event with subscribers at midday Monday and talked about Tokio Marine.
Davis, a longtime investor in the insurance industry, said he couldn't comment on the Berkshire investment in Tokio Marine but noted that he's familiar with the company, calling it a "dominant blue-chip organization."
Davis recounted how his grandfather, Shelby Cullom Davis, a hugely successful insurance investor, went to Japan in the late 1950s as a financial analyst, studied the insurance industry and "identified Tokio Marine and Fire as the absolute crown jewel."
Shelby Davis helped to bring the company public in the U.S. in the 1960s.
"And at the time, the market cap of the company was less than the real estate value of their headquarters building. So it was a hell of a bargain. And he held those shares all the way until his death in 1994. So it is a wonderful company."
The company financially survived a major Japanese earthquake in 1923 and paid out claims to policyholders, and emerged from the devastation of World War II.
Analysts at Hennessy funds wrote two years ago that after industry consolidation, three insurers control the Japanese non-life market and "enjoy high profitability and strong pricing power."
Tokio Marine has diversified away from Japan over the past decade or more and now gets about half its $35 billion of annual premiums from outside the country. The domestic market isn't growing much due to low population growth and a slow-growth economy, and Tokio Marine has made several U.S. acquisitions
It bought HCC Insurance in 2015 for about $7.5 billion and Pure Group, a provider of high-end homeowner's insurance, in 2020 for $3 billion.
The Berkshire investment in Tokio Marine was overseen by the company's insurance chief Ajit Jain and likely involved former CEO Warren Buffett, now serving as chairman of the board.
The deal shows Berkshire's ability to strike insurance deals is undiminished even as Buffett has given up the CEO job in favor of Greg Abel. That's a good sign for Berkshire given the importance of insurance to the $1 trillion market value company.
Berkshire's A shares were down 0.1% to $720,000 Monday and are lagging behind the S&P 500 index this year.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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March 24, 2026 10:49 ET (14:49 GMT)
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