Specifically, Tokio Marine is selling 48.2 million treasury shares—representing 2.5% of its outstanding stock—to Berkshire's insurance and reinsurance subsidiary, National Indemnity, for approximately $1.8bn. This amount represents the volume of share buybacks conducted by Tokio during the last fiscal year.
The insurer is something of a rare bird on the Tokyo Stock Exchange, as it has long been a regular buyer of its own shares, albeit in modest proportions: a quarter of its shares have been delisted over the last two decades.
While the market welcomed the news, one must read between the lines to put this development into context and note that this stake hardly resembles a strategic investment for the conglomerate led by Greg Abel, Warren Buffett's successor.
As the press release repeatedly emphasizes, this is primarily a courtesy to formalize the commercial partnership between National Indemnity and Tokio Marine, Japan's leading insurer. Moreover, on Berkshire's scale, the amount committed is insignificant.
Furthermore, Tokio Marine's valuation was not particularly enticing in itself. It bears little resemblance, for instance, to the case of the major Japanese trading houses—Itochu, Marubeni, Mitsubishi, Sumitomo and Mitsui & Co.—in which Berkshire invested six years ago, all of which were heavily discounted at the time.
The insurance group based in Chiyoda—in the heart of the Japanese capital—has for several years pursued a strategy of international development and portfolio optimization.
Rewarded by an exceptionally favorable environment in the insurance sector since 2022 and the rise in interest rates in the United States, this timely initiative has allowed Tokio Marine to significantly improve its financial performance.
This is evidenced by its profitability, which has doubled after about 30 years of anemia, and its valuation of over twice its book value, breaking away from long cycles of sustained discounts.
