Daily Brief: Warren Buffett’s Spending Nearly $12 Billion On An Insurance Company, And He’s Still Got Cash To Spare

Daily Brief: Warren Buffett’s Spending Nearly $12 Billion On An Insurance Company, And He’s Still Got Cash To Spare

almost 2 years ago3 mins

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Warren Buffett’s been comparing the markets: his conglomerate Berkshire Hathaway announced on Monday that it’s agreed to buy insurance company Alleghany for $11.6 billion.

What does this mean?

Buffett’s been searching for Berkshire Hathaway’s next big investment for a while now, and said just last month that he was having a hard time finding it. But it looks like perseverance paid off: Berkshire announced on Monday that it’s agreed to buy fellow conglomerate Alleghany – whose core business is property and casualty insurance – for $11.6 billion in cash, 29% more than the company was worth on average over the past 30 days.

The deal – Berkshire’s biggest since 2016 – isn’t its first move into insurance. The company owns plenty of firms – like Geico, one of America’s biggest car insurers – in the space, and the industry’s already played a big role in growing Berkshire into the conglomerate it is today, boasting a market value of more than $750 billion.

Berkshire stock

Why should I care?

The bigger picture: Talk about cash to splash.

$11.6 billion sure sounds like a ludicrous amount of money, but it counts for less than 10% of Berkshire’s nearly $150 billion in cash. So even after making one of its five biggest deals ever and pledging to keep $30 billion in cash last month, Berkshire still has $100 billion left that it could splash on even bigger deals in the future.

Berkshire deals

Zooming out: Software’s looking good.

Berkshire isn’t the only one making deals this week: private equity (PE) firm Thoma Bravo announced it’s buying Anaplan – a company that provides forecasting software to businesses – for $10.7 billion. The deal’s the latest in a bunch of PE takeovers in the software sector, including that of cyber security company McAfee last year. Some reckon it could be a sign that market volatility and higher costs of borrowing haven’t put firms off the industry, so more deals could be on their way this year.

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The Average UK House Price Hit A Record High This Month

UK housing image

Data out on Monday showed that the average UK house price hit a record high this month, but Brits will pay anything to escape life in the capital.

What does this mean?

It’s a great time to be a Brit with a house to sell: there aren’t many on the market, and hopeful homebuyers – backlogged after holding off during the pandemic – have been keen to lock in mortgage deals before interest rates rise higher. In fact, Rightmove reported that there were over twice as many buyers than sellers this month, the biggest mismatch ever recorded by the UK housing company. Buyers had to act fast amid all that competition: an unprecedented 22% of homes that were put up for sale were snapped up within a week. And they had to pay more too: the average house price in the UK rose by 1.7% this month from last, the biggest March increase in 18 years. That brings the yearly increase up to 10.4%, and means the UK’s average house price is now nearly £355,000 ($470,000) – the highest on record.

UK house prices

Why should I care?

Zooming in: Escape to the country.

London was the only region to see a drop in house prices this month. Once the breeding ground for stressed-out commuters, plenty of the city’s dwellers have left to work remotely in pastures new. Specifically greener, quieter pastures: Brits are after bigger houses with room for offices, and Rightmove says the scenic Cotswolds and peaceful Suffolk have been some of the new go-to spots for homebuyers recently.

The bigger picture: It won’t last forever.

Rightmove reckons buyers will outnumber sellers for a while still, but thinks the market could slow down in the second half of the year. After all, soaring inflation and rising interest rates – which are set to push up mortgage payments – will probably put potential homebuyers off, and might make it impossible for them to buy even if they wanted to.

UK inflation
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