FRANKFURT - Warren Buffett has built a $1 billion stake in Munich Re, 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 January 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 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 , at the height of the financial crisis after the Swiss group wrote down billions on illiquid assets.
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.
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.
Rumors 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
(Editing by Rupert Winchester)