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Wednesday, 6 November, 2002, 11:54 GMT
Buffett boosts insurance investment
Warren Buffett pictured in 1991
Mr Buffett is taking advantage of rising premiums
The billionaire investment guru Warren Buffett is spearheading a move into the global insurance industry.

Investors are eager to benefit from soaring insurance premiums in the wake of the 11 September attacks.

Through his investment vehicles, Mr Buffet has raised his backing of the Lloyd's of London insurance market to $1.4bn (900m), becoming one of its main underwriters in the process.

For investors like Mr Buffett, the insurance industry - reinsurance in particular - is offering a golden opportunity at a time when many of the sector's traditional backers are still reeling from losses caused by the attacks.

Many Lloyd's of London underwriters are unable or unwilling to commit more cash to the industry, so they have let Mr Buffett move further into the arena by providing capital and reinsurance.

His investment has further pushed Lloyd's of London away from its reliance on wealthy individual underwriters, known as names, towards dependence on the support of international investors.

Industry strength

Mr Buffett's greater involvement in the insurance industry coincided with reports of sharply rising profits from the two leading US life insurers Prudential Financial and MetLife.

Both firms have suffered in recent months, as much due to weak stock markets, which have hit their investment portfolios, as to terrorist actions.

But with sharp rises in insurance premiums, some insurance giants are well on the way to recovery.

The Pru's profits soared to $392m during the July to September quarter from $52m a year earlier, while MetLife's profits doubled to $328m from $162m a year ago.

Caution

But the bright outlook for certain sections of the insurance industry does not mean all is well across the board.

Many insurance companies are still under extreme pressure due to massive investment losses, and several firms are unlikely to survive an anticipated wave of mergers and takeovers.

The credit rating agency Standard & Poor's recently cited "the future consolidation that is expected to occur within the insurance and financial services industry" as a key reason why it was negative about the outlook for certain insurers.


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17 Oct 02 | Business
11 Oct 02 | Business
30 Sep 02 | Americas
02 Sep 02 | September 11 one year on
06 May 02 | Business
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