Thursday 28 February 2013

Münchener Rückversicherung

MüRe a German re-insurance company, 2nd largest in the world

This is one of the biggest re-insurance companies in the world. They are dealing with insuring everything from accidents to catastrophes. They are due to their float "expanding" into other areas... ex. gas pipelines etc. etc. They also have an insurance company (ERGO) that they still have not really managed to put straight meaning that they had a very bad company culture and MuRe have still not managed to push their own culture on to this daughter insurer. So still today there are every now and then bad news appearing due to that. the latest I read was about that insurance agents had their bonuses paid by being brought to "enjoyment houses"... I hope those things will stop soon. Either way when you read MuRes annual report they even make an estimate on the coming years based on the same calculations that they have made in the first place for taking the insurance. They usually manage to hit the nail.

So this first stock that I bought was Münchener Rückversicherung back in March 2012. The price was then 109€ per share which I found to be very cheap. This was a company that had in the past paid dividend and was back then paying around 5.5% which is a high value. The P/E was negative from 2011 due to the accident in Fukushima but P/E5 was around 12. The P/B was around 0.7 meaning that I got one euro of a very successful re-insurance company for 70 cents. I bought the company directly and first afterwards I discovered that Berkshire Hathaway owned 10%. This then also indicated to me that the management board must be serious otherwise Mr. Buffett would never stick his head into it.

The company therefore fitted very well to three of my rules for investment and I bought unfortunately only 18 shares.

Hopefully I will sell these shares before Mr. Buffett. When the dividend drops to 1.5-2% and/or the P/E goes up to far over 25 it will be time to sell these shares.

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