JPM to Sell Its Insurance Unit

One of the great secrets of Wall Street is that insurance is a highly profitable industry. Warren Buffett built his empire on insurance. Sure, the industry is boring as heck but this is an area where I don’t need any more excitement in my life.
We have three insurance stocks on our Buy List; AFLAC (AFL), Brown & Brown (BRO) and Progressive (PGR). All three are doing very well.
A few years ago, the financial services industry underwent a massive consolidation. Everybody bought everybody else. In fact, no one is just a bank anymore. To be really hip, you have to be a “comprehensive financial services organization.” All the cool kids are doing it. Or call yourself a “supermarket.” That’s hot.
Thankfully, we’re seeing some of that reverse. A number of financial megaliths are selling off their insurance units. Citigroup (C) sold Travelers Life insurance business to MetLife Inc. for $11.8 billion. Now, JPMorgan Chase (JPM) is selling off its insurance business. Last year, JPM completed (ugh) a huge merger with Bank One.
Speaking of insurance, Berkshire Hathaway (BRKA) reported that its profits fell in half last quarter due to Katrina. The company earned $381 a share, down from $739 a share last year.
Buffett has also been placing huge bets against the dollar. Between 2002 and 2004, he made a cool $3 billion by going against the greenback. But not lately. This year, Buffett’s dollar gambit has cost him over $900 million as the dollar has rallied.

Posted by on November 5th, 2005 at 3:45 pm


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