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Berkshire Hathaway (BRK.B) to Offer Services in Malaysia

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Berkshire Hathaway Inc. (BRK.B - Free Report) recently announced that it will now offer reinsurance services in Malaysia. Per a media release, Berkshire Hathaway Specialty Insurance Company (“BHSI”), which is part of Berkshire Hathaway's National Indemnity group of insurance companies, has established an office in Kuala Lumpur, Malaysia to provide non-life reinsurance services.

We note that Asia has now become a lucrative growth market for insurers intending to expand their business internationally. Notably, Asia’s contribution to global gross domestic product (GDP) has increased and is expected to continue rising. While Berkshire Hathaway already has operations in Singapore, Hong Kong, and Macau, the recent establishment in Malaysia will further expand its presence in the Asian markets.

We note that other insurance companies too have been eyeing strategic opportunities in the Asian market for business expansion. Canadian insurer Sun Life Financial Inc. (SLF - Free Report) is focusing on the emerging economies of Asia for higher return and growth than the North American markets. The company has a strong presence in China, Philippines, India, Hong Kong and Indonesia, and has also forayed into Malaysia and Vietnam. This has taken the count to seven Asian markets in which it has a presence. Over the past three years, net income from Asian operations has doubled while the value of new businesses have tripled. Other stalwarts like Manulife Financial Corp. and Chubb Corp. (CB - Free Report) also have strong presence in Asia and consistently seek growth opportunities there. Notably, the Asia business now contributes one-third of the Manulife Financial’s earnings.

Berkshire Hathaway – a conglomerate with nearly 90 subsidiaries – engages in businesses ranging from ice-cream to insurance. Though the company runs heterogeneous businesses/operations, its property and casualty insurance business generates the maximum return on equity. The company leaves no stone unturned in capitalizing on growth opportunities. The recent expansion in Asia bears testimony to its sustained efforts on improving the growth profile.  

Shares of Berkshire Hathaway has outperformed the Zacks categorized Property, Casualty and Title Insurance industry in the last three months. While shares of Berkshire Hathaway gained 28.35%, the industry improved by 25.88%. The company did not witness any estimate revisions in the last 60 days. The Zacks Rank #3 (Hold) beat expectations in three of the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nonetheless, Berkshire Hathaway is expected to benefit from its growing Insurance, Manufacturing, Service and Retailing, and Finance and Financial Products segments amid an improving economy. Its acquisitions will also drive growth. The expected long-term earnings growth is currently pegged at 7%.

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