Insurance is a business with a strong, predictable, and constant cash flow. People are paying premiums virtually every day of every month. Payouts are more spo

Insurance is a business with a strong, predictable, and constant cash flow. People are paying premiums virtually every day of every month. Payouts are more sporadic. So you're able to invest and make money on those premiums until needed for payouts. But wait, you don't need to liquidate those investments to make your payout. Just don't invest your incoming cash flow, and pay out from that instead? Bigger blip than usual and not enough cash flow to handle outgoing expenditures? Borrow against your illiquid assets at fantastic rates because of your predictable cash flow and solid asset portfolio. Gives you enough runway to either pay that debt down with a longer timeframe of cash flow or to liquidate those assets, if servicing that debt is worse than your asset return. ^^ General thought process of insurance. Geico is special in trying to maintain a breakeven on premiums vs payouts and source all profit from investment income. But doing so allows them to have competitive premiums in most risk pools, amass a large amount of market share, and provide Berkshire Hathaway with enormous liquid assets to invest. Many insurance companies bake a target profit margin into their actuarial models, and derive profit from a mix of premiums and investments. But the higher your premiums, the lower your market share, and the less capital/leverage your investment arm has available. So it's a balancing act based on business priorities.