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It took me 30 minutes to read the complete letter. It was time well spent. I learned why the property/casualty insurance business has a really good business mod

It took me 30 minutes to read the complete letter. It was time well spent. I learned why the property/casualty insurance business has a really good business model. It also reminds me to walk away from deals where the financial fundamentals are wrong, but our competition is eager to sign. And finally, I feel that his humble tone is honest and that he is trying teach by showing his considerations, successes and failures.

nabla9 10y ago
Buffet has structured his business to give him permanent advantage. The core of Berkshire Hathaway is the insurance business, GEICO and Berkshire Reinsurance. These companies are very profitable and generate steady cash inflow. His cash is cheaper compared other investors who get leverage using financial sector and must hedge against loss. This is important when times are tough, money is tight and stock valuations are low. When other investors must sell something they own or take expensive loan to buy what they want, Buffet is drowning in cash and looking ways to spend it. from page 8: >One reason we were attracted to the P/C business was its financial characteristics: P/C insurers receive premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos, payments can stretch over many decades. This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our float. .... We recently wrote a huge policy that increased float to more than $100 billion They have $100 billion float. That's incredible.
dv35z 10y ago
If you enjoyed that - take the time and get the book compilation of all BH's annual letters to shareholders - starting 1960s to present. Some of the most valuable reading I have done in years - strongly recommend.
- graeme 10y ago
  Link: https://www.amazon.com/Berkshire-Hathaway-Letters-Shareholders-Buffett/dp/0615975070/ https://www.amazon.com/Berkshire-Hathaway-Letters-Shareholde...
  - BatFastard 10y ago
    Sold, 2.99 for kindle edition.
- bufordtwain 10y ago
  You can view many of the letters for free here: http://berkshirehathaway.com/letters/letters.html http://berkshirehathaway.com/letters/letters.html

nabla9 10y ago

Buffet has structured his business to give him permanent advantage. The core of Berkshire Hathaway is the insurance business, GEICO and Berkshire Reinsurance. These companies are very profitable and generate steady cash inflow. His cash is cheaper compared other investors who get leverage using financial sector and must hedge against loss. This is important when times are tough, money is tight and stock valuations are low. When other investors must sell something they own or take expensive loan to buy what they want, Buffet is drowning in cash and looking ways to spend it. from page 8: >One reason we were attracted to the P/C business was its financial characteristics: P/C insurers receive premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos, payments can stretch over many decades. This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our float. .... We recently wrote a huge policy that increased float to more than $100 billion They have $100 billion float. That's incredible.

dv35z 10y ago

If you enjoyed that - take the time and get the book compilation of all BH's annual letters to shareholders - starting 1960s to present. Some of the most valuable reading I have done in years - strongly recommend.

graeme 10y ago
Link: https://www.amazon.com/Berkshire-Hathaway-Letters-Shareholders-Buffett/dp/0615975070/ https://www.amazon.com/Berkshire-Hathaway-Letters-Shareholde...
- BatFastard 10y ago
  Sold, 2.99 for kindle edition.
bufordtwain 10y ago
You can view many of the letters for free here: http://berkshirehathaway.com/letters/letters.html http://berkshirehathaway.com/letters/letters.html