Insurance companies usually lose money on underwriting. However, GEICO is not a good example, because it is the exception to the rule. GEICO usually makes an

Insurance companies usually lose money on underwriting. However, GEICO is not a good example, because it is the exception to the rule. GEICO usually makes an underwriting profit -- often a very large underwriting profit. In fact, all of Berkshire Hathaway's insurance operations make a long-term underwriting profit. Unlike GEICO, the reinsurers do not make a profit every year, because hurricanes and earthquakes are unpredictable. (Whereas car crash statistics change very slowly from year to year.) But averaged out over a long period of time, they make a profit. This is the secret of Warren Buffett's success as an investor. He is essentially buying stocks on margin, at a negative interest rate. Data collected from Berkshire Hathaway annual reports: 2012: $680 million profit on $11,578 million float 2011: $576 million profit on $11,169 million float 2010: $1,117 milion profit on $10,272 million float 2009: $649 million profit on $9,613 million float 2008: $916 million profit on $8,454 million float 2007: $1,113 million profit on $7,768 million float 2006: $1,314 million profit on $7,171 million float 2005: $1,221 million profit on $6,692 million float 2004: $970 million profit on $5,960 million float Not broken out separately prior to 2004 This profitability streak is truly exceptional. As Warren Buffett pointed out in his 2012 letter, State Farm has made an underwriting loss in 8 of the previous 11 years. The insurance industry as a whole has made an underwriting loss in 37 of the previous 45 years.