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Most insurance companies operate this way, which long predates Buffett. In fact, it's possible for premiums to sum to less than the costs of insuring precisely
by ISL 11y ago
Most insurance companies operate this way, which long predates Buffett. In fact, it's possible for premiums to sum to less than the costs of insuring precisely because of the float.
Buffett has done well by choosing companies and people that are good at avoiding losing money.
If Amazon had a viable competitor, the profits of float investments would be the ammunition in the resulting price war. Amazon's margin is someone's opportunity.
- yokohama11 11y agoNot even just possible, but the default of operation in the industry. Most don't turn an underwriting profit with any consistency and make all their money on their investments from that float.
- ethbro 11y agoI was under the impression that most insurance companies aren't part of a larger business entity that directly invests their float in other companies. I'd assume there would be advantages on that closer relationship vs a stand-alone insurance company simply investing in a publicly traded offering.