Insurance Transparency Project

Hello insured masochists and welcome:
Click on “about” for my General Theory of Insurance Transparency.

I’ll keep it short today. Check out the link to today’s news item. I really have no idea what this deal is about, but I use it to point out two salient items from Warren Buffett’s most recent annual report, 2005.

1. Here is the most-successful-company-around’s description of itself: “Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these is the property and casualty insurance business conducted on both a direct and reinsurance bass through a number of subsidiaries. Included in this group of subsidiaries is GEICO, one of the four largest auto insurers in the United States, and two of the largest reinsurers in the world, General Re and the Berkshire Hathaway Reinsurance Group. ”

2. And here is the bottom of a chart not far off comparing the percentage change in Berkshire’s book value to the percent change in the S&P 500, including dividends:

“Average Annual Gain — 1965 to 2005: 21.3 v. 10.3
Overall Gain — 1964 to 2005: 305,134 v. 5,583.”

Ka-ching! Yep, that’s a 305,134% total return.

Now, put your eyes back in your head and ask: Is there anything wrong with that? Honestly? Not as far as I’m concerned. It just shows that insurance is a good businesss for investors.  My favorite Hungarian billionaire might describe it as evidence of an out-of-equillibrium-situation. My MBA-and-economics-degree-toting sister might say it’s evidence of assymetrical information in the market. Me? I dunno.

The question is, is it as good for insurance buyers? And that I really don’t know, yet.

http://www.berkshirehathaway.com/2005arn/2005ar.pdf
www.insurancejournal.com/news/international/2006/10/20/73449.htm