Tomorrows trading promises to be keenly watched
by those of us in the BRK Community. I would be
interested in your views as to where the stock will close.
I'm looking for $83,000. This train's pulling out of
the station and I think there will be a scramble to
get on board.....am I right or wrong? It's gonna be
hard to sleep tonight......Tis the night before
I don't know what you mean by a hint, but I found
this interesting too. His joking about, meant to me
that he believes there are no concerns regarding the
merger passing muster before the merger
I think what WEB was implying, jokingly, is no one
can argue Berk has market power in the reinsurance
business (MP is thought to require around 80% market share
in a relevant market.) I also heard him to mean he
loves strong economics, read monopoly/market power, but
implies they won't have that type of power as to draw
attn from justice (eg Msft) or the ftc (eg.
They said the regulatory processes which would take
time were related to the states of incorporation, CT
and DE and also the states in which GR is licensed,
potentially all 50.
I am sure I have made some mistakes in the notes.
So, please forgive me for any oversights,
unintentional mistatements, or misquotes. I wanted my own
transcript/notes and I thought I might save others the 1.5 hours
on the phone. Anyone else who heard the conference
call, please feel free to elaborate on my summary.
Lawyers...and disclaimers, you can't have one without the
RF: we are licensed in US and Cologne. CT and DE
are most immediately requ'd, we feel approvals should
come smoothly, from financial integrity of acquirer.
We see no antitrust (Hart-Scott Rhodino) bumps in
WB: I wish we had an antitrust
RF: should be smooth sailing. It takes time, go
through the process in each state.
Is this a HINT?
re; MSFT, INTC
WB: never talk about father on mother's
Q:this is BH's largest acquisition, what is #2? You said
you've seen lots of business pitches hit the outside
corner of the plate.
WB: this is what Ted Williams
would call in his "happy zone". Geico is much smaller,
premium volume of $4B.
Geico was $2.2B for half of
Geico. Coke is now worth billions, but we didn't buy it
at that value of course.
Q: at Omaha, you said
with low interest rates and strong returns on equity,
stocks are not overvalued
WB: GR provides good value
at the current price if the synergies materialize,
and I think the chances of this are great. I am
familiar with this business. There won't be any surprise
factors that I believe.We should thus get our money's
Q: any other insurers with similar features?
no, we are looking at no others. Some don't have much
of a future. There is a wide variation of what they
bring to the game. We don't want a so-so company for
what looks like a reasonable price. This is the only
one on our dance card.
Q: State farm recently
announced a reinsurance transaction. do you see other
RF: yes on the capacity side of the
business, there appears to be some.
WB: needs for
insurance grow in tandem, as a leverage function of
economic growth. As economies grow, and insurance is
needed, reinsurance is needed. Look to new and best
growth economies for opptys.
RF: in growing markets
opptys are in the life reinsurance companies in
Q:WB, bank execs say if they could
underwrite insurance, they would get the reinsurance
business. Do you see those walls breaking down anytime
soon? would comm. banks come in if permitted?
don't see banks wanting the volatility common in this
industry. I don't buy it.
WB: I don't worry about banks
getting into PC , I worry more of primarys USAA,
progressive, and others, much tougher compeititors than banks,
and feel the same about reinsurance
WB: I thank you all for coming.
typos, mistakes, etc. As you can see, I don't do this
for a living. ;)
Attention fellow cult members: the conference
call # for
the General Re & Berkshire merger is
The duration of the call is 1 1/2 hr. So grab a few
mushrooms and your lotus glasses,and then drop into the
steam of Oz.
9 advances 30 seconds,8 pauses, 7 rewinds 30
Warren started right out with Qs and As.
want to get the shareholder mtgs done and soon we'll
be operating as one company.
Q how long deal
WB: Ron is better on chronology. Spoke
before Salomon Travelers, July September 1997 had
spoken, but didn't look good at the time,...started again
known each other for decades, great relationship, know
each other well.
Couldn't be better deal than it is
today for both.
Brings strengths of 2 orgs together
that has to
Q What happened?
WB:1 year ago
it couldn't, 1mo ago, I felt it could be done
without hurting BRK SH's
feel this will create a superior business
synergies:willingness of BH with enormous size, underwrite, stand
behind General RE, facing demand for larger and larger
underwriting from our clients.
Capital efficiencies from
having a reins. co. owned by BRK.
Global company all
1/2 is PC in US
1/3 PC Global
life health 50/50 US/Global
Buffett is willing
to invest in people and territories GR is
BH generates big capital, Gen Re is permitted to
invest in deals from this stream.
WB has long
followed reinsurance business, the kind of owner we want,
takes LT view, which suits reins. business. Takes on LT
WB: Both companies will write significantly more
business, and retain it . Abundance of capital that BH
brings to party permits doing anything we want, unusual
in insurance business. Flexibility vs. strictures of
capital common in insurance industry is great
See no downside.
Terrific mgmt at genre, I
will contribute by getting out of the way.
Strategy in Asian
RF:We are in offices in Singapore,
HK, Beijing, New Zealand, Australia. Strategy is put
more people on ground.
We can invest more,
Reins. may require months and years to make money, now
have oppty to expand this. In Japan, we haven't had a
WB: re global, sooner rather
than later, more rather than less.
Q: WB's role
in Gen Re?
1)allocate capital 2)get
people motivated to jump out of bed.
We will add $24B
to investments, 20% to shares outstanding, STILL 12
people in Omaha. All operating decisions will be made as
they have been. Investments of domestic operation will
be from Omaha.
Q: advantages of stock v. cash
WB: create insurance enterprise with more policy
holder surplus than any in world and largest GAAP
networth of any company in US. Using stock, not a dime of
equity leaves the combined enterprises, big advantage to
RF: elaborating, combined company
has largest networth, in world, Royal Dutch
(something to shoot for). We were very eager to have a STOCK
deal. BofDof Gen Re almost required
Q:1specific as to business you had to turn down before, 2
what old exchange ratio?
WB: 2) no ratio last year,
couldn't make a deal at that time.first numbers were early
1)regarding retention, gen re distribution system sees
business, a first choice among many in world. would come to
national indemnity, BH and ask us if we wanted some of it.
Now they can take it all.
BF: we didn't turn down
as much as not be able to take as much as we'd
WB: State farm follows same policy. BH if we want to
do it, we will write it all. Now GR can see even
more of this, big difference over time.
Q: is use
of stock signal of peak of your stock?
used stock a lot...
We rather use cash, but
normally sellers won't let us. It's not a market
Q: any conflicts w/ AIG
WB: no conflict, let's
not talk of my portfolio.
Q: any changes in
RF: no plans yet. we are wholesale
WB: quality over quantity is
important in this business.