From the great state of JAWGAH! Bastion of tha
confederacy. May the flag forevah fly! Well now, the fust
thang ole Warren really need to do is ditch tha ROC
Cola and the Sandy Sundy and put sum good ole polk
salat and kawnpone on the menu. The next thang he need
to do is develup sum kinda no fawlt caw inshoance.
These aw gonna be two of the maja planks in my platfawm
when I run agin old Warren for the president of
Buckshy Hathway! Can ah have ya vote, ladies and gents?
Ah pledge to yall to get this compny back own tha
right trak, to not make no foolish akazishuns, and to
pay out one-tenth of ALL income in dividends! For
whut mo could ya ast? Vote fa me. I ain't nevah lost
no 'lecshun, and I don't plan to stawt now. The
Thanks for posting this history of Gen Re and it's integration into the Berkshire Hathaway family. I'm a newbie to BRK (five months only) and still learning. I did work as an actuary for a number of years so I know how P/C insurers operate. Gen Re and GEICO are unique entities.
I raised alot of issues relating to Gen Re being
100% invested in equities. My main point was it would
be bad and it will never happen. You are right about
the combined ratio. I typed that message too fast. I
didn't mean that. Read my post answering beserkshire.
Anyone would have to admit nothing good could come from
Gen Re being all in equities. It would destroy their
I'm not a proponent of any particular asset
allocation. That wasn't the issue you raised -- you
questioned whether BRK would be allowed to do this. I would
rather leave the asset allocation decisions to WEB
because he is better equipped to judge that matter than I
am. To repeat, I don't believe the rating agencies
would care if the total capital were large enough
relative to the underwriting risk being taken.
asset allocation doesn't have anything to do with the
combined ratio. The combined ratio is just the sum of the
operating and marketing expenses and losses, divided by the
premiums. How the premiums get invested once they are
received never has any impact on the combined ratio.
GenRe's combined ratio is not benefiting from being in
bonds and would not be hurt by being in equities.
Because WEB often talks about options in the
annual report and obviously considers it an important
topic of discussion for value investors. I am assuming
most BRKA shareholders are value oriented.
course WEB can't take the time to explain the issue as
well as it deserves. So I thought I might help BRK
shareholders a bit.
I own BRKS since 1988.
I meant to say net income including both
investment income and the underwriting loss (or small gain)
will tank because they will not have the $1 billion
dollars or so in investment income currently coming from
their large bond portfolio if they go all equities. The
combined is based off premiums only. Sorry. I didn't proof
read that message.
"How will they keep their combined ratio at the 100 level? If they off their bond portfolio their combined goes to 105 easily."I'm feeling a little dense today. Would you walk me through this?
The latest Market View for the Value Investor
Workshop has been posted. This month I talk primarily
about Stock Option Compensation. It�s a very important
topic for all value investors.
I hope you enjoy
I'm not talking about smooth results for Wall
Street. I'm talking about operating results that are
unique to a casualty writing reinsurance company. Don't
think that because BRK is so overcapitalized that Gen
Re can lose 70% on their equity holdings and nobody
would care. Their competitors would have a field day
with the bad press. Everybody here on this board
thinks that Gen Re can do anything they want now that
they are a Berkshire sub. It is true that Gen Re no
longer answers to Wall Street and that is a good thing.
There are many other positives for Gen Re that will
come from them being a Berkshire sub. But one thing I
can tell all of you for sure which was my original
point - It would be a bad thing if Gen Re has all of
its assets in equities and it will never happen.
"Where will they get their steady investment
income that is crucial to the smooth operating results
of a reinsurance company? "
One of the major
benefits of BRK acquiring GRN is that we don't care about
"no stinking smooth ... results". This is a long-term
investment vehicle which IS NOT subject to the silly
quarterly Wall Street gyrations resulting from "smooth"
results. None of the insurance regs give a flip either
because BRK is SO OVERCAPITALIZED that its' equities
could lose 70% of their value and we would still be