For eons billionaire Warren Buffett’s Berkshire Hathaway has enjoyed underwriting profits. So it shocked the insurance world a couple of weeks ago when Berkshire Hathaway reported a pre-tax underwriting loss of $379 million.
GEICO and BH Primary Group did well and saw underwriting profits but the BH Reinsurance Group and General Re had huge losses. A big part of the losses is increased loss estimates that related to the year before and the $10 billion reinsurance deal with AIG.
The AIG deal has Buffet’s right-hand man and long time partner Charlie Munger — who is Berkshire’s vice chairman — worried. He said there’s scary risk but the opportunity is there for profit. “It’s intrinsically a dangerous kind of activity, but that’s one of its attractions. Get me in a lot more of those businesses and I’ll accept a little extra worry,” Munger said
Buffett agrees. “We’ll do well by getting $10.2 billion today, with a maximum payout of $20 billion between now and Judgment Day. The question is how fast we pay out the money,” Buffett said.
In his annual address to Berkshire Hathaway shareholders, Buffett couldn’t resist a political potshot at the Republican effort to repeal ObamaCare. While admitting that healthcare costs are eating at the U.S. economy like a “tapeworm,” he also said what the Republicans are doing isn’t all that helpful either.
He calls the American Health Care Act a tax cut for the rich and said under this plan his personal federal income taxes will drop 17%. “So it is a huge tax cut for guys like me. And when there’s a tax cut, either the deficit goes up or they get the taxes from somebody else,” Buffett said.
And then he came to a conclusion that many of us can not only understand but can find relatable. He said neither party “can think rationally” about healthcare because they “hate each other so much.”
Source links: Insurance Business America — link 1, link 2, Insurance Journal — link 1, link 2