The Berkshire Hathaway Letter to Shareholders is always an eagerly anticipated event on the financial calendar. It was published this past weekend with Berkshire Hathaway’s 2014 Annual Report and the National Indemnity Company Annual Statement.
I gave the documents an initial read last weekend, focusing on areas of the Berkshire business model most relevant to KCIC’s corporate clients. This letter is published 50 years after Warren Buffett first took charge of Berkshire and, as such, is a more expanded report than usual. It includes special reflections on Berkshire Past, Present and Future, written by both Warren Buffett and Charlie Munger.
Here are things that struck me from my initial reading:
“Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2014 — that makes 12 years in a row — and increased its float. During that 12-year stretch, our float — money that doesn’t belong to us but that we can invest for Berkshire’s benefit — has grown from $41 billion to $84 billion. Though neither that gain nor the size of our float is reflected in Berkshire’s earnings, float generated significant investment income because of the assets it allows us to hold”.
“Last year, our premier position in reinsurance was reaffirmed by our writing a policy carrying a $3 billion single premium. I believe that the policy’s size has only been exceeded by our 2007 transaction with Lloyds, in which the premium was $7.1 billion”.
“In fact, I know of only eight P/C policies in history that had a single premium exceeding $1 billion. And, yes, all eight were written by Berkshire. Certain of these contracts will require us to make substantial payments 50 years or more from now.”
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Jonathan Terrell is the Founder and President of KCIC. He has more than 30 years of international financial services experience with a multi-disciplinary background in accounting, finance and insurance. Prior to founding KCIC in 2002, he worked at Zurich Financial Services, JP Morgan, and PriceWaterhouseCoopers.Learn More About Jonathan