Gen Re

And the other guys.

Then you have Tad Montross at General Re.

He strictly adheres to four unyielding underwriting disciplines.

Understanding all possible exposures, conservatively evaluating probabilities, setting premiums that guarantee a profit, and crucially, being entirely willing to walk away from bad business and let market share plummet if competitors are writing policies at stupid prices.

Everyone knows the get-go.

Then you have General Re, their commercial reinsurance arm, managed by Tad Montross.

And the letter spends significant time detailing Tad Montross's approach, specifically his four disciplines of insurance pricing.

Right.

Berkshire Hathaway is really interested in reinsurance.

Berkshire Hathaway owns Gen Re.

They own GEICO.

They participate, um, in National Union Fire.

Goodwill is another massive point of divergence.

When Berkshire acquires a company like General Re for a price higher than its tangible book value, the premium paid is recorded as an asset called goodwill.

Under GAP.

Right.

When times get tough, GEICO wins.

Furthermore, General Re, which had serious cultural and underwriting problems years prior, they completed a massive successful turnaround under their new management.

They did.

But, you know, the most fascinating insurance development of 2008 wasn't GEICO or General Re.

No.

No.

Right.

Now, we know Berkshire provides that massive insurance float from GEICO and General Re.

And just to be clear on what float is for a moment, it's basically when policyholders pay their premiums up front, and Berkshire gets to hold onto that mountain of cash and invest it for their own gain before they ever have to pay out claims.

It is literally negative cost leverage.

... that they achieved in their careers, and it's just a, what a, what a collection of great men that did really good things in the industry.

We, we, we have a bunch of amazing people in our business, you know? Um, there was a woman named Constance Curnow that worked and was a managing director at Guy Carpenter when I first started, and I think she started her career at Gen Re, and I think she might've been a buyer for what was then Continental before the merger with CNA.

And, uh, you know, I've got two daughters.

One of them just started in the business, and I always think of Constance as to how different it was maybe for her to grow up in our business and what a real mentor she was to a lot of people, uh, you know, than it, than it would be for my daughter.