Ajit Jain

2025 Annual Meeting Highlight Reel

“There's no question the private equity firms have come into the space and we are no longer competitive in the space. We used to do a fair amount in this space, but in the last three, four years, I don't think you've done a single deal. As long as the economy is good and credit spreads are low, they will make money, they'll make a lot of money because of leverage. However, there is always the danger that at some point the regulators might get cranky and say, you know, you're taking too much risk on behalf of your policyholders, and that could end in tears. we do not like the risk of vote that these situations offer. And therefore, we put up the white flag and said, you know, we can't compete in this segment right now.”

Morning Session - 2025 Meeting

“Well, there is no question in my mind that AI is going to be a real game. game changer and it's going to change the way we assess risk, we price risk, we sell the risk, and then the way we end up paying claims. Having said that, I certainly also feel that people end up spending enormous amount of money trying to chase the next new fashionable thing. We are not very good in terms of being the fastest or the first mover. Our approach is more to wait and see until the opportunity crystallizes, and we have a better point of view in terms of risk of failure, upside, downside. So right now, the individual insurance operations do dabble in AI and try and figure out what is the best thing to exploit it. But we have not yet made a conscious big-time effort in terms of pouring a lot of money into this opportunity. And my guess is we will be in a state of readiness. And should that opportunity pop up, we'll be in a state where we'll jump in promptly.”

Morning Session - 2025 Meeting

“When he took over, there were two major issues that, issues that Geico was behind its competitors on. Firstly, the term Warren used and we all have been using is matching rate to risk. And secondly, telematics. We were at the bottom of the list in so far as telematics had been around about five, six years ago. Since then, we have made rapid strides. And telematics, which used to be a source of competitive disadvantage to us, is that no longer so. And I would argue that our telematics at GEICO is about as good as anyone else as today. So that's been one huge catch-up. Secondly, in terms of matching rate to risk, there again, I think we have caught up with our competitors and we are as good as anyone else in the field. All this together with the cost reduction effort that Geico and Todd gets a lot of credit for. He has basically reduced the workforce by 20,000, starting with something to goes to 50,000. He's brought it down to 20,000. And that translates to, I guess, at least $2 billion per year. So all of this has allowed GEICO to become a much focused competitor. So much so in the last seven quarters, Geico has shown a combined ratio that has an eight in front front of it. And I never thought I'd live to see the day when anyone could have a combined ratio at it's so low as it is right now. So I think GEICO has done a great job. It's 80 combined translates to the largest profit anyone is making on the underwriting side in the personal order of a real business. So, you know, we've achieved a lot, taught has achieved a lot, but I do not want to be so arrogant as to say that mission accomplished. We've achieved a lot, but I still think we need to do a lot more in technology. technology, AI, as we talked about, is going to be a big force. And we need to play catch-up there, not catch-up, but we ought to be in a state of readiness. So I think GEICO is in a great shape right now. Warren, you want to add anything?”

Morning Session - 2025 Meeting

“Yeah, there's no question that insurance for automobile is going to change dramatically once self-driving cars become a reality. The big change that we will see is what you identified.”

Morning Session - 2025 Meeting

“Most of the insurance that is sold and bought revolves around operator errors and how often they happen, how severe they are, and therefore what premium we ought to charge. To the extent these... If these new self-driving cars are most safe and are involved in fewer accidents, that insurance will be less required. Instead, it will be substituted by, as you mentioned, product liability. So we at Geico and elsewhere are certainly trying to get ready for that switch, where we move from providing insurance for operator errors and be more ready to provide protection for product errors and emissions in the construction of these automobile builds.”

Morning Session - 2025 Meeting

“And I don't know how the insurance industry adapts to them particularly, but that makes the game interesting. You really don't want, you wouldn't want to go out and play golf if you know you're going to hit the ball in the hole on every hole. I'd just like to add, we talked about the shift to product liability and to protection for accidents that take place because of an error in terms of how the product was designed or supplied. The only thing I want to add is in addition to that shift, I think what we'll see is a major shift where the number of accidents that take place and need to be provided for will drop dramatically because of automatic driving. But on the other hand, the cost per repair, every time there's an accident, the cost of repairing and bringing everything back to where you to be would go up very significantly because of the amount of technology that's going into the car. How those two variables interact with each other in terms of the total cost of providing the insurance, I think is still an open issue. Interesting figures to ponder.”

Morning Session - 2025 Meeting

“Yeah, clearly we are heads and shoulders above anyone else.”

Morning Session - 2025 Meeting

“I think, only had one underwriting loss of any. Yeah. I think if you look at the entire range, including life insurance, our cost of float is 2.2 negative. That means we've got the float plus. plus somebody has given us 2.2% of that of cash to... Yeah, it's like running a bank where people leave their money with you, and you pay a minus 2.2%. And you don't have any check clearing or anything else to do. It's included in that. So, but we run our business actually with a different mindset than any other PC company, I think, probably the world. And I wouldn't be talking about it if I thought they could duplicate her.”

Morning Session - 2024 Meeting

“Yeah. As Warren has pointed out in the past, one of the drawbacks that Geico is faced with, it hasn't been doing as good job as matching. rate with risk and segmenting and pricing product based on the risk characteristics. This has been a disadvantage at GEICO for a few years now. We are trying to still play catch-up. Technology is something that is unfortunately a bottleneck, but there again, we are making progress”

Morning Session - 2024 Meeting

“and equally importantly, we have hired people who are much better than what they inherited in terms of data analytics and pricing and slicing data. So, yes, I recognize we are still behind. We're taking steps to bridge the gap, and hopefully, certainly by the end of 25, we should be able to be along with the best of players when it comes to data analytics, whether it's pricing, whether it's claims, or any other factor that drives the economics of the insurance business. I would add equating rate with risk, obviously, is it. It's important in every line of insurance business. I mean, that's what you're involved with is deciding whether a given rate offers us the chance of the probability that we will make a little of money on it, and that sometimes we're only risking losing a little, and sometimes we're risking losing huge amounts. But GEICO, and Progressive has done a better job. that in that recently. But our fundamental advantage at GEICO, of course, is that we have lower costs than virtually anybody, and that cost advantage has been dramatically driven our underwriting expense ratio below 10 percent, and there's, there's just very, very, very few companies that can compete with that. So it isn't, it's not in the least a survival question, and it isn't even exactly a profitability thing, but, you know, we would rather have X% of the market than a half of X percent, but we roughly, I think in the month of March, we were just, we didn't, we didn't lose policyholders, and we've got 16 million or whatever it is of them. And we've got the lowest cost operations. So it's not a threat, it's not remotely a threat of survival, it's not a threat to, it's not a threat to, to even profitability. But on the other hand, we would like to be growing with something that is the best model around in the insurance business of delivering at a low cost, and we now have a recognition that we didn't have back when Leo Goodwin. started at 1936, but the same principle to work then is that if you can offer somebody a good product cheaper than the other guy, and everybody has to buy it, and it's a big business, you know, it's very attractive to be in, and GEICO is a very attractive business and has got its lowest cost thing, and it does have to do a better job of matching rate to risk. but our low costs of amassed the fact that for a while that we could do without progressing as much as we should have been the matching of rate to risk.”

Morning Session - 2024 Meeting

“Yeah. Climate change, climate risk is certainly a factor that has come into focus in a very, very big way more recently. Now the one thing that mitigates the problem for us, especially in some of the reinsurance operations we are in, is our contractual liabilities are limited to a year in most cases. So as a result of which at the end of a year, we get the opportunity to reprise, including the decision to get out of the business altogether if we don't like the pricing in the business. But the fact that we are making bets that tie us down to one year at a time certainly makes it possible for us to stay in the business longer term than we might have otherwise. Because of climate change, clearly prices need to go up. It is difficult to be very scientific about how much the prices need to go up. They need to go up a lot and we keep increasing prices and hope we stay ahead of the curve. But that doesn't happen in all cases. The regulators don't make it any easier by tying our feet to the ground and making it difficult for us to withdraw from certain territories or to make dramatic changes in the pricing of certain products. As a result of which, a number of insurance carriers including ourselves, have decided to not write business in certain states. I think the regulators are getting a little more realistic about the, and they are waking up to the fact that the insurance carriers need to make some kind of a return, a decent return for us to keep deploying our capital. It's a constant battle back and forth. It's been against the capital providers these last few years, but I think we are coming back”

Morning Session - 2024 Meeting

“into balance. If you look at the results that have been recently announced by the insurance carriers, everyone's now making record profits. Obviously, that will not last, but certainly for the next several months, I think the insurance industry, in spite of climate change, in spite of increased risk of fires and flooding, it's going to be an okay place to be in. Yeah, climate change increases risks. And, you know, in the end, it makes our business bigger over time. But not if we, if we misprice them, we'll also go broke. But we do it one year at a time, overwhelmingly. And I would say this, I would, I would rather have a jeet assessing this than any thousand hundred riders or insurance managers in the world. I mean, the factors aren't, you know, we'll take Atlantic hurricanes, which would be probably our biggest risk, you know, there's no question that you can measure the temperature of the water in the Atlantic and, you know, what more water does the hurricanes, but you don't know whether necessarily, whether that's good or bad, because it may cause them to turn faster, you know, and it may change the path as well as the intensity and frequency of, of, of the, of the, of the, of the, of the, of the, of the, of the, of the, of the, of losses. But we'll write it one year at a time and we'll have Bejita underwriting it. And, you know, we don't have to tell you what's going to happen five years from now or ten years from now. And people who don't have sort of analytical insurance minds that comment on this subject really don't expand our knowledge. It's, it's, we get a lot of letters from people. a lot of letters from people that I'm sure have good IQs, but they don't really know, they don't understand the insurance business. And they're not wrong. I don't think in my mind about climate change. But if there was no risk, there'd be no insurance business. And we're in the business of evaluating it. And we do it one year at a time. And there's some exceptions where you can't do it. decisions extend for a long time in the future. And we try to avoid those. But again, you don't need 1,000 people analyzing water currents. I think you need one very, very, very smart guy. And we've got him. Okay.”

Morning Session - 2024 Meeting

“Thank you very much, Warren. Thank you very much, everyone. But the fact of the matter is nobody is irreplaceable. And we have Tim Cook here in the audience, I believe, who has proved that, and”

Morning Session - 2024 Meeting

“Okay, let me start. Cyber secure, cyber insurance has become a very fast product these days. Over these last few years, it is at least a $10 billion market right now globally. And profitability is also being fairly high. I think profitability is at least 20% of the total premium has ended up as profit in the pockets of the insurance bearers. Now, having said that, we at Berkshire tend to be very, very careful when it comes to taking on cyber insurance liabilities for the part of actually for two reasons one is it's very difficult to know what is the quantum of losses that can be subject to a”

Morning Session - 2024 Meeting

“single occurrence and the aggregation potential of cyber losses especially if some cloud operation comes to a standstill you know that aggregation potential can be huge and not being able to have a worst-case gap on it is what scares us. Secondly, it's also very difficult to have some sense of what we call loss cost, or the cost of good sold could potentially be. It's not just for a single loss, but for losses across over time. They have been fairly well contained out of 100 cents of the dollar of the premium losses over the last four, five years, I think have not been beyond 40 cents on the dollar leaving a decent profit margin. But having said that, there's not enough data to be able to hang your hat on and see what your true loss cost is. So in our insurance operations, I have told the people running the operations, I have discouraged them from writing cyber insurance. To the extent they need to write it so as to satisfy certain client needs, I have told them no matter how much you charge, you should tell yourself that each time you write a cyber insurance policy, you're losing money. We can argue about how much money you're losing, but the mindset should be you're not making money on it, you're losing money, and then we should go from there. So it is projected to be a huge business. My guess is at some point it might become a huge business, but it might be associated with huge losses. And our approach is to sort of stay away from it right now until we can have access to some meaningful data and hang our hat on data.”

Morning Session - 2024 Meeting

“Yeah. The Florida market, both for auto insurance and for homeowners insurance, has had a few tough years. The two problems we face in Florida and all the risk barriers face in Florida. One is the lawyers and the amount of corruption that takes place in the Florida market keeps skyrocketing, making it difficult for us to price the product and make a profit.”

Morning Session - 2024 Meeting

“And secondly, the amount of activity in terms of storms, both the frequency and the severity, is also so severe that the losses in Florida tend to make it very difficult for a risk bearer to make money. Having said that, we've fortunately had a very good run at Florida last year. We increased our exposure in Florida as we talked about last year, and fortunately nothing bad happened. So a lot of our premiums. that were in the top line, flow straight to the bottom line. Florida is a large market. Florida is a market that's subsidized by the rest of the country. I don't think those, that's going to stand the test of time. The Florida market, the legislators are trying to improve it. They have passed law that is bringing down the amount of fraud that takes place in Florida. And I hope Florida will be a fairly buoyant insurance market, because at the end of the day, they do believe in the free market more than some of the other states that have an insurance crisis like California and New York. So, yes, Florida has a problem. Prices will go up fairly substantially, but at the end of the day, I think we'll achieve a degree of balance so that the risk bearers can make a decent profit and will be deploying capital out there.”

Morning Session - 2024 Meeting

“Yeah. If I can add a comment, from my perspective, the transition has worked out very, very well. But I think the credit really goes to how Warren has handled the situation. And what I mean by that is after the transition was announced, and a lot of the operating managers used to be, they were used to calling Warren directly on some issue or the other. When they, after the transition, when they would continue to do so, Warren would very skillfully in his manner handle them such that he would not answer what they were looking for, but at the same time, made them feel good and told them that he sort of enjoyed hearing from them and talking to them. So as a result of which, you know, the transition took place, people got the message, they got the message, and we're very responsive to it, and it's a non-issue as far as today is concerned.”

Morning Session - 2024 Meeting

“Yep, yep.”

Morning Session - 2023 Meeting

“Let me. In terms of you. In terms of GEICO and telematics, let me make the observation that GEICO has certainly taken the bull by the horns and has made rapid strides in terms of trying to bridge the gap in terms of telematics and its competitors. They have now reached a point where on all new business, close to 90 percent, has a telematics input to the pricing decision. Unfortunately, less than half of that is being taken up by the policy holders. The other point I want to make is even though we have made improvements in terms of bridging the gap on telematics, we still haven't started to realize the true benefit and the real culprit of the bottleneck is technology. Geico's technology needs a lot more more work than I thought it did. It has more than 500, actually, more than 600 legacy systems that don't really talk to each other, and we are trying to compress them to no more than 15, 60. 16 systems that all talk to each other. That's a monumental challenge and because of that, even though we have made improvements in telematics, we still have a long way to go because of technology. Because of that and because of the whole issue more broadly in terms of matching rate to risk, GEICO is still work in progress. I don't know if any of you had a chance to look at the first quarter results, but GEICO has had a very good first quarter coming in at a combined ratio of 90s. in change, which means a margin of six in change. Even though that's very good, it's not something we can take to the bank because there are two unusual items that contributed to it. Firstly, we've had what is called prior year reserve releases. We've reduced reserves for the previous years, and that contributed to it. And secondly, every year, the first quarter tends to be a seasonally good quarter for auto insurance writers. So if you had just for those two factors,”

Morning Session - 2023 Meeting

“My guess is the end of the year, GEICO will end up with a combined ratio just south of 100, as opposed to the target they're shooting for as 96. I hope they reach the target of 96 by the end of next year. But instead of getting too excited about it, I think it's important to realize that even if we reach 96, it will come at the expense of having lost policy holders. There is a trade-off between profitability and growth. And clearly, we're going to emphasize profitability and not growth, and that will come at the expense of policyholder. So it will not be until two years from now that we'll be back on track fighting the battles on both the profitability and the growth front. Gary?”

Morning Session - 2023 Meeting

“no um one way to look at how the deal is performing since we did the deal is at the point we in time when we did the deal we had made certain projections of how much we will pay out each year and what we do is monitor what the actual payments are since the inception of the deal and how does that compare with what we expected to pay out as Warren mentioned these two numbers are very close to each other more specifically the actual payouts are 96% of what we are projected to pay out at this point in time which is good but not great we are still ahead of the curve if we do end up paying out less than what we projected not only would we have borrowed money at a very attractive rate meaning less than 4% significantly less than 4% in addition to that we would have made a fee which in 1990 which in 2015 dollars would be a million dollars so we would have borrowed money at less than 4% and we would have made a million dollar fee which is slightly more than what we were expecting to do so net net we're very happy with the deal we're happy we did it but the game is not over they're taught liabilities that coming down on the pike every second day So I'm cautiously optimistic that the deal will work out better than what we expected it to work out.”

Morning Session - 2023 Meeting

“capital behind each dollar of premium volume. Four times normal. And of course we see the big deals. Who would you trust if you had a big liability you want to and we have 25 or billion or more coming in from things other than insurance uncorrelated to insurance every year with no obligations we don't pay dividends if you paid evidence and you know and you cut your dividend try going around trying to write insurance the next day i mean it's a business where the people are counting on you to pay and when we take that 10 billion we don't agree to put it in five-year bonds and 10-year bonds we don't even think that way and the people to do business with us know that they have somebody like nobody else on those on that's going to be able to pay 10 billion you know if no matter what happens to the economy uh so it's not only the presence of enormous strength in the insurance companies it's the fact we got all these earnings that essentially come in every month and we don't have we don't have a lot of I mean we have debt at the railroad and the energy level but but in terms of the rest of the operation and we don't guarantee that debt but but it's pulling you would and it's there's just isn't another Berkshire and and the jeet recognizes that when he's negotiating so does the other party if the sums are big enough there's all kinds of people that love to get 500 million or 300 million and they they can they may think in terms of lending it out because that's what their insurance companies can do at a somewhat higher rate but that is not a game we play in and we don't have any interest in playing in them.”

Morning Session - 2023 Meeting

“In terms of Allegheny, that's an easy response. We look, we treat operating units independent of each other. And as far as Allegheny is concerned, they have a major presence. presence of the reinsurance business under the brand name of Transatlantic Re. That company will operate the way it's been operating in the past. There'll be no change in terms of strategy or management and they will keep doing what they're doing. They've been very successful and hopefully they'll keep being successful. Now, in terms of the property cat business that I have been active in over these last several years, you are right that the last 15 years has been a difficult time. prices have not been attractive and even though we have had some presence in the property cat business in the last 15 years it really is being minimal this December 31st which is a big renewal date for cat re-insurance we were hoping that we would get a few days in the sun and we'd be able to deploy our capital and be able to write some fairly attractive business as it happened And towards the end of December, till about the third week of December, I was very optimistic that we would get a chance to put several billion dollars on the books. But in the last 10 days of December, unfortunately, a lot of capacity came out of the woodworks. Pricing that we were expecting to realize didn't really come and meet our pricing requirements as a result of which January 1 was a big disappointment. We did not write as much as do you have. We're hoping to write. Now, fast forward to April 1, which is another big renewal date, we had a lot of powder dry and we were lucky that we kept the powder dry because April 1 suddenly prices zoomed up again a lot”

Morning Session - 2023 Meeting

“higher than what they were on January 1 and started to look attractive to us. So now we have a portfolio that is very heavily exposed to property catastrophe. To put that in perspective, our exposure today is almost 50% more than what it was five, six months ago. So, you know, we, I think we have written as much as our capacity will allow us to write. We are very happy with what we've written. The margins have been healthy. The only thing that I want to mention to you is that while the margins have been healthy, we have a very unbalanced portfolio. What that means is if there's a big hurricane in Florida, we will have a very substantial loss, as opposed to that if we have a very big loss anywhere other than Florida, relative to our competition, we will have a much smaller loss. Net net, I'm very happy with the portfolio. It's been a lot better, it is a lot better than what it's been in the past. I don't know how long it will last. And of course, if the hurricane has been. happens in Florida, we could lose, across all the units, we could lose as much as $15 billion. And if there isn't a loss, we'll make several billion dollars profit. And gee, tell them how long, when you call me and said, you'd like to expose us to whatever it was, a couple billion more of exposure. How long I took to say yes.”

Morning Session - 2023 Meeting

“this? Yeah. So, Geico is talking to a number of original equipment manufacturers as well to try and see how best they can work with the auto manufacturer and offer insurance at the point of sale. There haven't been very many success stories as yet. So we'll wait and see, you know, clearly it is a very convenient way to sell auto insurance at the point of sale, but there's a fair amount of data that needs to be collected on the driver, not just the car, and that makes it a little more complicated. So we are talking to. some auto manufacturers ourselves. We are hopeful that we will strike a deal with some of them before not too long. Tesla has made and GM. They both have talked a lot in the press in terms of getting into their insurance business. And in fact, GM, I think, has projected. They'll write $3 billion of premium, which, you know, it's hard to imagine where it'll come from. But they're all hot to trot. I think somebody will find the secret source before not too long and we ourselves are in that race.”

Morning Session - 2023 Meeting

“Yeah. The only point I'd like to add is the margins on writing auto insurance are 4%, which is a very small number. And once there are more people that are trying to take a bite of the apple, it just becomes very, very difficult to keep all the mouths fed in a profitable manner.”

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“Well, it's essentially nothing. And we are writing more cat cover this year, actually, than we were writing last year because the prices are somewhat better. And actually, you know, I don't know a damn thing about hurricanes, but in terms of, you know, El Niño or whatever it may be, it's it's slightly, it's somewhat more probable that we have a good hurricane season, I mean, a good one of being a low one, than last year. but there's all kinds of chance events and that's what we insure people against. But, but, can you say without hesitation, Warren, can you tell without hesitation that you're, you need to charge much higher premiums because these things are happening much more frequently? Because that's, we're considering, we're considering spending in terms of, no, no.”

Morning Session - 2022 Meeting

“There's no question that the personal automobile insurance business is a very competitive business. Having said that both GEICO, and Progressive are two very successful competitors in this segment. Each one of them have their pluses and minuses. But having said that, there's no question that more recently, Progressive has done a much better job than GEICO, as you point out, both in terms of margins and in terms of growth rate. There are a number of causes for that, but I think the biggest culprit as far as GEICO is concerned, and again, you rightly pointed out, is telematics. Progressive has been on the telematics bandwagon for, I don't know, more than 10 years, probably closer to 20 years. Geico until recently wasn't involved in telematics, and it's been only the last two years that they've made a very serious effort in terms of making, using telematics for segmentation and for trying to match trade and risk. It's a long journey, but the journey has started, and the initial results have started, and the initial results have promising. It'll take a while, but my hope and expectation is that hopefully in the next”

Morning Session - 2022 Meeting

“In addition to all what Warren has said in terms of the chance of something like this happening, the additional thing that concerns me about a nuclear situation is my lack of ability to really estimate what our real exposure is in the event of a nuclear event. When you're talking about, you know, other big exposures we have, earthquake and hurricane and cyber, I can, with some reasonable degree of accuracy, have a point of view in terms of how large our exposures can be and how big our loss can be. When it comes to a nuclear thing, you know, I sort of surrender. I, you know, it's very difficult for us to estimate how bad can be. Very many different lines of exposures will be affected by it. And even though in almost all our contracts, we try and exclude nuclear as a covered peril, nevertheless, if something like that would happen, I'm fairly positive that the regulators and the courts will hold it against the insurance and we will be, and they'll rewrite the contract and we'll be”

Morning Session - 2022 Meeting

“required to pay. For example, one thing which is already being talked about, we issue. what are called fire policies. And these fire policies try and exclude nuclear as a covered peril. But there are several regulators who feel that, gee, if it's a fire policy and if the nuclear attack causes a fire, then how can you exclude fire? And you better include fire. So, you know, debates like that we will have to live with, and it will be very difficult for the insurance industry to fight back both the regulators and the code systems in terms of what is covered and what is not covered. And there won't be any regulators or anybody else. So we'll leave it to a million years of reconstruction. But Einstein said that, he said, I know not what the weapons will be for World War III, but I know the weapons for World War III. 4 will be sticks and stones. You know, there's a lot of things, you know. I mean, it's just, if you're worried about the effect of nuclear attacks, you know, you got other things to worry about than the value of your Berkshire. I'll put it that way. And what other cheerful things going on. station.”

2021 Annual Meeting Highlight Reel

“well I would say it would depend on the premium and and I would say that that I would probably have a somewhat different rate if Elon was on board or not on board I mean you know I No, it makes a difference. I mean, if somebody's asking you to insure something, you know. So I would, that's called getting skin in the game and what a, you know. But in general, I would be very concerned about writing an insurance policy where Elon Musk is on the other side.”

Part 2 - 2021 Meeting

“Yeah. In the insurance business, we often think about pandemic risk as one of the risk factors. that we need to cope with in our business. Having said that, I think the big lesson for us, having gone through what we've gone through recently, is that while we were aware of the fact that pandemic risk is a risk factor, it was totally, totally underpriced by all of us in the industry. Several of us thought it's an event that will happen at most once and a hundred years, and even then, those odds are pretty high. So I think the big lesson for us is to... to recalibrate and rethink about what the return time is for something like a pandemic risk. And separately, we haven't yet done a good enough job as an industry, I'm saying, in terms of correlating the risk and aggregating the risk and making sure we can deal with the aggregate numbers. For example, pandemic risk has obviously taken people's lives, but then separately a bunch of us used to write something called event cancellation or contingency policies. And in terms of pricing for the contingency policies like the Olympics being canceled, NBC would buy insurance for their rights which might suddenly be not worth much.”

Part 2 - 2021 Meeting

“And when pricing something like that, we would think in terms of earthquake and risk and more recently terrorism, but we would never factor something like what portion of the price should come from of the pandemic exposure. So I think the industry will become a lot more sophisticated in terms of thinking through what What is the impact of pandemic risk across the entire portfolio as opposed to it just being localized to one or two areas?”

Part 2 - 2021 Meeting

“Well, in terms of reserves, starting from last year to the end of the first quarter this year, we have put up a billion six and change in terms of reserves. Now, what that doesn't take into account is some of the frequency benefit because of COVID-19 that results because of fewer accidents, and GEICO has had a huge tailwind because of that. But in terms of what the insurance operations collectively are going to be writing checks, X4, that number as of now, is about a billion six. And my guess is that will probably grow, because if you look upon it, the industry as a whole has reserved, we've reserved on point six, as I mentioned, the industry as a whole is reserved about $25 to $30 billion for COVID-19 as of now. If you believe the pundits in the industry, they will tell you that number is probably going to be closer to $100 billion. So there's another about $70-75 billion of COVID-19 losses that need to flow through. through insurance industry's balance sheet and income statement. Our number, therefore, of 1.6 that we have as of now, is going to be a lot, lot higher. But it's not something that we cannot manage completely. Yeah, we will not be in its top five payers of, my guess, of insurance claims even though we're here. It's, and we write a much smaller amount of both life insurance and annuities, actually. And, you know, in the end, we get, we had more life insurance crimes, but the annuities are not going to last, more people will have died that would have otherwise got payments under annuities. It cuts a lot of ways. It's, it's a, you know, one of the great human catastrophes of all time, but it is not that big insurance. And I would say this, if the insurance industry thinks they're going to lose $100 billion, the $100 billion ought to be up on their books now. I mean, the idea of feeding in law. You've got a liability. And our goal is not, our goal is to have put up the liability when we think it's happened. And then if we should not be at a billion six, I would say”

Part 2 - 2021 Meeting

“This is an easy one. No thank you. I'll pass.”

Part 2 - 2021 Meeting

“And I would say that I would probably have a somewhat different rate if Elon was on board or not on board. I mean, you know, it makes a difference. I mean, if somebody's asking you to insure something, you know. So I would, that's called getting skin in the game and, you know.”

Part 2 - 2021 Meeting

“In addition to the demand side, the supply side has become a lot more competitive as well. A lot of people who can put up big limits, not as much as we do, but they can syndicate a program and put up a billion dollar very easily. So that competitive advantage we had, we still have, but it's no longer as bigger deal as it used to be.”

Part 1 - 2021 Meeting

“I mean, clearly, contract certainty is an issue for us in the insurance industry. It is an issue that cuts across not only the long-tail lines that you mentioned, but even short-tailed property focus lines. The most recent example is business interruption, which is an integral part of any property insurance policy that is bought and sold by corporations. It is a risk every time we issue a contract that either because of sloppiness in terms of how that contract is written or because of the regulatory environment we all have to live in, that the words in the contract may be tortured to, and normally when they are tortured, they end up going against the insurance industry, not in their favor. So it is an risk. It's an unknown risk in terms of how bad it can be. I hope we price for it, when we price for the product, we throw in something for the unknown unknowns, if you will. And we try and aggregate our exposures by major risk categories. Hopefully that will give us some comfort in terms of having some boundaries on what the exposure really can be. But there's no question the regulators play a very important role in terms of the economics of the business, especially in the U.S. where there are 50 state regulators who we have to deal with in terms of pricing, in terms of contracts, in terms of... Most of the surprises in insurance, frankly all of them are unpleasant. I mean, you get the premium up front. That's pleasant. And then from there on, you get some very imaginative losses that come through. And you get something that you've taken. We are willing to lose in terms of sort of the outside limit we think, we're willing to lose $10 billion in a single event.”

Part 1 - 2021 Meeting

“Yeah, and it goes back to the issue that you just raised. The reason why this number of claims have skyrocketed from less than 2000 to close to 100,000 is because the statute of limitations had expired, but in several states, if not in most states, they have unilaterally extended the deadline by when you can make claims and expanded it by a few years as a result of which a lot of more claims have appeared, funded by plaintiff lawyers who are now very well funded, and that results. and claims just skyrocketing.”

Part 1 - 2021 Meeting

“I agree. Okay. Well, there's no question. that the relationship Warren has with Charlie is unique, and it's not going to be duplicated. Certainly not by me and Greg, no. I can't think of very many other pairs that can duplicate it. Nevertheless, both Greg and I, at least certainly from my perspective, and I'm sure Greg will speak for himself. We've known each other for a very long time. I certainly have a lot of respect, both at a professional level and a personal level in terms of what Greg's abilities are. We do not interact with each other as often. as Warren and Charlie do, but every quarter we will talk to each other about our respective businesses and update each other on our respective businesses. And then during the course of the quarter, well, we may not have any formal sort of meetings, if you will. But every time a question comes up, which is related to insurance, Greg will pick up the phone and call me. By the same token, if there's any question that comes up relating to any of the non-insurance operations that Greg is in charge of, like we had recently, where a client, of mine who's looking for trying to find a buyer, and I picked up the phone and talked about, you know, how best to proceed. So there's that that happens during the course of the quarter, every quarter we exchange notes, and we have a perfectly well-functioning relationship between the two of us, and I hope it remains that way.”

Part 2 - 2021 Meeting

“Well, in my job, I spend a lot of my time reading deals that brokers and people send us, reading what they're proposing, trying to analyze them, having a point of view whether it is something that is of interest to us or not. I might add, I do not spend a lot of time reading on reports because I'm not in the stock picking business per se. But in terms of keeping track of what's going on in the insurance business, that's what 90% of my reading is all about.”

Part 1 - 2021 Meeting

“There's no question, Progressive is a machine. They're very good at what they do, but it's underwriting which Warren talked about in terms of matching rate to risk, whether it's handling claims. Having said that, I think Geico is catching up with Progressive. More than a year ago, about a year ago, Progressive had margins that were almost twice as much as GEICO's, and growth rates that were almost twice as much as GEICO's. If you look at the results as of now, Progressive is still crushing it in terms of growth relative to GEICO. But GEICO is certainly caught up with progressive in terms of margins, and hopefully that gap will be nonexistent in the future. The second point I want to make on the issue of matching rate to risk, GEICO had clearly missed the bus and were late in terms of appreciating the value of telematics. They have woken up to the fact that telematics plays a big role in matching rate to risk. They have a number of initiatives and hopefully they will see the light of day before not too long and that will allow them to catch up with their competitors in terms of the issue of matching rate to risk. I will predict that five years from now, State Farm is still the largest auto insurer, but I will predict that five years from now it's very likely. that the top two will be GEICO and Progressive in which order we'll see. But both companies are going to do very well, in my opinion.”

2020 Berkshire Hathaway Annual Meeting - Part 2 - Q&A

“Well, the amount of litigation that is going to be generated out of what's already happened, let alone what may happen, is going to be huge. Now, just the cost of defending litigation is a huge, enormous expense, depending on how much there is. Now, in the auto insurance field, which is our number one field in terms of premium volume by some margin, It's more definable, but who knows what comes out of it in terms of litigation. But in what they call commercial multiple peril, which involves property losses, and where some people elect to buy business interruption coverage, many policies, quite clearly in the contract would not have a claim for business interruption under a commercial multiple policy where you've elected that. But other policies do. I think I know of one company. I don't know the details that's written a fair amount where they cover, or they, certainly there's a good argument, perhaps, that they cover business interruption that might arise from a pandemic. Well, they're in a very different position than the standard language, which says that you recover for business interruption only if there's, uh, involves physical damage to the property. And you can, you can buy all kinds of different policies. We are not big in the commercial, multiple peril business. So, I mean, this is not like our auto business or anything to the sort. But we will have, we will have claims. We'll have litigation costs. But proportionally, it's not the same with us as with some other companies, which have been much heavier in writing business interruption as part of a commercial multiple peril. But you don't automatically get coverage if you have business interruption. I mean, for example, I think it would be unusual if, say, General Motors had a strike, which they did, and that they have business. interruption that covers a strike. We actually wrote about, probably the only annual report in the United States, we wrote about business interruption insurance because we had it over in France when one of our properties was adjacent to a property that's much smaller property that had a fire and then it spread to our plant. And it caused a lot of physical damage and we have bought it. We have business interruption that ties in with that. But if we had some company we were selling all auto parts to, and they had a strike, our business would be interrupted, but it's not covered by the, I mean, that is not part of the coverage unless you specifically really buy it.”

Morning Session - 2019 Meeting

“next hundred years, you'll have to have so much capital in the business that it's not a very good business. And if you really think about a worst-case situation, the reinsurance, that's the insurance you buy from other people as an insurance company to protect you against you. extreme losses, among other things, that reinsurance probably could likely be not good at all. So even though you think you're laying off part of the risk, if you really take the worst case example is you're not laying off, you may well not be laying off the risk. And if you keep the capital required to protect against that worst case example, you'll have so much capital in the business that it isn't worthwhile. Berkshire is really the ideal form. for writing the business because we have this massive amount of assets that in many cases are largely uncorrelated with natural disasters. And we can, we don't need to buy reinsurance from anybody else. And we can use that, we can use the money in a more efficient way than most insurance companies. It's interesting, three, in the last 30 years, the three largest reinsurance companies, and I'm counting Lloyds as one company, although it isn't, it's a group of brokers assembled and underwriters assembled at a given location. But people think of Lloyd's as a massive reinsurance market, which it is, not technically one entity. But if you take the three largest companies and they're all in fine shape now, I've, they're They're first-class operations. But all three of them came close to extinction sometime in the last 30 years, reasonably close. And we didn't really have any truly extraordinary natural catastrophes. The worst we had was Katrina, whatever it was 2006 or there, about 2005. But we didn't have any worst-case situation. And all three of those companies, which everybody looks at, is totally good on the asset side if you show a recoverable from them. Two of the three actually made some deals with us to help them in some way. And they're all in fine shape now. But it's really not a good business if you keep your, as a stand-alone insurer, if you keep enough capital to really be sure you can pay anything to comes along under any kind of conditions. And Berkshire can do that, and it can use the money in ways it likes to use. So it's a very valuable asset. I don't want to give you a figure on it, but we would not sell it. We certainly wouldn't want to sell it for its float value.”

Morning Session - 2019 Meeting

“Hi. Obviously the starting point, I mean, these situations where there's not enough data, not enough data to hang our hat on, it's more of an art than a science. We start off with as much science as we can use looking at historical data that relates to the risk in particular or something that comes close to relating to the risk that we're looking at. And then beyond that, if there's not enough historical data we can look at, then clearly we have to make a judgment in terms of what are the odds of something like that happening. We try, we absolutely, in situations like that, we absolutely make sure we cap our exposure. so that if something bad happens or if we got something wrong, we absolutely know that how much money we can lose and whether we can absorb that loss without much pain to the income statement of the balance sheet.”

Morning Session - 2018 Meeting

“a 2% probability per year of happening. Cyber is unchartered territory, and it's going to get worse, not better. And then the question is, is whether if we have a whole bunch of $25 billion commercial limits out there, whether there's some aggregation that we didn't foresee or that the course interpret those policies differently than, you know, they are generally going to give the benefit of the doubt to the insured. So you're right in pointing that out. is a very material risk, which didn't exist 10 or 15 years ago, and will be much more intense as the years go along. And all I can tell you, Gary, is that that's part of my $400 billion in my 2%, but if you've got a different guess, it's just as likely that yours is right than mine on that.”

Setting the stage for CEO succession | January 10, 2018

“As near as you can tell, you've got pretty good records back to the early 1800s on hurricanes that have hit the mainland United States. It looks awfully random if you look all the way back to, you know, 1830 or 40. And it's true. that we had the longest period here up to last year, most consecutive years without a hurricane hitting the mainland United States. And that came right after Katrina and, you know, in the year when we had Hugo and I forget various ones. So it appears random to us. And incidently, we did not, we went away from insuring what we call supercats. We moved away from it after”

Setting the stage for CEO succession | January 10, 2018

“Katrina because the race kept just coming down, down, down, down. And we just thought we were not getting paid enough for CAT. So we have not been in the supercat business to any degree at all in recent years. We used to be in a very big time when we thought the rates were more appropriate. But the rates have not been high.”

Setting the stage for CEO succession | January 10, 2018

“But I would say that there was a little catch-up in September when we had Irma and Harvey and Brea and Brea. No doubt. But we were not insuring supercats. We had a fair amount of exposure just generally, but not supercats.”

"I was wrong" on IBM | August 30, 2017

“Well, it's sort of unbelievable. I saw a figure the other day of 14 million, 14 trillion gallons of water being dropped from the skies. That's equal to 2,000 gallons of water for every man. woman and child on the planet. I mean, so it's, it's staggering. And the insured loss will be large. There'll be a lot of uninsured loss too, because flood, a lot of people have coverage with the national flood operation, but in the case of our particular company, we write about 10% of the auto insurance in Texas. So if you have comprehensive insurance, which covers flood, and about 70% of the people who buy auto insurance get that. You may very well have a total loss. We probably have 500,000 or so cars insured in that area for GEICO, which would be about 10% of the total. There probably be 5 million cars in that area. And we don't know at this point, but I wouldn't be surprised if we had 50,000 losses, and most of them will be total losses. That number is about the same as we had in Sandy. But our market penetration up here in New York is higher than in Texas. But we have to get tens of thousands of cars in there because a person's got enough trouble with their house and everything else, but they need a car. And we want them to have a full tank of gasoline, so we've been taking on big tanker's on gasoline. It's how you perform at a time like this that really defines whether your insurance company is doing the right job.”

"I was wrong" on IBM | August 30, 2017

“Not like we used to. We used to write a lot of what we call Supercat. In fact, we were the biggest writers of Supercat some years ago. And then they didn't have any hurricanes for a long time. It's been 10 or 11 years since a hurricane hit land in the United States. And you can go back to 1840 or so, which is the longest. record we have. And there's really never been that long a period without a hurricane coming ashore. So the rates kept coming down and down and down and down. And the wind doesn't know what the rates were. So if you get the wrong rate on an insurance, you're going to lose money over time. And so as the rates went down, we got out of the Supercat business pretty much entirely. So it does not hit us big in reinsurance like it was. would have been 10 years ago.”

"I was wrong" on IBM | August 30, 2017

“Yeah. The problem with flood insurance is that the only people that buy it are the people that are going to need it, where it's going to happen. You know, if I have a house that's higher up in Omaha, I'm never going to buy flood insurance. So you don't get the spread of risk that you get with auto. or homeowners. Nobody knows what a fire is going to hit a house or something of the sort. That's random. But it's not random on floods. And so people that live in flood planes are the only ones who want to buy flood insurance. And the normal insurance industry can't take care of it when you get adverse selection like that. So the government stepped in. They're already in the hole before this happened. And there'll be a lot further in the hole when this gets through.”

"I was wrong" on IBM | August 30, 2017

“I don't think they'll go up that much. But if Supercat rates get to where we think that the odds are in our favor, we'll write it. But it's been five or six years since we've written in a real amount of Supercat here in the United States. The rates just keep going down and down and down. And there's more and more houses on the coast and they're worth more money. And there's been a lot of money come in from outside the insurance industry with cat bonds.”

Morning Session - 2017 Meeting

“and that would mean that the overall economic cost of auto-related losses that had gone down and that would drive down the premium income of Geico. So I would say both of those autonomous vehicles widespread would hurt us if they went to, if they spread and they would hurt our auto insurance business. I think my personal view is that they will certainly come. I think they may be a long way off, but that will depend. It'll probably, frankly, depend on experience in the first early months of the introduction in other than test situations. And if they make the world safer, it's going to be a very good thing, but it won't be a good thing. but it won't be a good thing for auto insurers. And similarly, if they learn how to move trucks more safely, there tends to be driver shortages in the truck business now. It obviously improves their position vis-a-vis the railroads. Charlie?”

Afternoon Session - 2017 Meeting

“Yeah, I think it will be, and I think how fast it grows depends very, it does depend very much on the market. I mean, we are, we are not, we are not interested in trying to be a price cutter in a market where the prices already aren't that attractive. But we have built the scale worldwide, and a lot of this just have been added in, you know, recent months and just over the past year. We have, we will grow, we will grow a lot, but if the market should turn hard for any reason, we would grow a lot faster, but we are destined at Berkshire Hathaway's specialty to be one of the leading PC firms. And in the world, just as we were destined to have, when a cheat came in, even though we had nothing, uh, we were destined to become, a very important reinsurer throughout the world, and in certain ways, almost the only reinsurer for certain types of risks in the world. And we've got the people, we've got the people, we've got the capital, we've got the reputation. There is no stronger company in the insurance world, and there won't be than the Berkshire Hathaway insurers. We've got the talent there. So it will grow. It may grow. Slowly, some years, it may have big jumps, just like the reinsurance operation did many years ago. But it's a very important addition to Berkshire that brought that on. I just wish we could have started a little earlier, but we had to have the right people and they came to us. And as you say, we wrote whatever it was, a billion three or a billion four last year. And we'll write more this year, but we won't write as much as if if we were in a hard market.”

Buffett buys airlines and Apple | February 27, 2017

“But do you know, is the incidents absolutely increasing as a show that we're screwing things up? Well, last year, tornadoes were unusually frequent. And if you wrote comprehensive auto or you road homeowners in Texas, you probably lost a lot of money on that line. We have, I don't 25 auto dealerships or thereabouts in Texas. And we had losses that were, I think, seven or eight times the premium we paid, for example, on cars damaged at our auto dealerships through tornadoes. So Texas got hit hard. Well, a lot of places got hit hard. So what you've seen in the last few years is more toronto. than you might expect and fewer hurricanes. But who knows what's going to happen next year. You know, you've seen, you actually had a big quake over New Zealand not that long ago. Yeah, quakes. Like we had a few years ago. Yeah, I mean, we haven't quite started attributing quakes to increase CO2. That's coming, I'm sure. But now, I'm just trying to get a feel for weather. I'm trying to get a feel for weather. I saw, you know, one of the, the, the, the most vocal. advocates of anthropogenic global warming, this Michael Mann, gentleman, so we don't need to really measure things anymore because we can just see things, we can see the catastrophes happening so that we don't need to actually do it. You look at any data. We know it's real because it's happening. And I don't know. I remember things happening when I was young, too. So I don't know whether the frequency is higher or not. Sure. No, I have not seen anything yet that would cause me to change the way we look at evaluating quakes, tornadoes, hurricanes, by hemisphere. Right. Yeah. More snow, less snow, more, you know, it's just, it's unbelievable. Okay. That, I, you know, I'm not going to ask you anything else beyond that because, I mean, there's nothing more important, obviously, than things like clean water and clean air and keeping chemical, and, and, you know, the EPA has a lot of work to do with waste sites and all these things. I just don't know whether it's a slam dunk that we've changed the entire climate at this point. That's my only point. Yeah, the only thing I've changed my view on is I would now, I now charge a higher rate for whole and one insurance when you're playing in the tournament. I mean, we have done that, but that's been the only major change in our underwriting policies, Joe. When you're sarcastic, it doesn't,”

Morning Session - 2016 Meeting

“It was not a negative judgment on their management, but it was at least a mildly negative judgment on the reinsurance business. Now, we have the ability at Berkshire to actually rearrange to a degree. We are certainly affected by industry factors, but we have more flexibility in modifying business models. And we've operated that way over the years in insurance generally and particularly in reinsurance. So a Munich, a Swiss, all the major. reinsurance companies, except for us, is pretty well tied to a given type of business model. They don't really have as many options in terms of where capital gets deployed or something. They have to continue down the present path. And I think they'll do fine, but I don't think they will do as fine in the next 10 years as they have in the last 10. And I don't think if we played the same game as we were playing the last 10, we would do as well. But we do have considerably more flexibility in terms of how we conduct all of our insurance operations, but particularly in reinsurance. We have an extra string to our bow that the rest of the industry doesn't have. The amount of capital that's come in to the reinsurance business, you know, it is no fun. running a traditional reinsurance company and having money come in, particularly if you're in Europe, and have money come in and look around you for investment choices and find out that the great many of the things that you were buying a few years ago now have negative yields. That the whole idea of float is that it's supposed to be invested at a positive rate and fairly substantial positive rate. And that game has been over for a while, and it looks like it's supposed to be invested in a positive rate. while and it looks like it will be at least unattractive if not terrible for a considerable period in the future.”

Morning Session - 2016 Meeting

“And some of the supply is driven by investment managers who would like to establish something offshore where they don't have to pay taxes. And reinsurance is sort of the easiest, what you might call, beard behind which to actually engage in money management in a friendly tax jurisdiction. And you can set up a reinsurance operation with very few people by taking large chunks of what you're brokers may offer. It's not the greatest reinsurance in the world. And a couple of the operations that have done that have proven that that statement to be right. But nevertheless, it is in very, very easy way to have a disguised investment operation in a friendly tax jurisdiction. But that becomes supply in the in the reinsurance field. And supply has gone up relative to demand and it looks to me like that will continue to be the case. the case and couple that with the poor returns on float. And it's not as good of business as it was. Now we'll talk to an insurance man about it. Cliff Gallen. Thank you.”

Afternoon Session - 2016 Meeting

“So it is really not the issue before the shareholders is not how the issue before the shareholders is not how, I feel about whether climate change is real or whether carbon tax is appropriate, it's whether it poses a risk to our insurance business. And I recognize the Bank of England, read that report, but we respectfully disagree with them in terms of, not in terms of the importance of climate change, but in terms of the risk to our insurance business. We don't, we are not forced, we don't write policies for a long period we're not forced to write a policy on anything. So we are, our judgment is made as propositions are presented to us, usually as to whether for one year we are willing to accept a given risk for a given price. And that, obviously, climate is enormously important in our activities, hurricanes being the most important probably, although we also get involved in earthquakes, but that is what the proposal is about and that, and we've given a response to that, and it does not mean that we differ on the importance of climate change to the human race. So with that, I'd be delighted to hear from the various seconders.”

Afternoon Session - 2016 Meeting

“And I would point out that we have not been asked ever, to my knowledge, to write long-term contracts. Our primary insurers know that we look at it one year at a time, and we will not write business that we think has a major negative probability. And they don't expect us to. It's way less a relational business than in the past. It's much more a transactional business. But we will not, right, if we lose the customer because they want us to do something stupid, we lose the customer. And there is not a, in our business, I'm not speaking for other reinsurers, but in our business, and I believe with most other reinsurers, they are not going to do something that they think is terribly discharacterial. and advantageous to them just to maintain a relationship. That's not really a relationship and be a subsidy. So I do, that does not strike me, frankly, as a factor at all of any negative consequence at Berkshire. We, in terms of what happened after Katrina, rates one up. And actually, it, the hurricane experience in Florida has been better than any period since than before 1850 that we have any records on. That's been a surprise to us, incidentally, but we have not written business, catastrophe business in Florida during that period because we didn't think the rates were adequate. They were adequate. We just were wrong about it. So the, and incidentally, that is not. But the fact that we walked away from cat business in Florida that we thought was mispriced has not hurt us in the business. It's really a, it's much more of a transactional business. And there may have been a time when relationships were very big in reinsurance, but with so many entrants in it, it is very much a transactional business. And no one expects you to do something that's very stupid.”

"America's never been greater" | February 29, 2016

“And actually, when employment gets better, that affects driving to some degree. So they were more miles driven. But beyond that, people did not drive as well last year as they had the year before. And it had been coming down. I mean, it is, when you think about it, it's so much safer to drive a car now than, you know, when I was a kid, for example. And even when I was an adult, cars have gotten a lot safer.”

Reinsurance prospects "have turned for the worse"

“The reinsurance business is not as good as it was, and it's unlikely to be as good as it was. There's a lot of money that's come into reinsurance, not because they want to reinsure people, but because it's become either a fashionable asset class for people that are looking for so-called non-correlated investments and may not know what they're doing, but it's something you can sell people. You know, that's an attractive line to go to pension funds with. Secondly, it's a beard for asset management. So if you go to Bermuda and start a reinsurance company, you can actually run a hedge fund and you need a little business to make it look like you're doing something other than running a hedge fund and locating it offshore so you don't pay any tax. But that's the primary motivation. So when you get a whole lot of people that are bringing money in and they sort of need your facade of reinsurance to cover up what they're real. motivations are, you're likely to get less attractive prices in reinsurance. And that's been happening on a fairly large scale. And I would say that I would expect that reinsurance business in the next 10 years to not be as good as it has been, I'm talking about the whole industry as it has been, you know, in the last 30 or something like that. It's a business whose prospects have turned. for the worse. And there's not much we can do about it.”

Afternoon Session - 2015 Meeting

“I would say that it's almost certain that we, I don't want to say 100% certain, but it's almost certain we will not take over a large commercial insurance company. We've got a, we've got the ideal operation, in my view, in Berkshire Hathaway, specially. We've got the right people running it. We've got a jeet overseeing it.”

Afternoon Session - 2015 Meeting

“We set it one year at a time, and I see nothing that tells me that on a yearly basis that global warming is something that should cause me to change my prices a lot, or even even a small amount. That doesn't mean that it isn't a threat to humanity or, you know, and terribly important. It just means that if I'm going to sell a one-year insurance point, policy, and I'm going to sell it on a $1 billion plant. I may care enormously about the fire protection and various other kinds of protection within that plant. I may care about what's going on adjacent to that plant and all kinds of things. But I am not thinking about global warming. It does not change the situation in a material way in any one-year period of time in my judgment. And, you know, if I was writing a a 50-year windstorm policy in Florida, and I would think very hard about what global warming might do in that case to the incidents and the intensity of potential hurricanes. But I do not think it has any material effect on the likelihood or the intensity of a hurricane in Florida or Louisiana or Texas or next year. So it is not a, it's not something I would put in the, in the, in the, uh, 10-K as a, as a threat, Charlie?”

Afternoon Session - 2015 Meeting

“Yeah, do you think, would it change your one-year prediction as to what the rate should be?”

Afternoon Session - 2015 Meeting

“Yeah, look at it this way, Andrew. Would you change the rate for tomorrow on insurance because from the rate today for global warming? I doubt it very much. Now, you know, would you change it for 50 years? Might very well. But I think that one year is much closer to one day than it is to 50 years in terms of focusing on that factor. So I do not want our underwriters to sit there thinking a lot about in terms of writing a risk or at the price at which to write that risk. I do not want them thinking about global warming. I want them thinking about whether there's a moral risk involved in who owns the property.”

Afternoon Session - 2015 Meeting

“Well, wouldn't our competitors like to know? The reinsurance business is not as good as it was, and it's unlikely to be as good as it was. And there's a lot of money that's come into reinsurance, not because they want to reinsure people, but because it's become either a fashionable asset class for people that are looking for so-called non-correlated investments and may not know what they're doing, but it's something you can sell people. You know, that's an attractive, attractive line to go to pension funds with. And then secondly, it's a beard for doing, for asset management. So if you go to Bermuda and start a reinsurance company, you can actually run a hedge fund”

Afternoon Session - 2015 Meeting

“and you need a little business to make it look like you're doing something other than running a hedge fund and locating it offshore so you don't pay any tax. But that's the primary motivation. So when you get a whole lot of people that are bringing money in and they sort of need your facade of reinsurance to cover up what their real motivations are, you're likely to get less attractive prices. in re-insurance. And that's been happening on a fairly large scale. And I would say that I would expect that reinsurance business in the next 10 years to not be as good as it has been. I'm talking about the whole industry as it has been, you know, in the last 30 or something like that. It's a business whose prospects have turned for the worse. And there's not much we can do about it. We do find things to do. There are certain things that only that only Berkshire can do. And we've, I mentioned in the annual report that there have been eight, I think it was eight, contracts written with premiums of a billion dollars or more, and we've written all eight of them. So there, we do, there's a certain corner of the world that we've got a strong position in. And there's a few other things we will do. But it's not as good as it was. Charlie?”

"People react too much to short-term things" | March 3, 2014

“I made no difference. I'm, I calculate the point. probabilities in terms of catastrophes know differently than a few years ago. That may change in 10 years. Yeah, 10,000, I think it's been 3,000 days since something like a Category 2 hit landfire. That's the longest in history for a hurricane. And you mentioned tornadoes. Last year it was actually well below. I don't know about if he had up all the recent years, but I watched you after Al Gore's big year. It was a horrible year, but the one that he said we're going to have, it's going to be repeated year after year after year after one where he had. We went through the whole Greek alphabet and started again with hurricane. I watched you. You knew. You knew, you knew, you knew, you knew, you knew. And you knew that that was going to be an opportunity to raise premiums and then not really have many events over the, and it played out exactly like you thought. I don't know how you'd do it. I love apocalyptic predictions on it, because you're right, it probably does affect race. And the truth is that writing U.S. Hurricane has been very profitable in the last five or six years. Now the rates have come down very significantly, so we aren't writing much, if anything, in the U.S. Our biggest single cat risk would be earthquakes in New Zealand.”

Morning Session - 2013 Meeting

“Well, the goal is to take a greater share of the market. There have been two important moves made by a G's operation in the last month or so. One is the first one that was announced was this participation of 7.5% in all of the all of the business. Originally, it was announced as applying to the Lloyd's market. I believe it's been extended to the entire London market. Now bear in mind that the people that are insured still have the right to pick who their insurers shall be, so it isn't totally automatic that we receive seven and a half percent of every slip. But we had had an arrangement for a couple of years with Marsh on a Marine book and perhaps some other areas, but not across the board. And we think that the profit possibilities are reasonable for that business. We wouldn't have entered into it. It will give us more of a cross-section of business than business. than we've been used to having. But it doesn't mean that we give up our present business at all, either. The second item you mentioned is just in the last week or thereabouts. It was announced that four pretty well-known insurance people that had been with AIG had joined us to write primarily commercial insurance, initially domestically, perhaps, but around the world. And these are people that reached out to Berkshire, in case of at least one of me, reached out a”

Morning Session - 2012 Meeting

“Yeah, it's very hard, you know, because of the random nature of quakes and hurricanes and that sort of thing, it's very hard to know when you really have had a trend. We've had that situation in global warming. I mean, it has been a godly warm here in the last few months, but a few years ago, it was extremely cold. And anything that moves us slowly. So as the things affecting our globe, separating out the random from new trends is really not easy to do. We tend to sort of assume the worst. I mean, if we see more earthquakes in New Zealand than have existed in the last few years than existed over the last 100 years, we don't say that we'll extrapolate the last couple of years and say that's going to be the case that's huge. explosion of quakes. But we also don't take the 100-year figure anymore. We have written, in the last few months, we have written far more business in Asia, and by that I mean New Zealand, Australia, Japan, and Thailand, we've written quite a bit more, a lot more business than we wrote a year ago or two years ago or three years ago, because they've had some huge losses. And they have found that the rates that they had been using were really inadequate. And they are looking for large amounts of capacity in some cases. And we are there to do that if we think the rate's right. But nobody knows for sure what the right rate is. I mean, we can tell you how many 6.0 or greater quakes have happened in California in the last 100 years and how many category three hurricanes have hit, you know, both sides of Florida, whatever. There's all kinds of data available on that. But the question is, how much does it tell you about the next 50 years? And so we, if we think we're getting a rate that if a fairly negative hypothesis would indicate, then we move ahead. And we've done that in the Pacific. I don't know whether you know it, but if you, last year, the I forget whether they had two or three quakes in Christchurch in New Zealand. But the, I believe it, the second one caused like $12 billion of insured damage. And if you think of that in relationship of a country of four or five million, and you compare that to the kind of cats we've had in the United States, that's 10 Katrina's. There have been some really severe. And Thailand was the same way with the floods. It was, the losses were just huge in respect to the entire premium volume in the country.”

Morning Session - 2012 Meeting

“So when that happens, everybody reevaluates the situation, and we are perfectly willing to take on very big limits if we think we're getting the right price. We have propositions out for as much as $10 billion of coverage. You know, now we don't want that $10 billion to correlate with that. anything else and we want to be sure we get the right price, but, and we may write some, you know, at some point. It's certainly the market for cat business in some parts of the world is significantly better from our standpoint than it was a year or two ago. But that's not true every place.”

Morning Session - 2011 Meeting

“to that in the first quarter. What was very different in the first quarter was that was that we had probably the second worst quarter for the insurance industry in terms of catastrophes around the globe. Normally, the third quarter of the year is the worst period because that's when hurricanes tend to hit the U.S. with most of them, well, about 50% of them occurring in September and then sort of forming a normal curve on either side of September. So the third quarter usually is the record quarter. And the third quarter was the record quarter back at the time of Katrina. But in the first quarter of this year, we had some major catastrophes in the Pacific Asian areas. And that hit the reinsurance industry particularly hard. No one knows at this point. I mean, it's a wild guess, but probably those catastrophes cost the reinsurance industry on the order of $50 billion. And we usually participate to the extent of three to five percent. First of all, I'll give you our overall earnings of the way we normally present them. And if we'll put the first slide up, you can see that our insurance underwriting is suffered an after-tax loss of $821 million. Now, when I wrote the annual report, I postulated normal earning power of Berkshire at about $17 billion pre-tax and about $12 billion after-tax, assuming break-even on insurance underwriting. Our insurance underwriting has done better than break-even. In fact, it's made quite a bit of money for eight consecutive years. But I would say with the start of these catastrophes in the first quarter, or the catastrophe experience we had in the first quarter, I would say that it's unlikely that we would have an underwriting profit for 2011. If it was remarkably catastrophe-free from this point forward, including hurricanes in the United States, it's conceivable we would break even or make a tiny profit. But that's an improbable assumption. So I think for the first time in nine years, we will likely have an insurance underwriting loss this year. I think our record may very well be quite a bit better than certainly most other reinsurers. And it does not change my expectation that over time our insurance underwriting should at least break even. And if you have followed what I've written in the annual reports, if insurance breaks even, we get the free use of float. And that's been enormously valuable in the past and I would expect it to be in the future.”

Morning Session - 2011 Meeting

“Swiss Re, where we get 20 percent of their business. That contract is in the fourth of its five years. They have indicated that they will not be interested in renewing it. I just wish they told us that a few months ago. But we've enjoyed the relationship with Swiss Re, it's just that we enjoy it some quarters more than others. And our estimate, we've added a little something into their estimate because on balance, we feel that most catastrophe losses develop upward. It's sort of the nature of the business. But that, incidentally, the The tornadoes in April, just at Geico, we expect, and all we're talking about is automobiles here, cars, because we don't insure the homeowners. We act as agent in placing insurance for people, but we do not take the insurance risk. We estimate the 25,000 cars will get automobile claims. That's a lot of automobiles when you think about it. You know, our market share is about 9%, although it varies by state. But it's been an extraordinary tornado season, as you know. That does not hit, I don't, I do not believe that that hits the reinsurance business particularly hard, because there are multiple, multiple events, but no one event is anything like, say, the New Zealand earthquake. The New Zealand earthquake estimated at 12, $12 billion of insured damage.”

Morning Session - 2010 Meeting

“I'm not sure got all of that, but the, we run significant risks from earthquakes. We had in the Chilean quake, I don't know how much would have been in the first quarter. When you read our 10Q, there'll be a number in there. But we insure 20% of Swiss re, we will take 20% of their loss from that. that. We have various other exposures and something like that. We included our best estimate in those figures I put up earlier. We are peak risks now in terms of earthquakes or hurricanes, which are the two biggest natural catastrophes in terms of frequency and severity, are probably down quite considerably from a few years ago, not Not because of our, because of any diminished appetite for risk, but we just haven't felt that the, the rates were that attractive in those areas. But if we thought the rates were attractive, we're perfectly willing to take on a group of risks where if something very close to worst case happened, you know, we would lose $5 billion or something like that. We lost $3 billion plus in Katrina. We lost well over $2 billion, I think quite a bit more than that, actually on 9-11. There will be things come along like that. Nothing that ever remotely comes close to making us uncomfortable, though, in terms of the level. I don't know whether I got his full question there or not, Charlie, but new.”

Afternoon Session - 2009 Meeting

“to them to call it and disadventageous to us. But if it does get called, we will get a hundred percent. 120% of par plus 12% a year for it. We are senior, actually, to the Swiss re equity of roughly 20 billion Swiss francs. So I would not regard it as a junior security. Swiss re's problems of the last year or so have not come about in any way through their insurance underwriting. Their insurance underwriting has been fine over the years. And we feel fine about having a 20% quota share in that and we feel fine about our investment. So I would regard, they develop a large amount, as many reinsurance companies do, they develop a large amount of float per dollar, a premium volume. So we would expect that this 20% quota share that we've had for a year will develop a very significant amount of float relative to the three billion or so of premiums that it represents. And I think it will turn out to be attractive float. It will be attractive for us and it will even be a little more attractive for Swiss free because in effect they get, the commission we pay them gives them a little override on that. I think, like I say, that the most likely thing is that our three billion dollar position gets called. We also have that $2 billion, or $2 billion Swiss franc. If I've said dollar, I meant Swiss franc. $2 billion, 2 billion Swiss franc, adverse loss cover. And what that says essentially is that if their reserves will say in the property casualty business at the end of 2008 were roughly 60 billion francs, but once they paid out, these are not precise figures, but once they paid out $58 billion, $2 billion less than their carried reserves, that we pay the next $5 billion. And like I say, it's very unlikely. we'd be paying out money before 15 years on that. And if their reserves are accurate, we will pay out only the $2 billion. So that was a transaction again that was made at a time when Swiss Re was under considerable pressure. They were under threat of downgrade in terms of ratings. And I met with the CEO, the then CEO of Swiss Re on a Sunday in Washington, D.C., along with his investment advisor. and we arranged a transaction, which their shareholders and their directors later approved. And I think we met their needs, and I think we've got an attractive transaction. There's nothing wrong, you know, we may prefer January, but there's nothing wrong with Swiss Re's underwriting.”

Morning Session - 2005 Meeting

“Yeah, well, that's a very good question because we are doing things. things in different parts of our insurance operation where there is correlation. And there's not only correlation among the insurance risks. I mean, just, you know, take a major, really major earthquake in California in the wrong place. There have been about 25, 6.0s, or larger in the last 100 years, but most of them don't occur where a lot of people are. But if you get, if you get the wrong one and the wrong place. It would not only hit national indemnity in General Rhee, as you mentioned,”

Morning Session - 2005 Meeting

“to be prepared absolutely for the very worst. And by and large, I would think hurricanes and quakes are the biggest thing now. But a few years ago, we did not have nuclear, chemical, and biological risks excluded in policies. And we had huge exposure subsequently gotten rid of. But we take on large risks. I'll give you a couple of examples, just the other day, and nobody else write this stuff, basically, because they would want to reinsure it with somebody else, and they're not set up to do it. But one large airport, one large international airport, came to us, and we wrote a policy for $500 million, excess of $2.5 billion from any action that was not caused by nuclear, chemical, or biological sources. So if that airport, is taken out in some way, but not by nuclear, chemical, or biological activities. The first two and a half billion, somebody else worries about, and we get the next half billion. There's a sublimits, so only a billion six can be counted for business interruption, so you would need, and that airport would have to be out for a couple of years to have a billion six of business interruption. So you need 900 million of physical damage on top of that. But somebody is willing to buy that policy. And there's a real risk. We insured the NCAA final four down in St. Louis against being canceled, not postponed, or having the games, those final four games, move to another city. But if it was canceled, and again, not through nuclear, chemical, or biological, we would have paid $75 million. Same thing at the Grammys. I mean, we take on risks. that very few people want to write. But in the end, we're willing to lose a lot of money in one day, but we're not willing to do anything that causes us any discomfort in terms of writing checks the following morning. Incidentally, while I'm on the nuclear, what we're talking about, the pleasant subjects, I recommended in the annual report that book, Nuclear Terrorism, and, uh, uh, uh, uh, uh, it's, you If you go to LastBestChance.org, you can obtain or will soon be able to obtain a tape free that the nuclear threat initiative has sponsored, which has a dramatization of something that is now fictional, but it's, it's not, it's not fanciful. It's something that could happen in which the nuclear threat initiative is, is, is working to minimize the chances of, and on that program, in addition to this dramatization of what could happen in that field, you have, you have Sam Nunn and Senator Lugar with Tom”

Morning Session - 2004 Meeting

“but I know you're directing your question more to the insurance carriers than actually what takes place with policyholders and doctors and lawyers and various other parties. But we find that for every dollar we spend on fraud prevention, or detection, I think we get back well over $10. In the comp field, workers comp, you know, Mike, you know, we have lost more money in workers' compensation insurance, I would guess, I may be wrong on this, but I would, I would guess than just about any line. Not necessarily as a percentage of premiums, but in terms of aggregate dollars, it's been a very tough period. So from the standpoint of a, we have one small workers' compensation direct operation in California, called Cyprus. And then Gen Re had written a lot of workers' comp reinsurance. And it's been a bit of a bloodbath. The rates have not covered the losses. And I would say that there's a fair amount of fraud that enters into the losses we've experienced, or at least the industry's experienced, particularly at the direct level. But in terms of your dispute with an insurance company, I don't know what company that would be, but I would say that many companies that have been in the workers' compensation business, particularly in California, in recent years, wish they hadn't been in the business. I mean, they have not been making a lot of money off of defrauding policyholders that I know about. But Charlie, do you have anything to say on that?”

2002 Annual Meeting Highlight Reel

“9-11 made everybody realize that they weren't charging for, and they either had to exclude those exposures or they had to charge for them. We have sold a fair amount, quite a large amount, of terrorism insurance that excludes what we call NCB, nuclear chemical and biological. as well as fire following nuclear. There, an act or two or three coordinated could cause damage that would destroy the insurance industry.”

Morning Session - 2002 Meeting

“because it doesn't, it won't aggregate. It aggregated at the Twin Towers in a way that World Trade Center in a way that just about was about as extreme as you could get for non-NCB type activities. I mean, that that was a huge amount of damage done without nuclear, chemical, or biological. But we can have tens of billions of dollars with NCB excluded throughout a greater New York area or something. But we can't have hundreds of billions of exposure that would be exposed, say, to, nuclear activities because they're an act or two or three coordinated could cause damage that would destroy the insurance industry. And if we had coverage on that, it would destroy us as well. So we write very little. We do write a little because we can take – we can take – we can lose a billion or two billion dollars, and if we got paid appropriately for taking the risk, you know, that's a business we're in. But we can't lose $50 or $100 billion. And so we take a little bit, we take a few risks that involve nuclear, chemical, or biological. But generally speaking, the terrorism insurance that we're writing, and we've written a fair amount of it, excludes those particular risks. You can say, you know, to take biological, how could that be something significant from an insurance standpoint? Many people don't realize that the World Trade Center loss was, by a huge margin, the largest workers' compensation loss in history. If you think of it as property damage. But in the end, close to 3,000 people died who were working at the time they died and therefore covered by workers' compensation. If the same thing had happened at Yankee Stadium while they were all watching a baseball game or some other place, they wouldn't have been covered by workers' compensation. So it was happenstance. some degree. But that became the largest workers' compensation loss in history by a huge margin. Now, if you were trying to cause huge damage in this country and you could figure out something that in the way of a biological agent, and there are people working on this, that could be injected into the ventilation systems or whatever of large plants, large office buildings, you could create workers' compensation losses that – that – that – you know, would just totally boggle your mind. And anybody that was working on such a thing, you have to expect they would, if they thought they had perfected it, would try to do something close to simultaneously in areas where there”

Morning Session - 2002 Meeting

“would be thousands and thousands of people working in. It could make the World Trade Center loss look like nothing. So we have to be basically vigilant in how much risk we let aggregate in something of that sort. People have always been vigilant about how many houses they'll insure along a shoreline or – in terms of physical risk. They don't want too many – they don't want too many homes or factories on the San Andreas fall or something of the sort because they recognize that as having aggregation possibilities. But now you have to think about things that man may plan in the way of catastrophes that will have aggregation possibilities. And that is something that's pretty much been introduced into the insurance world's thinking since September 11th. And I can tell you, you know, we think a lot about it. It's – I mean, the social consequences are far worse than insurance, but we have to think about how we pay our claims. Because if we ever do anything really foolish and in danger, take an aggregation that would cause us to lose the net worth of Berkshire, we would not only not be able to pay the claims of the people in that disaster, but there are other people that suffered injuries 15 years ago, paraplegics and all that that we're making payments to for the rest of their lifetime. And we wouldn't be able to make those payments, and we're not going to run our business that way. Charlie?”

Afternoon Session - 2001 Meeting

“preferred business has fallen by a point or so. But that's the big difference, and now, unfortunately, you know, our new business is not as strong, so you'll actually see, and but our preferred business is running stronger than our standard and non-standard. So you were seeing the mix go back in the other direction right now. I mean, currently that's going on. Through right to date this year, our preferred business is up. in aggregate policyholders and our standard and non-standard is down. So what you've deduced from those figures reflects changes in mix and age of business far more than it does retention ratio, although there was a minor change in the retention ratio. And that will be true, and maybe I should explain that better in the annual reports in the future. I touched on it once a year ago, but we can make that clearer in in future reports. What you said about the American Express people, I echo, I mean, they have just done a fabulous job with people. We sort of turned the problem over to them of how people get here and where they stay and all of that, and we've had wonderful help from the local American Express office. And frankly, they've been so good we don't even think about it. We just refer people on to American Express, and I congratulate them for the job they've done. Thank you. Area 7, please.”

Afternoon Session - 2001 Meeting

“Yeah, General Rhee was a, it is a, and General Rhee and Cologne are a very different operation than the historical reinsurance business of National Indemnity. National Indemnity had nothing like their distribution system and they have a, they have a knowledge base for a whole different form of reinsurance than we could ever accumulate at National Indemnity. General Rhee, did not, nor Cologne, did not retain as much risk as we're quite willing to retain because their financial profile was different before they joined Berkshire. So it's an opportunity for us for two reasons to make more money in that respect than General Rie might have made on its own.”

Morning Session - 2001 Meeting

“And included in that 6% cost was about a quarter of it, came from these transactions that distorted the current year figure. And therefore, our cost of float, if we hadn't willingly engaged in those transactions, would have been about 4.5%. I should mention. to you that I expect that our cost to float, I said in the annual report, that absent a mega catastrophe, and I might define a mega catastrophe as insured losses, we'll say, of 20 billion or more or something on that order, absent a mega catastrophe, we expect that our cost of float to come down this year, and I said perhaps substantially. In the first quarter, our cost of float will probably run just a touch under 3 percent. and on an annualized basis. And I think that, I think the trend is in that direction absent a mega catastrophe. I would expect the cost of float actually to come down substantially this year. But if we were to take on some of these gain, pain today, gain tomorrow transactions, and we don't have any in the works at the moment, but if we were to take those on, then it would be reflected in our cost to float, and we would lay out the impact of that sort of transaction. Charlie?”

Afternoon Session - 2001 Meeting

“but it does mean if you're insuring 100,000-70-year-olds, you better get this sort of price. We have these predictors, too, and past driving. driving history is an important predictor. But you've got this long history with USAA, and Dave, probably for very good reason, on that total history, keep you in the preferred class, and we, based on criteria that are developed from looking at 5 million policyholders, we can't make the determination. We can't come out and actually observe you driving or anything of the sort. We have to look at the information that comes to us, which if it says speaking, tickets or accident, it does result in various scores being applied. So I really can't offer you a better deal. I'd like to. I have a feeling you'd be a good client. If USA ever gets mad at you, come over and see us.”

Morning Session - 2001 Meeting

“they had written, but the reinsurance companies are pretty careful about writing unlimited policies. We write huge limits. We're the biggest, you know, if somebody wants to write a huge limit or an unusual limit, they should call us because there's no one else in the world that will act as big or as promptly as we will. But we don't write things that are unlimited. Now, the interesting thing is that the biggest exposure. in our view are the people who write a lot of primary business and don't have the catastrophe cover they need. I mean, if you write 10% of all the business and homeowners or 15% on Long Island or in Florida, I mean, you were writing a catastrophe cover that would blow your mind. If you're Freddie Mac or Fannie Mae and you're guaranteeing mortgages, you know, for millions of people in areas like that, and they don't have insurance, earthquake in California or proper insurance in Florida, they'd be less likely to have earthquakes someplace. You are taking on enormous risks. I mean, huge risk, far beyond what we would ever take on. They just, but you don't get paid for them, unfortunately. I mean, just take the New Madrid section of Missouri down in the corner. That was the area of three of the greatest quakes. They're sort of related in time. And certainly in the recorded history, they were the three greatest quakes in the United States. You know, how much homeowner's business, how much commercial property business do somebody have in that huge territory, which, you know, supposedly caused church bells to ring in Boston when it happened back in whenever it was 1807 or 9 or something like that. So there are all kinds of risks that can aggregate in huge ways that companies are not thinking about at all. I mean, I don't know whether Freddie Mac or Fannie Mae, for example, is demanding that all of the homes they insure in the 300 miles radius of New Madrid have earthquake insurance. But, you know, that sort of thing never comes to mind until the unthinkable happens. But in insurance, the unthinkable, always happens. State Farm, as a competitor, is a mutual company. a mutual company and it has a huge amount of net worth. You referred to them as a high cost operator or a higher cost, but they're really a relatively low cost operator. But they're not anywhere near as low cost as GEICO, but they're a low cost operator compared to many people in the insurance business. And it's certainly true that they do not have the demands for profitability, partly because they've done such a great job in the past and build up so much surplus. I have nothing but basically good things to say about what State Farm has done over”

Afternoon Session - 2000 Meeting

“and B, its ability to pay what it really owes. I think we have a huge edge in reputation and actuality, with reference to both those two factors. Yeah, we have a reputational advantage, and I think that in actuality it's even stronger than the reputational advantage. I mean, I can't. I can't think of a case where there's been any problem with having Berkshire or General Rhee write a check very promptly for anything at old. I mean, we have never been subject to people suing us and getting money later on or anything like that after fighting us out in courts. It's just not the nature of – it's not the attitude we bring toward the reinsurance transaction. And we have a reputational advantage. But like I say, I don't think it's quite as wide as it should be in some cases even. And then we have a huge attitudinal advantage in that we have no need, none, to write more business, or the same amount of business, or even something close to the amount of business next year that we wrote this year. There are no volume goals at Berkshire Hathaway at all, and that is not true at most insurance organizations. We report the results as we – as they come in and as we see them, which also, I think, gives us an advantage in being realistic about all aspects of our business. We have huge amounts of capital behind us so we can take large pieces of attractive business and keep them all for our own accounts. So we have a lot of advantages in the business and they will translate into something better than the rest of the world gets. I don't know how much better and I don't know what the rest of the world will get, but it's not insignificant the advantages we have in the business.”

Morning Session - 1999 Meeting

“Yeah, I would say that that reputation, certainly the reputation is a stronger, it's a stronger than ever. I mean, Berkshire's preeminent position as the reinsurer most certain to pay after any conceivable natural disaster. That reputation is stronger today than it's ever been, and General Rees' reputation right along with it. I would say the commercial advantage inherent in that reputation is very important. I can't tell you exactly how it rates compared to 1994, but I can tell you that it's important.”

Morning Session - 1999 Meeting

“It tends to be more important when we're reinsuring other very large entities, large entities, either primary insurers or large reinsurers than it is with a smaller company. The smaller company probably focuses on that less. But we are writing probably this week a very large cover for a very important reinsurer. I don't think they'd want to buy that from almost anyone else. I mean, a couple of people maybe, but they may, they could decide not to buy it from us because they might not feel they wanted to buy it. I think in this case they will. But I don't think they would have a of 10 people from whom they buy it, and they're too smart for that because it's a very high-level cover. And if that is called upon, there will be a number of people whose checks will not clear, and Berkshire's check undoubtedly will clear. So it is a big, the reputation has never been better. The commercial advantage is significant, how much it translates into, you know, that can vary from year to year. But I think it's a permanent advantage that Berkshire will have. I mean, I think five years from now and 10 years from now, and particularly after there has been a huge super cat, it will be a great asset to Berkshire to be thought of as, essentially as I've described it as Fort Knox. And we will pay under any circumstances. And there aren't many people in the insurance or reinsurance business that can truly that. And when the very big cover comes along, we should have very few competitors. Charlie?”

Morning Session - 1998 Meeting

“You've got it. I just want to put an asterisk on one thing. We say insurance will be our most important business. We've not said the Supercat business will be our most important. Supercat has been a significant part of our business and may well over the years remain a significant part. But it is far less significant than Geico, and I'll mention a word or two about that. But the Supercat business, you can price wrong as I illustrate. wrong as I illustrated in my report. You can be pricing it at half what it should be priced at. I used an illustration in the report of how you could misprice it a policy that you should be getting, say, a million and a half for, namely a $50 million policy on writing on something that had one chance in 36 of happening. So you should get almost a million and a half for it. I said if you priced it at a million a year, you would think you were making money after 10 years, 70-odd percent of the time. percent of the time. The interesting thing about that is if you priced it for a dollar a year, you would have thought you made money, 70-odd percent of the time, because it, it, when you were selling insurance against very infrequent events, you can totally misprice them but not know about it for a long time. Supercat bonds open up that field wide open. I mean, you've always had the problem of dumb competitors, but you have a much more chance of having dumb competitors when you have a whole bunch of people who, in, in the case of hedge funds who have bought some of these, where the manager gets 20 percent of the profits in the year when there are profits, and there is no hurricane, and when there happens to be a hurricane or an earthquake, he doesn't take the loss as limited partners do. So it's very likely to be a competitive factor that brings our volume down a lot. It won't change our prices. You know, the thing to remember is the earthquake does not know the premium that you receive. I mean, the earthquake happens regardless. regardless. So it doesn't say, you know, you don't have somebody out there on the San San Andreas Faults that says, well, he only charged a 1% premium, so we're only going to do this once”

Morning Session - 1998 Meeting

“every 100 years. It doesn't work that way. So we will probably do a whole lot less volume in the next few years in the Supercat business. We have these two policies that run for a couple of more years. But in terms of new business, we will do a whole lot less. But GEICO is by far the most important part of our insurance business, though. GEICO in the 12 months ended April 30th, had a 16.9 percent increase in policies enforced. Year end, I told you it was 16.0. A year ago, I told you it was 10. A year before that, I think it was 6 in a fraction. So its growth is accelerating, and it should be in a whole lot more homes around the country than it is now, you know, by a big. factor, and it will be, in my view. So that will be the big part of our insurance business. But we may be in the insurance business in some other ways, too, as time goes along. It's a business that if you exercise discipline, you should find some ways to make money, but it won't always be the same way. Charlie?”

Afternoon Session - 1997 Meeting

“institutes, how much they would lose under certain kinds of circumstances. And they couldn't have been further off with an Andrew or with the North Richard earthquake. Fortunately, we don't rely on those. I don't know what exactly we do rely on, but we don't rely on. on those. And the Hurricane Andrew was, you know, that was just, that's part of business with Berkshire. And we will have another one. And we'll have another one after that. So every three or five or seven years or who knows what, we will lose significant money in the supercat business. And we expect that over 20 or 25 years, we will make more money than we lose. We bring some real advantages to that business, as I wrote about it. in the report and it makes sense for us to be in it. It only makes sense for us to be in it when the premium prices are right. But when they are, when they are appropriate, we will, we're more than willing to step up and take on a fair amount of risk. As I wrote in the report on the California Earthquake Authority, you know, we could tomorrow face a demand for roughly a billion dollars. And we are prepared to write a check that day to take care of that. And we will write it if it happens. And there aren't very many people in the world that an insured can count on to do that. The interesting thing is that the worst exposure still for supercats are not born by us, but they're born implicitly by some very big direct riding companies that have lots of risk on Long Island or along the New Madrid fall or other places. And they have got, well, millions of policies and maybe hundreds of thousands of exposed policies. And they don't think of themselves as being in the supercat business. Or they really do, but they don't think, you know, day by day about it. And they are very exposed. Our exposures are limited to a given dollar amount. That dollar amount may be large, but at least we know what it is. And we take risk that we're willing to take risk when we think we're appropriately paid. There's a mentality to bring to the Supercat business that's somewhat akin to what you bring to the investment business. So we think we're well equipped for it. Charlie?”

Afternoon Session - 1997 Meeting

“I mean, it is, we'll get a large supercat premium today. It's invested. Now, if we have a claim tomorrow, then we disinvest, you know, and in a substantial way. If you take something like GEICO, the cash flow is always going to be positive, probably, on that. You know, we won't have another Hurricane Andrew because we backed out of the homeowner's business to quite an extent. So month by month, the money comes in at a GEICO, and the faster it grows, the more the money that comes in. We have so much capital that we can basically put that money into whatever makes the most sense for Berkshire. So we have none of the, either the mental or psychological constraints or regulatory constraints that the, that many insurance companies operate under. Many of them think they sort of should have this portion and this and this portion and that and so on. Investments usually play second fiddle to the insurance business at most companies. that are in the insurance business. We look at them as being of equal importance, and we run them as two distinct businesses. We do whatever makes the most sense on the investment side, whatever makes the most sense on the insurance side. We never do anything on the investment side that will impinge on our business on the insurance side. But you really should look at each one of our businesses separately. Geico has entirely different characteristics than the Supercat business. They both call themselves insurance. They both develop float. But in economic terms and in terms of competitive strengths and that sort of thing. They're two very different businesses. And our smaller businesses are different businesses. Some of those may grow reasonably well. We'll keep working on it. Charlie?”

No layoffs because of "a drop in volume"

“But there's been capital come in. And that is negative for our business. I mean, because any capital that's brought in basically will get employed. We are willing at Berkshire, and we do it. We are willing to sit on the sidelines in... in the reinsurance business. We'll offer quotes, but somebody that will cut those prices substantially if they've got a lot of capital and want to keep busy. And if you've got a lot of capital in this business or if you've attracted a lot of capital, you will do something. You might like to do something smart, but if need be, you'll do something dumb. You'll rationalize it so you think it's smart. But you will do it. You won't just sit there and write the shareholders at the end of the year and said, you know, we asked you for $300 million last year, and we'd like to report that it's all so. safely in a bank account at Citigorp. It just doesn't work that way. So they will go out and do something. People don't like to sit around all day and do nothing. And that means that prices will get cut under certain circumstances and that's happening now. We will, at Berkshire, we do have a rule about downsizing on that. And we have promised people at all of our insurance operations that we will never have layoffs because of a because of a drop in volume. We do not want the people who run our insurance business to feel they have to write X dollars in order to keep everybody there. We can afford some overhead around that's costing us a little money for lack of using it at full capacity, because it isn't that much relative to the size of our insurance operation. What we can't afford are people feeling some internal compulsory to keep writing business in order to keep their jobs. So we have a strong policy on that. And if the business falls away in terms of price, we won't be doing business, but we will be around to do business in a big way when the circumstance is reversed.”

Afternoon Session - 1996 Meeting

“The reinsurance business of Berkshire Hathaway is totally international. I mean, we deal with risks all over the world. We deal with companies all over the world. And that's the nature of the reinsurance business, generally, although there might be some that would be more specialized to this country. But we are quite well. We are quite willing to take on risks around the world, although they have to be risks with a large premium.”

Afternoon Session - 1996 Meeting

“You know, Warren can answer that question a lot better than I can. We don't, there wouldn't be any good market share figures in something like Supercat. We know that a couple years, and last year, I think, too. We had to be the biggest in terms of premium volume. We simply take on so much more than anyone else will. And we were getting the calls on the big risks, you know, 400 million here or something of this. We had a quote, we put out on a billion dollars on the New Madrid fault here a little while ago. Nobody else will be doing that. So we got market share by our willingness to do large volume by the fact that people knew we would pay subsequently. But we don't. We know we were the largest. We can't give any precise figures. We also know we're slipping in that now, but that makes no difference to us. We'd only be interested if we were slipping in profitable markets. And what was the second part of the question on that, Chairman?”

Afternoon Session - 1996 Meeting

“medical bills for many decades, sometimes 50 or 60 years. Those annuities are provided by our companies to other insurance companies and to these injured people, usually with the approval of the injured person's attorney, and when the advisors to the injured person think who is going to be around in 50 years to pay to make money to this person who's been incapacitated, they frequently, and in our view, logically, think of Berkshire. So we have become much better known in that over the last couple of years. It's not a big business and it won't be a big business, but it's a perfectly decent business, and it's one where we have a competitive advantage over time. We don't obtain the competitive advantage by price. We obtain the competitive advantage from the peace of mind that the injured party obtains from knowing that that that check will be in the mail 50 years from now. And that's the kind of business where we have some edge, and we'll find other things to do over time, but I can't, I can't, it is. like we're looking at some specific area and saying we're focusing on this. We're aware generally of what's going on in the insurance business and we're very ready to move when the time comes so that we can do something intelligent.”

Afternoon Session - 1995 Meeting

“Well, Lloyd's, which is not an insurance company, as you know, but a, well, originally was a place. It was a coffee house, but it's people think what, it's a place where a large number of syndicates”

Afternoon Session - 1995 Meeting

“operate and congregate in a given physical location. And it's had a history for larger, more exotic risks over time. Lloyd's has lost its relative position to a fairly significant degree in the last 10 or so years, partly, well, and significant part because of bad results, which had the other effects of causing capital to withdraw and people who back the syndicates to become unhappy. So Lloyds is still an important competitive factor in the reinsurance business and in certain specialized kinds of primary insurance. It's a very, you know, it's a very important factor, but it's not the factor it was 10 or 15 years ago. And I'm not sure how Berkshire's capital compares with the capital of all those syndicates of Lloyd's, but it certainly changed in its relative importance in the last five or 10 years. the ability of Lloyds to attract capital with the problems they had has been diminished, although they're working on that problem. But we regard Lloyds as a competitor, just like we would regard any one of a number of reinsurance companies as competitor. But we also do business with a number of syndicates at Lloyds, and we'll probably do a lot of business over the next 10 years with various syndicates. Charlie?”

Morning Session - 1995 Meeting

“They may take the first $5 million of loss. They may take the first $50 million of loss. It depends on their own capabilities. But then they come to us. And we are really uniquely situated to take care of problems that no one else. that the companies can't bear themselves and that they can't find anybody else to insure. But we really don't want to insure someone for a loss that they can afford themselves because if we're doing that, it may be because they're dumb, but it may be because they also have a loss expectancy that's higher than the premium we're charging, which is not what we're trying to do in business. I think that, I think, I think, probably probably as compared to 30 years ago, that risk managers at corporations are probably more intelligent about the way they buy their insurance than many years ago. I think it's become a, I think they're more sophisticated and they've thought it through better. But there is a lot of insurance. There's some, there's a fair amount of insurance bought that doesn't make sense and there's a fair amount of insurance that isn't bought that should be bought. There There are certain companies that are exposing themselves in this country to losses which would wipe them out, and they prefer not to buy reinsurance because it's, quote, expensive. But what they're really doing is betting on something that won't happen very often, happening not at all. And if you take a huge hurricane on Long Island, or you take a huge hurricane on Long Island or you take a major quake in California, there are a number of companies that have not positioned themselves to withstand those losses. And if you're a 63-year-old CEO and you figure I'm going to retire in a couple of years, you know, the odds are pretty good that it won't happen on your watch, but it will happen on somebody's watch. And we try to sell reinsurance to those people, and usually we do, but sometimes we don't.”

Morning Session - 1995 Meeting

“competitive position and its rates of return. Well, you're very right. There is an ease of entry into the catastrophe business, and, you know, it's sort of attractive for, it's particularly attractive for promoters because if you start an insurance company to write earthquake insurance in California, and you raise a few hundred million dollars, and you'll either have essentially no losses, or if you write enough of it, you'll go broke. And most years, you'll have no losses. So if your intention is to sell your start. stock publicly in a year or two. The odds are very good that you will have a beautiful record for a couple of years and you can sell and, you know, maybe one time out of ten you'll go broke and nine times out of ten you'll sell to somebody else who eventually will go broke. And it, there is, there's really the ease of entry. The only thing that may restrict that is that if the buyer is sophisticated enough to, to, question the viability of that company under really extreme conditions, which is the only conditions that count when you're buying catastrophe insurance. That may restrict. But the second thing is, of course, none of the people that have started up can offer anywhere near the amount of coverage that Berkshire has. Berkshire is really one of a kind in terms of its capital strength in the business. I don't think anybody in Bermuda that I can remember, I don't think Ajit's out there, but I don't think anybody has a billion of net worth, and, you know, we have, at present, we probably have close to 13 billion of net worth and considerably more of value. So we can sustain shocks, and we will sustain shocks, I should add, that others can't, and we try to get paid appropriately for that. But when we say we can take a billion dollar loss, we can take a billion dollar loss, and we will have a billion dollar loss at some point. And anyone buying it knows we can take it or something greater. And they should know that very few other, very few of our competitors can. So there's competition. We do an unusual proportion of our business with the eight or ten largest insurance reinsurance companies and insurance companies in the world. So we really have a staff. established with the people who understand the real risks of the business, they come to Berkshire and a lot more often than they stop in Bermuda because they know that we'll pay and they've been around long enough to know that in the end that's what really counts”

Morning Session - 1994 Meeting

“The L.A. Earthquake, which is originally, I believe the first estimate of insured damage was $1.5, which struck us as kind of ludicrous, but has now escalated. The last official estimate, the one we used that's a trigger in our policies, I think, is either $4.5 billion or $4.8 billion, but it's going to be higher than that. Our losses are fairly minor. If it gets to $8 billion of insured damage, that would trigger another policy or two. But I would say that the L.A. Quake, which did considerably more damage, I think, than people would have anticipated from the 6.7 for various reasons having to do with how? how quakes operate. That quake is not going to turn out to be of any reels.”

Morning Session - 1994 Meeting

“It's not the kind of super cat that a $15 or $20 billion hurricane, which hit Florida or Long Island or New England would be. That's the kind of, we could lose, or we could pay out $6 or $700 million in sort of a worst case. case, super cat. Now, our total premiums this year might be, say, $250 million or something in that area. So one super cat in the wrong place would be, would produce, and there could be more than one, could produce, we'll say, a $400 million or thereabouts underwriting loss from that business. The L.A. Quake is peanuts on that scale, but it wouldn't have taken a whole lot more in terms of numbers on the Richter scale if it happened to have. an epicenter where it did and be of the type that it was relatively shallow, that we could have had that sort of thing happen. I think that the insurance industry has vastly underestimated, or maybe not now, but up until a few years ago, the full potential of what a super cat could do. But Hurricane Andrew and the L.A. Quake may have been something of a wake-up call. They were far from a worst-case situation. A really big type 5 hurricane on Long Island would end up leaving a lot of very major insurance companies in significant trouble. We define our losses. Essentially, $700 million sounds like a lot of money, it is a lot of money, but there are limits on our policies. That is not true of people that are just writing the basic homeowners or business. those losses could go off the chart. There were certain companies in the L.A. Quake that thought they had a, what they call, a probable maximum loss for California quakes. And the L.A. quake, which is far from the worst case you can imagine, turned out to far exceed those probable maximum losses. So I think the industry has had and may still have its head in the sand a little bit in terms of what can happen, either in terms of a quake in California or more probably in terms of a hurricane along the East Coast. So far this year, we're in reasonable shape, but that doesn't mean much because by far the larger exposure is in hurricanes and essentially 50 percent of the hurricanes hit in September and about, I think it's about 15 percent would be in August, close to 15 percent in October. So you have 80 percent roughly in those three months, and there's a little tail on. those sides. But that's when you find out whether you've had a good or bad year in the Supercat business, basically. It's a business we like at the right rates, because there”

Morning Session - 1994 Meeting

“he had riots in dozens of cities. Is that one event or is that a multiple number of events? I mean, they started by different people. But maybe arising from a common cause. Some of those things aren't. actually very well defined even after hundreds of years of insurance law and custom experience of that. But I would say that rioting is very unlikely to get to a level that triggers our policy. The big risks we face are quake and hurricanes. And hurricanes are more significant risk than quake. They call them typhoons in the Pacific Ocean. Floods, tremendous damage from floods last year. But basically there's not a lot of private flood insurance bought, so the insured losses do not get large.”

Morning Session - 1994 Meeting

“But that measure, that is no measure of risk does. The risk in terms of our supercat business is not that we lose money in any given year. We know we're going to lose money in some given day. That is for certain. And we're extremely likely to lose money in a given year. Our time horizon of writing that business would be at least a decade. And we think the probability of losing money over a decade is low. So we feel that in terms of our horizon of investment, that that is not a risky business. And it's a whole lot less risky than writing something that's much more predictable. Interesting thing is that using conventional measures of risk, something whose return varies from year to year between plus 20% and plus 80% is riskier as defined in something whose return is 5% a year every year. We just think the financial world has gone haywire in terms of measures of risk. We look at what we do, we are perfectly willing to lose money on a given transaction arbitrage being an example. Any given insurance policy being another example. We are perfectly willing to lose money on any given transaction. We are not willing to enter into transactions in which we think the probability of doing a number of mutually independent events, but of a similar type, has an expectancy of loss. And we hope that we are entering into our transactions where our calculations of those probabilities have validity. And to do so, we try to narrowly. narrow it down. There are a whole bunch of things we just won't do because we don't think we can we can write the equation on them. But we basically, Charlie and I, by nature, are pretty risk-averse, but we are very willing to enter into transactions. If we knew it was an honest coin and someone wanted to give us seven to five or something of the sort on one flip, how much of Berkshire's network would we put on that flip? Well, we would, it would sound like a big number to you. it would not be a huge percentage of the net worth, but it would be a significant number. We will do things with probabilities favor us. Charlie?”