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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Jacques Newey who wrote (2742)1/20/2001 2:56:23 PM
From: Moominoid  Read Replies (2) | Respond to of 4691
 
If the combined ratio is less than 1 then the float is like a loan with a negative interest rate and the excess premia are added to current profits. But there is nothing more to it than that. Very cheap, free, or negative cost long term loans with occasionally unpredictable high interest payments needed when insurance losses are high.

I've read those posts on Yahoo about float and in my opinion they are plain wrong. Float isn't earnings or anything like it. Nobody says that new deposits with banks are earnings. There is no difference except banks usually have to pay more for the money.

The second post is about right.

I have BRK/B :)

David



To: Jacques Newey who wrote (2742)1/20/2001 4:43:31 PM
From: Shane M  Read Replies (1) | Respond to of 4691
 
All float is not created equal.

Jacques, could you elaborate on this point? I've never really understood the assertion that floats created from prepayment of policyholder premium created a superior investment, because as you point out - all insurance companies tend to have them and are willing to run at operating losses if need be as long as the investment portion generates sufficient return to get a mid-teen ROE overall.

Thanks, Shane


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