Warren Buffett: Floating on $2.8 Billion

By Ken Silverstein

From Warren Buffett’s letter to the Shareholders of Berkshire Hathaway Inc, February 27, 2009:

We are fortunate that Berkshire’s two most important businesses—our insurance and utility groups—produce earnings that are not correlated to those of the general economy. Both businesses delivered outstanding results in 2008 and have excellent prospects.

As predicted in last year’s report, the exceptional underwriting profits that our insurance businesses realized in 2007 were not repeated in 2008. Nevertheless, the insurance group delivered an underwriting gain for the sixth consecutive year. This means that our $58.5 billion of insurance “float”—money that doesn’t belong to us but that we hold and invest for our own benefit—cost us less than zero. In fact, we were paid $2.8 billion to hold our float during 2008. Charlie and I find this enjoyable.

But it was a bad year overall: “Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A and Class B stock by 9.6%.”