Future or revolving liabilities are less “costly” to Berkshire – “the true value of this liability is dramatically less than the accounting liability”. Thus, the book value is more valuable than it seems.
However, this is not the norm for the insurance industry –
There is very little “Berkshire-quality” float existing in the insurance world. In 37 of the 45 years ending in 2011, the industry’s premiums have been inadequate to cover claims plus expenses.
Hurricane Sandy cost GEICO 3 times more than Katrina. Isn’t climate change the biggest long-term threat to insurance companies? And we may influence nature, but it’s a threat we can’t directly control now.
“As long as a newspaper was the only one in its community, its profits were certain to be extraordinary; whether it was managed well or poorly made little difference.”