The big question for me in terms of how to value Berkshire has been insurance and specifically insurance float. Historically I have like many others assumed zero or some normalized level of underwriting profits and have made no deduction for the float liability.

But if you look back historically this method has consistently undervalued the insurance franchise. The reason of course is that float has grown almost every year with no or few exceptions. Going back to, for example, 2013, hardly an eternity ago, float stood at 77bn. Since then the insurance franchise has amassed an additional ca 90 bn of this free money available for investments. This is 90 bn of cash flow going to the business over the past 10 years. This ability to grow float while maintaining underwriting profitability is a demonstration of the strength of the franchise or moat or whatever you want to call it and it would not be wrong to assign some value to it.

The assumptions that has to back this is of course is that the growth will not reverse, or that any reverse will not happen until far enough into the future.

Growth has slowed down considerably, but adding say 2% float growth capitalized at 10x to the valuation wouldn’t be completely crazy. On the other hand, 30 billion here or there I guess and in the interest of being conservative it makes equal sense to exclude it. But historically it has been a real source of value and if you play around with 5-10% growth numbers it is easy to see how it’s been one of the big reasons for SP500 beating returns.