Post #1010 by DTB on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)

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Q. Where do you include the annual benefit of underwriting profits? I assume $1.39 BB which I believe is the average over the past 21 years.

A. Buffett didn't include it in the 5-groves. Just another area where the 5-groves IV is conservative. I expect that over time underwriting profits will be nicely positive.

I think this is right, but it's a big omission/ conservative factor.

Bloomstram estimates that total Berkshire earnings in 2022 were $53.9b, after making multiple adjustments, including smoothed underwriting results and smoothed capital gains from the stock portfolio, with underwriting earnings $3.2b of that. That represents a combined ratio of 95%, i.e. 5% of earned premiums falling to pre-tax earnings. As in much of the Bloomstramian analysis, that may be a tad optimistic: here are the pre-tax earnings and percentages from the last 15 years:

Underwriting
           2022   2021   2020  2019  2018  2017  2016  2015  2014  2013  2012  2011  2010  2009  2008
Revenues  74645  69478  63401 61078 57418 60597 45881 41294 41253 36684 34545 32075 30749 27884 25525
Earnings    (98)   936    838   417  2010 (3239) 2131  1837  2668  3089  1625   248  2013  1460  2690
%         -0.1%	  1.3%	 1.3%  0.7%  3.5% -5.3%	 4.6%  4.4%  6.5%  8.4%	 4.7%  0.8%  6.5%  5.2%	10.5%  average: 3.5%

It is interesting that the numbers are not great for the last 6 years; maybe trouble with GEICO? But 0% does not seem like the best neutral assumption!

Regards, DTB

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