March 31, 2017
Warren Buffett, the “Sage of Omaha,” loves the insurance business, so much so he bought Geico. The appeal: what we call “the float.” That means that the money held to pay claims is free to be invested somewhere else so it’s an opportunity to earn twice. Like any business, it’s not all profit so when the winds blow and cars crash, it’s time to “pay the piper” and profits go down. Not all the money can be invested; some liquidity is involved to pay claims in a timely manner.
Now the word on Wall Street is that premiums are going up. Disasters such as Hurricane Katrina, Cali...