Monday, May 21, 2018

"Buffett & Munger discuss reinsurance challenges Berkshire Hathaway faces"

BRK's annual meeting was held May 5, video below if interested.
From Artemis, May 9:
This weekend saw the quarterly results and annual shareholders meeting of Berkshire Hathaway and one of the most interesting exchanges during the question & answer session was Warren Buffett and Charlie Munger discussing over just how tough reinsurance can be these days.

Berkshire Hathaway experienced positive underwriting and investment results across its insurance and reinsurance business in Q1 2018, as reported by our sister site Reinsurance News.
But with market conditions in reinsurance remaining challenging, the analysts lined up to quiz Buffett and his deputy Munger were keen to explore just how tough Berkshire Hathaway is finding the state of business these days.

The responses highlight the close relationship developed over almost six decades of friendship that the pair enjoy, having originally met over dinner back in 1959.

Responding to an analyst question about the state of the market and the challenges Berkshire Hathaway faces, Buffett implied that while there are challenges, he expects to continue to achieve growth no matter how difficult the market gets.

“The reinsurance business, I don’t think I’d say that it’s tougher than it was ten years ago,” Buffett explained. “But if you go back to forty or fifty years ago, it was not brutally competitive.”
Discussing reinsurance subsidiary Gen Re, Buffett hailed the work Ajit Jain has done since taking responsibility for the firm, saying it has, “changed somewhat and it probably is more growth oriented than it was before.”

However he insisted that growth is not at any cost, saying that anything Jain has a hand in the development of has underwriting discipline attached.

But he noted that the portfolio at Gen Re has been growing, like so many other major reinsurers, explaining that, “There has been some pick-up and I think you actually will see the property casualty reinsurance business grow a fair amount.”
This despite the much discussed challenges faced by reinsurers.

On the life reinsurance side Gen Re has been growing steadily since Berkshire Hathaway took it over and Buffett noted that overall, “I think we’ll have a somewhat larger operation at Gen Re.”
On the appetite of Berkshire Hathaway to remain in the reinsurance business, despite the challenges faced, Buffett said, “We will be in the reinsurance business five years from now, ten years from now and fifty years from now, and we will have some unusual advantages that stem both from our capital position, our attitude towards the business and the talent that we have.”

Clearly Berkshire Hathaway benefits from efficiencies of scale across the conglomerate, as well as its active investment or total-return type model, which perhaps explains why the company can continue to expand into a still-challenging reinsurance environment....MORE 
2018 Berkshire Hathaway Annual Shareholders Meeting
Yahoo Finance Video (7:29:36)