Buffett's insurance industry has been the flagship investment company Berkshire Hathaway's core business, but in this year's financial crisis made the sharp deterioration of business in the past passed their prime, it seems, at the beginning of insurance Buffett Business concerns have been translated into reality, in addition to his subordinate's business contraction, the more insurance funds into the safety of the first.
"Not a good day. Insurance industry profit margins, in 2008 there will certainly be a significant drop." Buffett wrote in February this year, investors in the letter so that he estimated that even if the United States this year from major natural disasters, The insurance industry profits will be down about 4 percentage points. He said that if there is hurricane or earthquake, and other serious natural disasters, the insurance industry will face a more difficult situation. "Please for the next few years in the insurance industry to prepare low-income."
Insurance is Buffett has been investing heavily in the first. Over the years, Berkshire in about half of the proceeds from the insurance industry. "Feast has ended," as a result of the crisis caused by sub-loan-to-market downturn, the U.S. insurance market last year, major price war. This year Berkshire's insurance revenue brought about a significant impact.
In the first quarter of the company's premium and investment income of 4,725,000,000 euros, compared to the same period last year dropped by about 50%; insurance operating income was 1.17 billion euros in the same period last year, the figure was 388,000,000 euros; and the company's second Quarterly Bulletin revealed that the company Quarter income from insurance business fell 43%. The auto insurance Geico, a subsidiary pre-tax profits fell 8.3 percent to 298,000,000 U.S. dollars; General Reinsurance subsidiary pre-tax profit from the same period last year was a significant decline in 230,000,000 U.S. dollars to 102,000,000 U.S. dollars. "Price war led to an acceptable sales price of reinsurance opportunities for getting smaller and smaller." Berkshire in the Quarterly Bulletin of the document said. In the third quarter of this year, Berkshire insurance investment income decreased by 12%, to 809,000,000 U.S. dollars, the profits of insurance business fell 83% to 81,000,000 U.S. dollars, of which by the hurricane, "Gustave" and "Ike "Impact of the loss of nearly 1,050,000,000 U.S. dollars.
In the face of the once-in financial crisis, Buffett's insurance company is expected performance dropped. However, financial institutions and events of default and bankruptcy repeated frequently, so that Buffett had to be more alert to these transactions. In addition to the announcement in March for not including MBIA, Ambac Financial Group and FGIC Corp, three bond insurance companies 800,000,000,000 U.S. dollars worth of municipal bonds to provide reinsurance, in September is the market withdrawal of deposit insurance business, Berkshire Its subsidiary, Kansas Bankers Surety (KBS) to inform the more than 30 of the approximately 1,500 state banks, will no longer provide a "bank bonds".
This year's financial crisis, serious deterioration, including the United States has led the insurance industry's financial system has suffered heavy losses, and the economic downturn in the third quarter from the signs of recession. The future of the United States will experience a fairly long period of time difficulties, have not gone through the Great Depression of the 1933 Buffett, the insurance industry's ability to lead the company through the crisis?
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