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Stocks B / Berkshire Hathaway

URL:  http://boards.fool.com/even-so-15-bn-pre-tax-i-think-is-a-closer-to-30310368.aspx

Subject:  Re: Two Column/Rationalwalk Date:  10/10/2012  8:04 AM
Author:  mungofitch Number:  194797 of 212567

Even so, $1.5 bn pre-tax I think is a closer to the truth than zero (Buffett's implicit number)....

For anybody interested in the cost of float trend

        Underwriting
Year pretax P/L Float Cost of float
1999 -1394 25.30 5.5% (gen re cleanup era)
2000 -1585 27.87 5.7% (gen re cleanup era)
2001 -4067 35.51 11.5% (gen re cleanup era and Sept 11 attacks)
2002 -510 41.22 1.2% ("no megacatastrophe...a downward adjustment is appropriate")
2003 1700 44.22 -3.8%
2004 1551 46.09 -3.4%
2005 53 49.29 -0.1% (katrina)
2006 3838 50.88 -7.5%
2007 3374 58.69 -5.7%
2008 2792 58.49 -4.8%
2009 1559 61.91 -2.5%
2010 2013 65.83 -3.1%
2011 248 70.57 -0.4% (tsunami, NZ earthquakes)

Conservative average cost of float 1999-2011 -0.57% (underwriting profit +0.57%)
Optimistic average cost of float 2003-2011 -3.48% (underwriting profit +3.48%)

A rather arbitrary geometric mean of those two figures is -1.41% which gives a nice
round billion a year in pretax underwriting profit based on the current amount of float.
That's what I pencil in when I do cyclical adjustments.

Jim
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