RT Journal Article
SR Electronic
T1 Berkshire Hathaway, General Re, and Franchise Risk
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 83
OP 95
DO 10.3905/jai.2005.523084
VO 8
IS 1
A1 Joseph Calandro, Jr
A1 Robert Flynn
YR 2005
UL https://pm-research.com/content/8/1/83.abstract
AB This article illustrates how the modern value-investing framework can be employed to more effectively value insurance companies. By utilizing the case study of Berkshire Hathaway's 1998 purchase of General Reinsurance Corporation, this article demonstrates how to more effectively construct a valuation, and specifically how to better consider the unique and intangible aspects of insurance company valuation. At approximately $22 billion General Re was Berkshire Hathaway's largest acquisition, and given the losses sustained post-buyout, it was also the firm's most troubled. Berkshire Hathaway's experience here is no mark against the unparalleled expertise of its chairman, investor Warren Buffett, but rather illustrates the unpredictability and volatility of insurance company valuation.