Crash Summary and Analysis

Insurance was a huge part of Berkshire by the mid-1980's, in the form of a group of casualty and property companies under the umbrella of National Indemnity. To Buffett, insurance rates were simply mathematics. Using the odds of disasters and car crashes, one simply priced policies accordingly. Buffett's insurance business was really re-insurance, that is, selling big policies to smaller insurance companies, thereby assuming some of the risk the smaller companies had in insuring individuals, especially high-risk policy holders. There had been setbacks in the insurance industry in the 1970's and always there was competition that might discount their premiums. Premium "wars" were not uncommon, but Buffett's policy was always to "ride them out." However, realizing that he had not managed the business well, he hired Michael Goldberg, originally a New Yorker and one who worked and lived much like...