1 March 2013
Dear Mr. Buffett,
Four years ago, I contacted the IR department at AIG to ask for copies of all the 2008 statutory books for all the insurance subsidiaries. To my surprise, they sent them, 60 pounds worth, and I wrote a report explaining how almost all of the domestic life subsidiaries had to be bailed out because of a funky securities lending agreement that allowed AAA subprime RMBS to used as collateral in place of T-bills. The report was cited by SIGTARP in their review of the AIG bailout.
I am writing to you asking for copies of the 2012 statutory books for Berkshire Hathaway. My purposes are different than with AIG. You’ve done something unique with Berkshire Hathaway. No one else has created such a multifaceted conglomerate, much less one with well-run insurance companies at the core, providing funding.
I have the capability of understanding the documents and doing a good job with them. I am an actuary as well as a value investor, and have been a buy-side analyst in a hedge fund where I focused on the insurance industry. (Todd Combs and I interacted a little when I was a buy-side analyst. You chose well.)
My clients and I own “B” shares of Berkshire Hathaway, so I am a small part of the Berkshire family. If you are willing, please send me of the 2012 statutory books for Berkshire Hathaway.
David J. Merkel, CFA
Principal, Aleph Investments
Writer at the Aleph Blog
And the deservedly terse handwritten response:
David, Sorry we get a lot of requests & it would be burdensome for a small staff to respond to these.
Buffett is right, and I should have thought harder. Everything BRK does is disaggregated, even filing Statutory Statements. I am mentally stuck in the world of when I was an actuary engaged in financial reporting, where we would have a room where we would gather all the data to go to the states, rating agencies, etc. I had to do that many times.
But Berkshire acts like a bunch of unaffiliated companies, and files their data separately. To the best of my knowledge, that means I would have to ask 37 different entities for their Statutory Statements. Here they are:
|Company Name||State of Domicile||NAIC Number|
|CALIFORNIA INSURANCE COMPANY||CA||
|COMMERCIAL CASUALTY INSURANCE COMPANY||CA||
|CYPRESS INSURANCE COMPANY||CA||
|FINIAL REINSURANCE COMPANY||CT||
|GENERAL RE LIFE CORPORATION||CT||
|GENESIS INSURANCE COMPANY||CT||
|IDEALIFE INSURANCE COMPANY||CT||
|NATIONAL LIABILITY & FIRE INSURANCE COMPANY||CT||
|AMERICAN CENTENNIAL INSURANCE COMPANY||DE||
|GENERAL REINSURANCE CORPORATION||DE||
|GENERAL STAR NATIONAL INSURANCE COMPANY||DE||
|APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC.||IA||
|CONTINENTAL INDEMNITY COMPANY||IA||
|ILLINOIS INSURANCE COMPANY||IA||
|MEDICAL PROTECTIVE COMPANY (THE)||IN||
|GEICO CASUALTY COMPANY||MD||
|GEICO GENERAL INSURANCE COMPANY||MD||
|GEICO INDEMNITY COMPANY||MD||
|GOVERNMENT EMPLOYEES INSURANCE COMPANY||MD||
|SEAWORTHY INSURANCE COMPANY||MD||
|BERKSHIRE HATHAWAY HOMESTATE INSURANCE COMPANY||NE||
|BERKSHIRE HATHAWAY LIFE INSURANCE COMPANY OF NEBRASKA||NE||
|CENTRAL STATES INDEMNITY CO. OF OMAHA||NE||
|COLUMBIA INSURANCE COMPANY||NE||
|CSI LIFE INSURANCE COMPANY||NE||
|NATIONAL INDEMNITY COMPANY||NE||
|OAK RIVER INSURANCE COMPANY||NE||
|REDWOOD FIRE AND CASUALTY INSURANCE COMPANY||NE||
|STONEWALL INSURANCE COMPANY||NE||
|ATLANTA INTERNATIONAL INSURANCE COMPANY||NY||
|BERKSHIRE HATHAWAY ASSURANCE CORPORATION||NY||
|UNIONE ITALIANA REINSURANCE COMPANY OF AMERICA, INC.||NY||
|AMGUARD INSURANCE COMPANY||PA||
|EASTGUARD INSURANCE COMPANY||PA||
|NORGUARD INSURANCE COMPANY||PA||
|PHILADELPHIA REINSURANCE CORPORATION||PA||
|UNITED STATES LIABILITY INSURANCE COMPANY||PA||
How do you get the data in this case?
1) I suppose I could write each one and ask, but there is no guarantee that many would listen or act.
2) I could buy it from the NAIC, but it would run to around $700, and I am not doing that for a mere blog post. Most insurers give you the statutory statements if you ask (in PDF form). I never pay for Stat statements; I believe that they should be available in electronic form for free, or a nominal fee.
Maybe someone would want to pay it in exchange for credit on the series of articles that would flow from it? Maybe SNL would pay for an article from me? Or Bloomberg? Or a competitor? Or the sell-side wanting a guest piece? Or…
3) I could ask my readers for ideas.
Why would anyone care about this?
1) Alice Schroeder wrote the first sell-side analysis of Berkshire Hathaway. In it she stated that the company had a waiver from the Risk-Based Capital rules from the states. If true, that is quite a regulatory advantage, and I would want to verify that. Current regulators might care.
2) Buffett is clever, and has the holding company and well-run insurers owning industrial, utility and service businesses. If this is done well, and it is quite an accomplishment, because the alphas of prudent underwriting and ownership of well-run businesses get added together on one capital base. Others might like to duplicate it. I know that I have gotten pitches from consultants touting such ideas.
Well, it was worth a try. Marc Hamburg did not return my phone calls, but I understand. BRK is different from other companies — even the insurance is done subsidiary by subsidiary. If any of you have ideas, I am all ears.
On the bright side, I do have a short note from the guy I have learned so much from. I may frame it…
Full disclosure: long BRK/B
By David Merkel, CFA of Aleph Blog