Berkshire Hathaway 1994 Annual Meeting Audience Question # 68

The insurance business’ intrinsic value exceeds its book value in terms of absolute dollars

Warren Buffett:

Zone 1?

Audience Member:

Lawrence Grawning, Mill Valley, California.

On page 13 of the annual report, in… talking about the insurance operation, you say that it possesses an intrinsic value that exceeds its book value by a “large amount… larger, in fact, than is the case at any other Berkshire business.”

To refine an earlier question that was asked, could you tell me whether you mean that it is larger in… by a percentage or in absolute dollars, that is…

Warren Buffett:

By absolute dollars. And…

Audience Member:

That’s what you’re referring to?

Warren Buffett:

Yeah, by absolute… it’s very hard to stick a percentage figure on the insurance business, because we have so much capital in there that… And then… and we have other businesses. I think that the… we’ve got businesses with a book value of in the tens of millions that are worth in the many hundreds of millions. So, you couldn’t apply that to the insurance company (Inaudible). So, it’s absolute dollars.

But in terms of absolute dollars, we think the excess of intrinsic value over carrying value… at least I do… is substantially greater for the insurance business than any other business we own.

Charlie, do you have any…

Charlie Munger:

No…

Warren Buffett:

…thoughts on that?

Charlie Munger:

…that’s exactly right.

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