> profits made from the myriad of wholly owned businesses such as insurance, railroads and utilities
Genuinely curious where you would rather that capital be allocated?
Genuinely curious where you would rather that capital be allocated?
The counter arguments that I've seen (there may well be others) are either that it does see those opportunities, but not at this precise moment in time, so is keeping the cash for later. At the level of $156b, this seems a bit unlikely but hey maybe they have some great ideas in the pipeline.
The alternative is that they don't but aren't distributing it to shareholders, because of the tax implications of that distribution (and in general many corporations seem to favour buybacks rather than dividends for tax reasons), and they have some hope that those tax implications will change in the future (or their share price will fall, allowing for better buybacks), allowing them to then distribute the money in a way that benefits the shareholders more.
As https://www.reuters.com/article/us-berkshire-buffett-insuran... says, Buffett gives a 2%/year probability to a $400 billion mega-catastrophe that is likely to wipe out a good chunk of the insurance industry. If that happens, Berkshire Hathaway will be able to pay its share of the claims.
Add that to your thinking. Does maintaining a $150 billion reserve sound so crazy now?
My understanding of berkshire's business model was that they're heavily diversified, so that they're not as vulnerable to catastrophic loss from a single company/industry.
I tried to verify this by looking at the financial report that it is based on. Which may be found at https://www.berkshirehathaway.com/qtrly/3rdqtr23.pdf. Unfortunately the $157 billion figure quoted in the title does not appear anywhere in the report. But page 37 quotes the float as being approximately $167 billion at September 30, 2023. So I suspect that they are quoting the float, and have a typo. Though they might be doing a calculation off of some other numbers.
My claim about how they think about it can be verified on page 32.
"Our management views our insurance business as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett, and Berkshire’s corporate investment managers. Accordingly, we evaluate the economic performance of underwriting operations without any allocation of investment income or investment gains and losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized, as non-operating. We believe that such gains and losses are not meaningful in understanding the quarterly or annual operating results of our insurance businesses."
A ways down the article says:
"The firm spent $1.1 billion to repurchase shares, bringing the nine-month total to approximately $7 billion."
So they are returning some of that to shareholders.