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On the other hand, it's important to note that Berkshire's insurance companies have been unusually profitable. Their combined ratio (ratio of expenses to premiums collected) is often below 100% -- not especially common for the insurance business. However, that average incorporates more volatility, and more deviations from the norm.

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Well, any insurance company that doesn't have a combined ratio (CR) less than 100 is not making money.

Example: a CR of 92 means that for every dollar of premium, the company has to spend 92 cents, leaving 8 cents of profit. A CR of 102 means that the company has to spend $1.02 for every dollar taken in.

How much spent depends, in general, on operating expenses and claims paid. Limiting how much you spend can only get you so far; hence the rest of an insurers profit comes from investments.

(And where does the money for investing come from? Collected premiums!)

An insurance company with a combined ratio of 99 has a cost of capital lower than the US treasury. So yes, it is probably making money -- even if it has its assets in T-bills.

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