Buffett's Berkshire (BRK-A) Still Driven by Insurance 'Float'

Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK-A) has spent tens of billions of dollars on railroads, machine tools and utility companies in recent years. But Mr. Buffett's 2010 annual letter, to be released Saturday, is likely to emphasize just how much Berkshire's core insurance business is still driving its growth.

Berkshire, where Mr. Buffett serves as chairman and chief executive, is likely to report improved fourth-quarter earnings and an increase in book value, a performance yardstick Mr. Buffett uses to measure the company's growth.

Warren Buffett has previously described investing with Berkshire's 'float' as using other people's money without having to pay interest.

Results will be buoyed by rising stock markets that helped Berkshire's large stock portfolio and its derivatives contracts. The company's manufacturing and retail operations, and its February 2010 acquisition of railroad Burlington Northern Santa Fe, likely boosted net income, as did insurance underwriting. Berkshire's net earnings through the first nine months of 2010 totaled $8.6 billion, already exceeding reported net income for the whole of 2009.

Of importance, Berkshire's pool of funds from insurance—something Mr. Buffett calls "float"—could have swelled to roughly $67 billion at the end of 2010 from $63 billion a year earlier. It is poised to rise further in 2011 despite challenging insurance-market conditions amid the slow economy, analysts say.





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