The best place to learn about the insurance business is reading Buffet's annual letters to shareholders from about 1975 to 2005. They are an absolute must read for investors in insurance companies given Berkshire over that time created from almost nothing the greatest and most impregnable insurance company on the planet.
It is all about being disciplined with ensuring the premiums received adequately compensate for the risks assumed.
Berkshire for many periods of time happily lost market share when the insurance industry got too competitve and pushed down premiums to levels below what Buffet et al considered prudent.
Poor insurance managers have a tendency to:
(a) chase premium volume and market share even in a competitve market where what is being offered is likely to result in an underwriting loss; (b) complain about unexpected events or natural disasters even though such things are an inherent part of the business of insurance and need to be factored in when setting premiums; (c) have atendency to underestimate likely losses so they can book short term underwriting profits only for those to be reversed in later years when the true exposures are revealed.
I would love to have Ajit Jain (Berkshire's insurance virtuoso) do a complete review of IAG and give us his opinion on the state of things.
IAG Price at posting:
$4.87 Sentiment: Hold Disclosure: Held
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