I have to ask for your view on the below comment in today’s report by Paul Rickard. How does this square with a certain Warren Buffet’s well publicised affection for this industry?
“Answer (By Paul Rickard): I don’t like insurance as an industry”.
A: Thanks for the comment.
I don’t in any way dare to put myself up against Warren Buffet. Let me point out a couple of differences:
1. He is an investor that either takes a material position in the company, or gets involved in managing the company – I am a tiny, insignificant investor with no influence on the management; and
2. I am not sure the US insurance industry is like the Australian industry.
My experience of the Australian general insurance industry is broadly the following cycle:
Catastrophe
Premiums rise
New players enter
Competition drives premiums down below economic value
Catastrophe
Even with re-insurance (all sourced internationally) , not a particularly attractive business cycle.
Where are the local success stories?