Insurance Company Stocks..

**igt500** Sun May 13, 2007 5:06 pm

Insurance Company Stocks..
Hi Blast,

Can you tell me what you think of insurance companies at this time? I know you don't comment on stocks you don't follow.. however I am interested in BER and TRV in particular.

Thank You

**blast_investor** Sun May 13, 2007 10:29 pm

Hi igt500,

I don't have anything to say on the 2 insurance stocks you mentioned.

In the past decade also, I never invested any dollar into insurance stocks. The reason was still true as it is today for me. I don't believe that I am able to understand insurance stocks, and be confortable on them, especially in recent years because insurance companies are heavy in risky derivative dealings.

My shyness on insurance sector is more than derivative issues. Insurance business model make money by collecting small amount of money (premium payment) every year, then may be once in a decade pay out a big sum for disasters. Therefore, this is purely a mathematical business or statistical business calculating the risk of disaster and I am not expert on this kind of disaster math.

The second issue is that insurance actually collect the money first, then keep it in investment for a long term (many years) before it needs to pay for disaster. Therefore, the investment return when insurance company can generate is key for the business model for this business. Assessing the investment return from insurance company is extremely difficult.

The only insurance company that I myself like is Buffett's company: Berkshire Hathaway. Berkshire Hathaway is mainly an insurance company. The premium collected from insurance business allows Buffett to invest with value investing method compounding at very high rate of rate historically. But again, I don't have any personal money invested in Berkshire Hathaway stock as part of disclosure.