Underwriting Profit - Explained
A beginner-friendly explanation of Underwriting Profit in value investing.
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Underwriting Profit Explained
The profit (or loss) from insurance operations after paying claims and expenses, before investment income — the core measure of insurance business quality.
What It Means for Investors
The Two Sources of Insurance Value
Insurance Economics
| Source | Description |
|---|---|
| Underwriting profit | The actual profit from insuring risk |
| Float income | Investment returns on premiums held |
"Our goal is to earn an underwriting profit — meaning we're paid to hold float rather than paying for it."
Berkshire's Track Record
The Profit Streak
| Years | Underwriting Profit? |
|---|---|
| 2003-2016 | 14 consecutive years |
| Total profits (2003-2016) | ~$28 billion |
This is remarkable in an industry where most insurers lose money on underwriting.
Key Takeaway
The profit (or loss) from insurance operations after paying claims and expenses, before investment income — the core measure of insurance business quality.