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Marked to Myth - Views on News from Equitymaster
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Marked to Myth
Sep 18, 2017

One of India's largest non-life insurance company, ICICI Lombard General Insurance will soon get listed. It will be the maiden stock of a non-life insurance business to be available to retail investors.

Those of you who have read Buffett, certainly know how important motor insurer GEICO was to Buffett's career and investing track record, right from his early days. In fact, he is such a big fan of the insurer, that in 2016, he tried to once again drive that point home in Berkshire Hathaway's annual letter to shareholders.

Here's what he wrote about GEICO taking the top spot amongst non-life insurers...

  • On August 30, 2030 - my 100th birthday - I plan to announce that GEICO has taken over the top spot. Mark your calendar.

Now, Buffett loves the float that insurance companies enjoy due to their 'collect premiums now-pay claims later' business model. The abundant float in the insurance companies he owns has allowed Buffett, to buy the most attractive businesses, for Berkshire Hathaway.

So, these free funds should naturally attract value investors. Especially ones like us, who have grown reading Buffett's endorsement of insurance float and their contribution to Berkshire's success.

So, did we grab the opportunity to recommend investing in IPO of ICICI Lombard?

No, not because the float that ICICI Lombard enjoys is not attractive enough. But because the float runs the risk of not earning enough returns.

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