The Visible Hand
TIM COHEN: Creative Sanlam a better investment than Berkshire Hathaway
The US firm may have Buffett and Munger, but the SA insurance company has Ian Kirk and originality
One of the curses of journalism is that you are constantly trying to simplify things that really cannot and should not be simplified. A long time ago I asked a financial analyst what the rationale was for investing in an insurance company. The problem with insurance companies is that the risks are by definition unknowable. If you invest in an insurance company you are essentially trusting that the actuaries within the company have calculated the underwriting loss correctly. But the upside of investing in insurance companies is that an underwriting loss can often be sustained because insurance companies sit on a huge “float” — money they control but do not own. This is because over the years people are making contributions to their life insurance policies but will only draw down those investments much later. So, the investment analyst told me, you invest in insurance companies essentially because they are a leveraged bet on the markets. If the float is managed well, and invested well...
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