Buffett reveals his traditional insurance premiums funds source is diminishing

Warren Buffett and President ObamaFormer hedge fund manager, Warren Buffett, who is known for turning Berkshire Hathaway Inc. into a company worth $195 billion through the leveraging of insurance premiums, has announced that his staple new revenue source is rapidly shrinking.

The insurance units for Berkshire, which are in sectors covering everything from healthcare for asbestos exposure to auto plans, has dried up to the degree that it is no longer providing adequate investment funds as either float or accumulated premiums.

According to a letter released by Buffet, as of December 31, 2011, the float increased to $70.6 billion; compared to $65.8 billion at the same time in 2012, and $39 million back in 1970. He explained that it’s not likely that this will “grow much — if at all — from its current level.”

Buffet, now 81 years old, started in the insurance industry in 1967, with an acquisition worth $8.6 million. The combination of Berkshire’s earnings and the float expansion provided Buffet with the funding he required for his acquisitions and stock choices. The outcome has been a similar growth in the stock price at Berkshire, as well as of its float over the years.

According to the author of “Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett,” Jeff Matthews, “It’s an engine of growth that is running out of gas.” He explained that the company is now officially a conglomerate and that it doesn’t have what is required in its culture to continue as an investment vehicle any longer.

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