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The Journal of Alternative Investments

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Primary Article

Berkshire Hathaway, General Re, and Franchise Risk

Joseph Calandro and Robert Flynn
The Journal of Alternative Investments Summer 2005, 8 (1) 83-95; DOI: https://doi.org/10.3905/jai.2005.523084
Joseph Calandro Jr
A financial services consultant and a Finance Department faculty member of the University of Connecticut.
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  • For correspondence: jtacalandro@yahoo.com
Robert Flynn
The executive director of the Connecticut Insurance and Financial Services Cluster.
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  • For correspondence: rflynn@metrohartford.com
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Abstract

This article illustrates how the modern value-investing framework can be employed to more effectively value insurance companies. By utilizing the case study of Berkshire Hathaway's 1998 purchase of General Reinsurance Corporation, this article demonstrates how to more effectively construct a valuation, and specifically how to better consider the unique and intangible aspects of insurance company valuation. At approximately $22 billion General Re was Berkshire Hathaway's largest acquisition, and given the losses sustained post-buyout, it was also the firm's most troubled. Berkshire Hathaway's experience here is no mark against the unparalleled expertise of its chairman, investor Warren Buffett, but rather illustrates the unpredictability and volatility of insurance company valuation.

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The Journal of Alternative Investments
Vol. 8, Issue 1
Summer 2005
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Berkshire Hathaway, General Re, and Franchise Risk
Joseph Calandro, Robert Flynn
The Journal of Alternative Investments Jun 2005, 8 (1) 83-95; DOI: 10.3905/jai.2005.523084

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Berkshire Hathaway, General Re, and Franchise Risk
Joseph Calandro, Robert Flynn
The Journal of Alternative Investments Jun 2005, 8 (1) 83-95; DOI: 10.3905/jai.2005.523084
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