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Stock Strategist

A Banner 2006 for Berkshire Hathaway

Our take on the firm's year-end results and shareholder letter.


On Thursday,  Berkshire Hathaway (BRK.B) reported that its book value per share increased by 18.4% during 2006, primarily thanks to stellar underwriting profitability across all of its insurance operations. We'd expected solid underwriting results, but this still bested our forecast, and we plan to raise our fair value estimate.

The underwriting results were driven by auto-insurer GEICO, which achieved a pleasing 88.11% combined ratio last year, while still growing its top line by almost 10%. Given that the U.S. auto insurance industry has over $165 billion of annual premium, and since GEICO has only around 7% of the market, there is ample room for the firm to profitably grow.

Justin Fuller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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