They typically pay out more than they take in as premiums. But the time from taking money in to paying it out is in years to decades, so they sit on a mountain of money. Warren made the bulk of his money by using that money wisely.

They typically make money from investing the money in between when it's received, and when they pay out claims - imagine a life insurer holding the cash between the start of the policy and the insured's death.

> wait, insurance companies don't usually make an actual profit directly from premiums?

Well, it depends how you measure it.

In a basic model an insurance company's profit is:

Profit = Premiums + Investment Returns - Claims - Expenses

Talking about "profit from premiums" doesn't really make sense, that concept isn't defined. So you can't really say that "insurance companies don't usually make profit directly from premiums".

Fiatmoney is simply claiming that Bekshire's insurance operations have Premiums > Claims + Expenses.

I think it's just an artifact of inflation/growth. They make a profit directly if you measure in constant dollars, it's just that by the time they pay out they're paying out more nominal dollars than they took in in premiums.

It's one of the reasons the most instance companies have been mutually owned until recently.

Now they've mostly turned into cash generators for investment banks.