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GEICO Insurance

Berkshire Hathaway Most Vulnerable Auto Insurer in Florida

(BRK.A), (BRK.B)

Berkshire Hathaway’s GEICO is the top auto insurer in Florida, and has the most at risk with Hurricane Irma possibly headed for landfall on the state’s east coast.

In 2016, GEICO had a 20.68% market share of all auto policies in Florida.

The Category 5 storm. which has been leaving a trail of destruction through the Caribbean, could hit Florida in the early morning hours of Sunday.

The magnitude of the hurricane has Florida Gov. Rick Scott warning that the damage could be greater than 1992’s Hurricane Andrew, which caused 65 fatalities and $26.5 billion in damage.

“I want everybody to understand the importance of this. This is bigger than Andrew,” Gov. Scott said.

GEICO will be sending its Catastrophe Response (CAT) teams to Florida. The CAT teams include auto damage adjusters, supervisors and managers, and IT personnel.

Last week, GEICO sent CAT teams to Houston in the wake deal with the estimated 50,000 vehicles the company insures that were damaged by Hurricane Harvey.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Minority Stock Positions Stock Portfolio Warren Buffett

Stock Swap Gives Berkshire Dividend Increase from Bank of America

(BRK.A), (BRK.B)

An additional $8 million a year in income may not mean much in the scheme of things for Berkshire Hathaway, but it proves once again that Warren Buffett know how to make money, even as he struggles to find ways to spend Berkshire’s over $100 billion in surplus.

With an almost $12 billion paper profit from its conversion of its preferred Bank of America stock to common stock, Berkshire Hathaway is reaping the rewards from bailing out the bank in 2011 during the Great Recession.

The move was one of Buffett’s most astute moves of the past decade.

It’s always nice to triple your investment, especially when the preferred shares had also been earning Berkshire $300 million a year in dividends.

But wait, there’s more, as they say on TV infomercials

In swapping the Bank of America preferred stock for a $11.5 billion common stock profit, Berkshire had to give up the $300 million in annual dividends the preferred stock paid. However, Bank of America just raised its quarterly dividend so the amount that Berkshire now gets annually in dividends will be $308 million.

The 66% increase in the common stock dividend came after the Federal Reserve allowed Bank of America and 33 other large banks to increase their dividends and buy back more stock after passing the most recent stress test in June that was required under the Dodd-Frank Act.

Also benefitting Berkshire, which now owns 6% of Bank of America, is the bank’s decision to increase to $12 billion to its share repurchase authorization.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
GEICO Insurance

GEICO CAT Teams on the Ground in Houston

(BRK.A), (BRK.B)

GEICO has sent its Catastrophe Response (CAT) teams to Houston to handle damage claims in the wake of the massive flooding caused by Hurricane Harvey.

The hurricane may be the most destructive hurricane in U.S. history due to the estimated 500,000-1,000,000 vehicles that were damaged. Initial estimates put the number of those vehicles that are insured by GEICO at around 50,000.

The CAT teams include auto damage adjusters, supervisors and managers, and IT personnel.

GEICO earlier installed express call lines for Hurricane Harvey claims and the company reports its claims teams are effectively answering the incoming calls.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Minority Stock Positions Stock Portfolio

BYD Launches Commercial SkyRail Monorail in Yinchuan, China

(BRK.A), (BRK.B)

Chinese new energy technology company BYD’s monorail transportation solution SkyRail has launched its first commercial line in Yinchuan, capital of Northwest China’s Ningxia Hui Autonomous Region.

The SkyRail line, housed under China Flower Expo Park in Yinchuan, officially goes into operation on September 1st.

BYD first unveiled its SkyRail electric monorail plans at the biannual C40 Mayors Summit in Mexico City in December 2016.

SkyRail, which is China’s first straddle-type monorail system, was developed out of BYD’s five-year RMB 5 billion R&D project. It is a sustainable and strategic solution to counter traffic congestion in cities around the world while also offering more convenient mobility to urban residents.

Han Jianglong, Vice Mayor of Yinchuan, highlighted the significance of Yinchuan being the first city in the world to launch the BYD SkyRail line, “it is a strategic move for Yinchuan to introduce the green, low-carbon SkyRail to promote innovation, sustainable development and industrial transformation, as well as the improvement of the city’s image.”

As a rail transit alternative with relatively smaller passenger capacity, BYD SkyRail delivers numerous benefits, including low capital cost, short construction period, low noise level and elevated views. It can complement existing public transport systems to create a layered transport system. At the same time, SkyRail provides urban residents with safe, comfortable and fast mobility while making a real difference to alleviate traffic congestion.

“Mass transit systems are an indispensable solution to alleviate traffic congestion in cities”, said BYD Chairman and President Wang Chuanfu at the launch ceremony. “Yinchuan is an important juncture of China’s ‘Belt and Road’ initiative. The launch of SkyRail in Yinchuan is setting a benchmark for SkyRail projects to come in other cities, and demonstrates how BYD’s innovative products can help alleviate traffic congestion in urban areas all over the world.”

Since the launch of SkyRail in October last year, BYD has conducted feasibility studies in more than 100 cities worldwide including the city of Iloilo in the Philippines, and has entered into strategic partnerships with over 10 cities in China, including Yinchuan, Guilin, Shantou, Guang’an and Bengbu. Construction of SkyRail lines are expected to begin in 20 Chinese cities in 2018.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $2 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results..

Categories
Brooks

Running Shoe Market Forecast Projects Solid Growth

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Sports footwear makers, which include Berkshire Hathaway’s Brooks, are projected to have solid growth over the next five years.

A new report “Global Sports Footwear Market 2017-2021,” is projecting that the global sports footwear market will grow at a compound annual growth rate (CAGR) of 2.71% during the period 2017-2021.

According to the report, one driver in the market is high operating margin of sports footwear. Sports footwear is usually priced higher than regular shoes. This is because their manufacturing process involves different technicalities that enhance performance at sports. Vendors focus on introducing innovative features in their products that are used for running, tennis, basketball, football, soccer, and other sports. Manufacturers also earn high operating margin from premium-priced sports footwear. This is because the manufacturing cost of these products is low, whereas they are sold at higher prices.

Further, the report states that one challenge in the market is increasing cost of raw materials. Rising fluctuations in the profit margins of the manufacturers of sports footwear are due to the increasing prices of raw material and intense competition among the vendors. This makes executing a proper pricing strategy challenging for vendors. Ethylene vinyl acetate (EVA), an elastomeric polymer, is the raw material used in the production of soles of sports footwear. Increase in the price of this material has a directly proportional impact on the prices of sports footwear. This further leads vendors to increase the prices of their products.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
BNSF

Robust Carload Numbers Mean Good Year for BNSF

(BRK.A), (BRK.B)

Robust carload numbers are continuing to bring good news to BNSF Railway when compared to 2016 levels.

Slumping volumes in 2016 saw the total intermodal and carload volumes down 4.94% from 2015 levels, with coal shipments slumping 20.88% from 2015 levels.

Coal is still leading the way in the recovery, with shipments up a strong 15.82% through August 19, as compared to the same period in 2016.

Also up a solid 5.77% are intermodal shipments.

While petroleum shipments continue to slide, with year-to-date numbers down 15.41%, the combined intermodal and carloads numbers are up 6.74% in the aggregate.

The rise in shipments has BNSF rehiring 4,000 of the 5,000 employees it laid off in 2015.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
McLane

McLane Company Part of Blockchain Consortium Addressing Food Safety Worldwide

(BRK.A), (BRK.B)

Berkshire Hathaway’s McLane Company, a leading supply chain services company providing grocery and foodservice supply chain solutions, is part of a group of leading companies across the global food supply chain that have announced a major blockchain collaboration with IBM intended to further strengthen consumer confidence in the global food system.

In addition to McLane Company, the consortium includes Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, Nestlé, Tyson Foods, Unilever and Walmart.

The companies are coming together with IBM to further champion blockchain as an enabling technology for the food sector. Together they will help identify and prioritize new areas where blockchain can benefit food ecosystems and inform new IBM solutions. This work will draw on multiple IBM pilots and production networks in related areas that successfully demonstrate ways in which blockchain can positively impact global food traceability.

Every year, one-in-ten people fall ill – and 400,000 die – due to contaminated food. Many of the critical issues impacting food safety such as cross-contamination, the spread of food-borne illness, unnecessary waste and the economic burden of recalls are magnified by lack of access to information and traceability. It can take weeks to identify the precise point of contamination, causing further illness, lost revenue and wasted product. For example, it took more than two months to identify the farm source of contamination in a recent incidence of salmonella in papayas.

Blockchain is ideally suited to help address these challenges because it establishes a trusted environment for all transactions.

In the case of the global food supply chain, all participants – growers, suppliers, processors, distributors, retailers, regulators and consumers – can gain permissioned access to known and trusted information regarding the origin and state of food for their transactions. This can enable food providers and other members of the ecosystem to use a blockchain network to trace contaminated product to its source in a short amount of time to ensure safe removal from store shelves and stem the spread of illnesses.

“Unlike any technology before it, blockchain is transforming the way like-minded organizations come together and enabling a new level of trust based on a single view of the truth,” said Marie Wieck, general manager, IBM Blockchain. “Our work with organizations across the food ecosystem, as well as IBM’s new platform, will further unleash the vast potential of this exciting technology, making it faster for organizations of all sizes and in all industries to move from concept to production to improve the way business gets done.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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NetJets

NetJets Partners with Mercedes-AMG Petronas Motorsport

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Berkshire Hathaway’s NetJets, the worldwide leader in private aviation, has formed a partnership with Mercedes-AMG Petronas Motorsport, a Formula One chassis team, based in Brackley, United Kingdom.

NetJets will provide travel for race drivers and team members.

With an expanding race calendar and resulting greater travel burden on both race drivers and team members, the Team has made it a major focus to optimize travel times and improve the efficiency of its logistics as much as possible.

For example, the ‘triple header’ of three consecutive race weekends planned for the 2018 season will present the Team with new logistical challenges. The prospect of gaining back working hours at the factory that would otherwise be spent travelling is a particularly valuable prospect.

“Over the past season, we have been working to optimize every area of our team operations and that includes how we best manage the challenges of race travel,” explained Toto Wolff, Head of Mercedes-Benz Motorsport.

“People will automatically think that private aviation means luxury lifestyle – but it has been common practice in Formula One for some time and will provide us with valuable time savings that can then be invested in finding more performance.

“We know that these extra hours can make the difference and also keep the team fresher and fitter as the season goes on. I am delighted that we have been able to transform this work into a partnership with a market leader like NetJets.”

“We share a special kinship with motorsports professionals who thrive at the intersection of speed, safety and innovation,” commented NetJets Executive Vice President of Sales & Marketing, Patrick Gallagher.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Berkadia

Berkadia Closed $221 Million in Financing for Brookdale Senior Living

(BRK.A), (BRK.B)

Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has announced it had closed $221 million in financing for Brookdale Senior Living Inc. on July 11.

The Fannie Mae Credit Facility is for 10 years and will be used to refinance two existing Brookdale loan portfolios. It has a a 75% loan-to-value ratio and a 30-year amortization schedule.

“The Fannie Mae Credit Facility product provided Brookdale flexibility to meet their financing needs. The Brookdale team, the Fannie Mae team and the Berkadia underwriting team worked together to make this transaction a seamless process,” said Berkadia’s Managing Director Heidi Brunet. She originated the transaction with Christopher Fenton.

Brookdale Senior Living is the leading seniors housing operator in the country and operates 1,036 communities with the ability to serve approximately 102,000 residents as of June 30, 2017.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Insurance

MedPro Group Expands International Facility Coverage Capabilities for United States Domiciled Risks through Reinsurance Program Participation

(BRK.A), (BRK.B)

Berkshire Hathaway’s MedPro Group will participate in the US Jurisdiction medical professional liability facility of The Medical Professional Liability Company Ltd.

MedPro has added its support to that of existing subscribing Syndicate, Pembroke Managing Agency Limited Syndicate 4000. Pembroke Managing Agency Limited is a wholly-owned subsidiary of Ironshore.

Launched in January 2011, the facility offers cover on Lloyd’s paper to US institutions providing clinical services outside of the United States. The cover is enhanced by a unique offering of claims handling solutions, clinical governance review and a 24-hour legal helpline delivered by The MPLC.

MedPro and The MPLC believe the combination of their respective domestic and international expertise will provide their clients an unparalleled partner for underwriting risks that extend beyond U.S. domestic borders.

Maximum limits available for this facility are USD15M for any one claim and USD30M in the annual aggregate.

John Young, Managing Director of The MPLC said: “We are delighted to have MedPro’s and Pembroke’s support which will strengthen our program, especially for MedPro’s producing brokers and healthcare clients. The offering combines MPLC’s wide international experience with MedPro’s financial strength and experience as well as the strength and expertise of the Pembroke Syndicate at Lloyd’s of London.”

Discussing MedPro’s motivation behind the partnership, Craig Rowland, Business Development Lead for MedPro’s International Division said: “Through this facility, we are very pleased to be able to further support our domestic institutional clients, who daily trust us to protect their assets and reputations, by now being able to cover their international risks. It is always our deepest desire to continually meet the needs of our clients and serve them as their risks grow and become more complex.”

Tim Glover, Chief Underwriting Officer for Pembroke Managing Agency said: “We look forward to expanding our successful partnership with MedPro and The MPLC. Our collective breadth of experience and distribution will better serve our broker and client needs.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.