2015: What's the purpose of Berkshire's inter-company transactions?

GARY RANSOM: I have a question on intercompany transactions within the insurance companies.

In the last couple of years, you’ve had a number of them, including 50 percent of the business ceded up to — from GEICO — to National Indemnity.

You did something similar with MedPro and with GUARD. You also moved some of the companies — or the subsidiaries — like Clayton Homes, out of the Geico sub and up into the holding company.

It seems like a lot more activity than normal, and I’m just asking, what is the main purpose of all those movements, what financial flexibility might it provide you, and why now?

WARREN BUFFETT: Yeah. Well, there are a lot of things at Berkshire that the ‘why now’ is answered by — going to be answered by the fact, well, we just got around to it.

The huge chunk of capital, in the insurance companies, is at National Indemnity. So we have moved through these, quote, “share arrangements,” we moved premium volume that is generated at GEICO or MedPro or different companies, we’ve moved that up to the parent, because that’s where all the — there’s a — you know, there’s just extra layer after extra layer after extra layer of capital there, and it makes it a little simpler that way.

It makes it a little simpler just in keeping all the money invested, as opposed to having 50 pockets or 75 pockets to look at it, if you have a couple of main pockets to look at it.

There’s no real change in the certainty of payment of policies or anything of the sort.

It really makes life a little — just a little easier — in terms of managing the money by having most of the — most of the funds concentrated in National Indemnity.

So there’s no mastermind to it. We ended up with a few companies in GEICO Corp, which was a holding company for GEICO itself. And it just seemed that we probably ought to get those up to the parent company level and we put them there.

But our general approach is just to keep every place loaded with more capital than anybody could possibly conceive of us needing. And that’s going to result, more and more, probably, in the funds being concentrated in National Indemnity.