Stock Strategist: Berkshire Weathers the Storms

[Morningstar Logo]( [Company Site]( [Company News]( [Membership]( [Portfolio]( [Stocks]( [Options]( [Funds]( [ETFs]( [Markets]( [Tools]( [Personal Finance]( [Discuss]( Stock Strategist Berkshire Weathers the Storms Recent hurricanes add to a difficult year for the insurance business but have minimal impact on our valuation. [tab_bar] by Greggory Warren, CFA | 10/6/2017 1:00:00 PM Given the storm damage and flooding created by hurricanes Harvey, Irma, and Maria during the third quarter, we find it unlikely that wide-moat [Berkshire Hathaway]( [BRK.A]( will come away unscathed. With estimates of total insured damages from Harvey and Irma running at $50 billion-$70 billion and Maria looking to be a $40 billion-$85 billion event, 2017 is expected to be as one of the worst years for natural disasters since 2005, when hurricanes Katrina, Rita, and Wilma racked up more than $50 billion in total insured losses. There are some mitigating factors that should limit the exposure for property-casualty insurers and reinsurers, and our own valuation models already account for the possibility of large natural catastrophe losses, even with the exact timing of these events being impossible to predict. This keeps us from doing anything too drastic during times like this, especially with a company that is as diversified as Berkshire is--not only in its insurance operations but overall. While we expect the company to experience material losses, it is more than adequately reserved to deal with this year’s hurricane season. CEO Warren Buffett likes to keep at least $20 billion in cash on hand as a backstop for Berkshire’s insurance operations, primarily for scenarios like this. To read more, click [here](. Sponsored Links [Buy a Link Now]( New: ETF Managed Portfolios Center On [MorningstarAdvisor.com]( Tap into the industry's best source of information on ETF strategies for financial advisors. See key performance data, screen for specific strategy attributes, and learn more about this fast-growing area of the investment marketplace. [Click to get started](. Free Issue | Morningstar's Stock Newsletter >> Morningstar StockInvestor is celebrating more than 10 successful years of high-quality stock investing. Its two real-money portfolios have outperformed the S&P 500 since 2001. [Get new ideas for the core of your stock portfolio]( ). Search Most Recent Articles [A Period of Relative Calm for Bond Funds]( [21 Days to Improve Your Financial Life]( [Optimize Investments Across Account Types]( Latest Analyst Reports [Royal Philips]( [Siemens]( [Charles River Laboratories International]( [Monsanto]( [Mylan]( ABOUT OUR EMAIL TO UNSUBSCRIBE this email address to the Stock Strategist newsletter, please click "reply" and then click "send." This will unsubscribe only this email address to this specific newsletter. All subscription changes will take effect within one business day. Replies are not read by individuals, so please do not use this for queries about Morningstar.com. If you have questions about Morningstar.com or your membership, send a note to [joe@morningstar.com](mailto:%20joe@morningstar.com). ABOUT OUR PRIVACY POLICY Please [click here]( to learn about Morningstar's privacy policy. (c) Copyright 2017. Morningstar, Inc. 22 West Washington Chicago, Illinois, 60602 All rights reserved.