2008: Ajit's Municipal Bond Insurance Business
WARREN BUFFETT: In that connection, I’d like to give you a little report.
We went into the municipal bond insurance business a few months ago, and naturally, we did it through Ajit. And he got our companies up, licensed, and running.
And in the first quarter of 2008 — I don’t have the figures for all the other people — but our premium volume came to over $400 million.
And I think — now, that was overwhelmingly written in the secondary market, but I think our premium volume was not only larger than any other municipal bond insurer in the United States, I wouldn’t be surprised if it’s as large as all of the rest of them combined.
And this was from a standing start that Ajit accomplished this. And I have here a list of, what, 300 and — this is the end of the quarter — 278, I believe it is, transactions.
Now, that’s all done out of an office with 29 or 30 people who are doing a lot of other things, too. I mean, it’s a remarkable, remarkable place.
One of the interesting things about this is that almost all of this business — although not all the premium volume — all of — almost all of this business was — came from people who came to us with municipal bonds asking us to insure them, and in every case, except two or three, they already had insurance from the other bond insurance, most of whom are rated triple-A.
So they were paying us a fee which was higher to write insurance which would only be paid, not only if the municipality didn’t pay, but the original bond insurer didn’t pay.
So we were writing business at an average rate of two and a fraction percent for the quarter, and the original insurer had charged, perhaps, an average of 1 percent. And they had to pay and they — in fact, the only way we’re going to pay is if they went broke.
So it tells you something about the meaning of triple-A in the reinsurance — in the bond insurance — field in the first quarter of 2008.
Ajit has done a remarkable job in this arena. And Berkshire wrote a couple of primary policies for the Detroit Sewer District and the Detroit Water District that — each about 370 or 380 million — and people have found our insured bonds trading in the secondary market at a more attractive yield to the issuer. In other words, at lower yields than from any other bond insurer.
So this whole company has been built, just in a matter of a couple of months, by Ajit in his small office in Connecticut. It’s pretty remarkable, and I congratulate him for it. (Applause.)