2012: How has GenRe adjusted to 50% lower premium volumes over the last decade?

GARY RANSOM: OK. A question on General Re. If I look back at the General Re property-casualty premiums, it’s been cut in half, roughly, from 10 years ago, maybe a little more stable recently.

Can you give us some idea of how you’ve had to adjust the personnel over that time, and then also what opportunities are there for General Re to grow as we go forward?

WARREN BUFFETT: Yeah, Gen Re, I think, got off the track. It may — it was probably off the track when we bought it, and I didn’t spot it.

CHARLIE MUNGER: Sure it was.

WARREN BUFFETT: Yeah. OK. (Laughter)

I was in charge of that part. And, they had — I think they’d gotten more concerned about growth and satisfying certain personnel, in terms of their activities, than they had about emphasizing profitability, and it took us awhile to figure that out.

And when Joe Brandon came in, he operated 100 percent, in terms of focusing on underwriting profit instead of premium volume, and Tad Montross has followed through on that, with terrific results.

But it did mean getting rid of a lot of business that didn’t make any sense. They did an awful lot of what I would call “accommodation business.” So, it’s true that the PC volume dropped very significantly during that period, but it’s not volume that we miss.

The life business kept growing consistently during that period. Their life business strikes me as very, very good. They’ve got a little long-term care mixed in there that we wish we didn’t have.

But I think Gen Re is — it’s right-size, in terms of people. It’s got an underwriting discipline to it. And I wouldn’t be surprised if it grows at a reasonable rate in the future.

But it, there was a major change that had to be made in the culture at Gen Re. And, you don’t make that overnight, and you don’t keep a lot of the business — or some of the business — that you got through a wrong culture when you do straighten it out.

It’s a terrific asset to us now. And I think that, the life business will continue to grow, and I would bet the PC business grows, too. But it will only grow if we see the chance to do it on a profitable basis.

That’s one we feel enormously better about than we did some years back.

Charlie?

CHARLIE MUNGER: Well, it was a major fix-up operation, but we finally got it done.

WARREN BUFFETT: We don’t go looking for those, though.

CHARLIE MUNGER: No.