Warren Buffett

Factual · Economics and markets

“It was our worst year in float cost since 1984, and a result that to a significant degree, as I will explain in the next section, we brought upon ourselves.”

Warren Buffett, Berkshire chairman · 28 February 2002 · Chairman's Letter (2001) (Berkshire Hathaway)

Buffett said the year he was reporting on was Berkshire's worst year in float cost since 1984, a result that he said Berkshire to a significant degree brought upon itself.

Resolved true The record shows it happened or was so.

The second judge would not resolve this claim; the verdict shown is the first judge's.

Said for an organisation they lead or work for; it counts on both records.

What would count as true or false

This is a factual claim about Berkshire's 2001 results, as reported in the 2001 letter. It has two parts: (a) 2001's cost of float was the highest, i.e. the worst, of any year since 1984; and (b) the result was to a significant degree self-inflicted, for example through underwriting or reserving mistakes rather than only outside events. True: Berkshire's published float-cost or underwriting-loss data (the 2001 annual report and its yearly float-cost table) show 2001's cost of float exceeded every year from 1985 through 2000, and the company's account attributes a significant part of the loss to its own errors. Mostly true: 2001 was the worst since about 1984, but with a one-year slip in the base year or a near-tie, with the self-inflicted part supported. Mixed: one of the two parts holds and the other does not. Mostly false: the data show 2001 was a bad year but at least one year between 1985 and 2000 clearly had a higher cost of float, even if the self-inflicted point holds. False: 2001 was not an unusually bad float-cost year by Berkshire's own figures.

Evidence

1. Management's Discussion Berkshire Hathaway Inc. Own record

   “Due to the magnitude of underwriting losses in 2001, the cost of float was about 12.8%. In 2000, the cost of float was approximately 6.0%.”

2. Management's Discussion Berkshire Hathaway Inc. Own record

   “During 2001, it was determined that reserve estimates established for claims arising in prior years with respect to the North American property/casualty business were insufficient. As a result, an $800 million underwriting loss was recorded.”

3. 2001Shareholder Letter berkshireletters.com (reproduction of Berkshire's 2001 Chairman's letter) · 28 February 2002 Own record

   “The events of September 11th made it clear that our implementation of rules 1 and 2 at General Re had been dangerously weak. In setting prices and also in evaluating aggregation risk, we had either overlooked or dismissed the possibility of large-scale terrorism losses.”

4. Management's Discussion Berkshire Hathaway Inc. (2001 annual report, MD&A) · 31 December 2000 Own record

   “Due to the magnitude of underwriting losses in 2001, the cost of float was about 12.8%. In 2000, the cost of float was approximately 6.0%.”

5. Management's Discussion Berkshire Hathaway Inc. (2001 annual report, MD&A) · 31 December 2000 Own record

   “During 2001, it was determined that reserve estimates established for claims arising in prior years with respect to the North American property/casualty business were insufficient. As a result, an $800 million underwriting loss was recorded.”

6. 2002 Buffett Letter: Financial Strength - 2002 buffettknowledge.com (reproduces Buffett's 2002 Berkshire letter) · 1 February 2002 Own record

   “In 2001, however, our cost was terrible, coming in at 12.8%, about half of which was attributable to World Trade Center losses. Back in 1983-84, we had years that were even worse.”

7. 2002 Buffett Letter: Financial Strength - 2002 buffettknowledge.com (reproduces Buffett's 2002 Berkshire letter) · 1 February 2002 Own record

   “At yearend 2001, General Re attempted to reserve adequately for all losses that had occurred prior to that date and were not yet paid — but we failed badly.”

8. Berkshire Hathaway Inc. Chairman's Letter Review 2001 focusonrisksv (Substack) · 10 April 2025

   “The cost of float surged to 12.8% in 2001, the worst since 1984, largely due to the impact of the September 11th attacks.”

9. Berkshire Hathaway Inc. Chairman's Letter Review 2001 focusonrisksv (Substack) · 10 April 2025

   “Underreserving at General Re: A significant $800 million in prior-year loss costs was belatedly recognized in 2001 due to underreserving at General Re, leading to overstated past profits and incorrect pricing decisions.”

Reasoning

Berkshire's 2001 MD&A puts the 2001 cost of float at about 12.8%, against about 6.0% in 2000 (E2). Buffett's 2002 letter says that 1983–84 had years that were even worse (E7), and an independent review calls 2001 the worst since 1984 (E9). On the self-inflicted part, the MD&A records an $800 million loss because reserves set for prior years' claims proved insufficient (E3). The 2001 letter says General Re had overlooked or dismissed terrorism risk in its pricing (E4), and the 2002 letter and the independent review describe the reserving as a failure and as underreserving (E8, E10). The year-by-year float-cost table itself is not in the evidence, but these sources together support both parts of the claim.

Cite this claim

Warren Buffett, “Buffett said the year he was reporting on was Berkshire's worst year in float cost since 1984, a result that he said Berkshire to a significant degree brought upon itself.” (said 28 February 2002). Verdict: resolved true. Reliability API, claim c_9845a14ccd9e, method 0.1.0+28da144b. https://epistacklabs.com/claims/c_9845a14ccd9e