Investing lessons from a mini-Berkshire Hathaway

IT WAS the luck of the draw. In 1986, a young analyst, Tom Gayner, was tasked with covering Markel’s initial public offering. While researching Markel, Gayner was struck by its similarities to Berkshire Hathaway, led by renowned investor Warren Buffett.

For a start, both companies had a large insurance operation. Insurance firms have two sources of revenue: charging premiums for coverage and investing those premiums into interest-bearing assets, typically bonds. Most insurers would take a loss in the insurance operations and make up the difference through investment gains.

Markel, a specialty insurance firm, stood out by making an underwriting profit, a rare feat in the sector. Instead of investing solely in bonds, Markel would invest the profit into stocks, taking a long-term approach. Intrigued by Markel’s unique strategy, Gayner joined the company in 1990.