Often overlooked in an age where investors are looking for quick returns, insurance companies just might offer you a decent path to millionaire status over time.
Insurance is all about assessing risk, making it one of the most inflation-resistant businesses. After all, as costs increase, premiums also increase, even if those premiums remain fairly constant in terms of the percentage of insured asset value.
In addition to this natural resilience to inflation, insurance companies have a rather unique ability to make money by investing. other people’s money. When you purchase insurance, your premium is pooled with that of other policyholders and is available for the company to pay claims. When in the hands of the insurance company, this money – called float – can be invested by the insurance company, with the insurance company retaining all profits from this investment.
With these two assets in mind, here are three insurance values that could make you a millionaire.
#1: A company that celebrates its strong foundations
Prudential financier (NYSE:PRU) is so focused on maintaining a solid financial foundation that he uses a real rock – the Rock of Gibraltar – as his company logo. This is supported by a balance sheet with more than $320 billion in bonds and total net equity in excess of $28 billion.
Even though the biggest insurance companies are pretty good at assessing risk, no one gets it right every time. A strong balance sheet – like Prudential Financial’s – helps an insurer cover times when it has to pay more claims than expected. It’s the financial rock that sits alongside the physical rock and gives investors good reason to believe that Prudential Financial has strong staying power.
When it comes to building a million-dollar nest egg, after all, it helps if the companies you invest in are sustainable. It’s likely that you’ll need to stay invested – and continue to invest new money – over a fairly decent period of time in order to achieve such a high net worth.
No. 2: The master of float investing
Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is perhaps best known as the company run by billionaire investing guru Warren Buffett. When it comes to insurance fund investing, Buffett has been doing it well for decades.
Indeed, in addition to its successful insurance lines, Berkshire Hathaway owns companies such as BNSF Railroad, Duracell Batteries, Dairy Queen restaurants and NetJets private aviation. Additionally, under Buffett’s leadership, Berkshire Hathaway has built a multibillion-dollar portfolio of large, publicly traded companies..
Putting it all together, Berkshire Hathaway investors enjoy the benefits of the insurance industry, its subsidiaries, and its investments in public companies. This combination provides a solid foundation for investors looking for a potential path to…
