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They're able to turn investments into cash quickly if cash is needed to pay claims. Clearly, investment income is a significant piece of the insurance.

These are the companies that are able to achieve satisfactory returns over time. It's companies that really pay attention to the details of their business and execute effectively. When you look for the biggest moneymakers for the industry, it isn't any particular product line, and it isn't any particular investment strategy. The insurance industry has often failed to produce an acceptable profit margin relative to other industries, because it's failed in its efforts to properly match the premium rates it charges, with the coverage it provides, with the losses that develop from that coverage. We're factoring into the pricing of those products our typical investment yields, our cost of doing business, including our operating costs and the acquisition costs associated with our business, and our historical loss patterns. But we're pricing our products to produce a reasonable return.

Some years we'll come up short of that objective, and other years we might exceed it. We try to manage our business to yield a 15 percent return on beginning equity, on average, over time. Our business is not nearly so exotic. However, since such companies tend to write a lot of unusual risks like this, the law of large numbers tends to work out for them. If there is a loss, it will take them years to make up for it.

If there's no loss, then they realize a handsome profit. Some markets will say, "Sure, we'll insure that," and they'll just throw a high price on the cost of the insurance, because there's no way to know what the real cost is. There isn't a lot of experience to base one's underwriting and risk pricing on. However, without the profit motive, companies have no incentive to exist. Producing a profit is desirable; too often today, public skepticism and cynicism seems to suggest that profit is a bad thing. By investing premiums so as to ensure a positive investment return, insurers can ultimately afford to charge policyholders less and still achieve a reasonable profit. However, investing is one of the primary ways in which insurers can deliver value to their policyholders.