Women at the Helm

Q I see that GlaxoSmithKline recently named Emma Walmsley as its new CEO. What other major companies have women CEOs? — P.S., Maryville, Tennessee

A As of earlier this year, there were 26 women heading S&P 500 companies — just 5 percent. They included General Motors (Mary Barra), IBM (Virginia Rometty), Duke Energy (Lynn Good), Lockheed Martin (Marillyn Hewson), PepsiCo (Indra Nooyi), General Dynamics (Phebe Novakovic), Hershey (Michele Buck), Occidental Petroleum (Vicki Hollub) and Mattel (Margo Georgiadis). Two other financially powerful women include Federal Reserve Chair Janet Yellen and Christine Lagarde, who heads the International Monetary Fund.

Companies might do well to appoint more female CEOs. According to research by Quantopian, Fortune 1000 companies led by women outperformed the S&P 500 by 226 percent between 2002 and 2014.

Q What does the insurance term “float” mean? — A.G., Saginaw, Michigan

A Warren Buffett, who heads insurance giant Berkshire Hathaway, explained it well in his 2002 letter to shareholders:

“[F]loat is money we hold but don’t own. In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. During that time, the insurer invests the money. This pleasant activity typically carries with it a downside: The premiums that an insurer takes in usually do not cover the losses and expenses it eventually must pay. That leaves it running an ‘underwriting loss,’ which is the cost of float. An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money.”

Learn more from the insurance industry itself at iii.org.