Warren Buffett’s Berkshire Hathaway notes from 1965-2013

An important change at any level of our manufacturing process could require major capital expenditures at tomorrow’s replacement prices. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 257-258

Because of the uncertainties in knowing when the Company may be called upon to produce substantial sums of cash, and the possibility that this might not occur for a considerable period of time, your directors have felt that we should be as zealous to achieve a realistic return on this portion of our capital as we are on the other funds that are at the time invested in plant, — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 262-265

Our history in this area shows occasional periods of strong prices, regularly followed by heavy imports of goods, severe price cutting and curtailed operations. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 331-332

During another year in which the fire and casualty insurance industry experienced substantial underwriting losses, our insurance subsidiaries achieved significant adjusted underwriting profits. Since establishment of the business in 1941, Mr. Ringwalt has held to the principle of underwriting for a profit—a policy which is frequently talked about within the industry — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 372-375

Our traditional operation experienced a surge in volume as conventional auto insurance markets became more restricted. This is in line with our history as a non-conventional carrier which receives volume gains on a “wave” basis when standard markets are experiencing capacity or underwriting problems. Although our combined loss and expense ratio on the traditional business rose to approximately 100% during the year, our management, led by Jack Ringwalt and Phil Liesche, has the ability and determination to — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 404-407

Of capital inaugurated five years ago. It will continue to be the objective of management to improve return on total capitalization (long term debt plus equity), as well as the return on equity capital. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 431-432

When standard markets become tight because of unprofitable industry underwriting, we experience substantial volume increases as producers look to us. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 444-445

We set no volume goals in our insurance business generally—and certainly not in reinsurance—as virtually any volume can be achieved if profitability standards are ignored. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 453-454

In 1971, Illinois National earned well over 2% after tax on average deposits while (1) not using borrowed funds except for very — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 475-475

Occasional reserve balancing transactions; (2) maintaining a liquidity position far above average; (3) recording loan losses far below average; and (4) utilizing a mix of over 50% time deposits with all consumer savings accounts receiving maximum permitted interest rates throughout the year. This reflects a superb management job by Gene Abegg and Bob Kline. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 475-478

In all three cases, the founders were major sellers and received significant proceeds in cash—and, in all three cases, the same individuals, Jack Ringwalt, Gene Abegg and Vic Raab, have continued to run the businesses with undiminished energy and imagination — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 502-504

Over-all, we probably would have retained better prospects for the next five years if profits had not risen so dramatically this year. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 514-515

Our seasoned management, headed by Jack Ringwalt and Phil Liesche, will continue to underwrite to produce a profit, although not at the level of 1972, and base our rates on long-term expectations rather than short-term hopes. Although this approach has meant dips in volume from time to time in the past, it has produced excellent long-term results. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 519-521

Management’s objective is to achieve a return on capital over the long term which averages somewhat higher than that of American industry generally—while utilizing sound accounting and debt policies. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 569-570

Which show signs of continuing in 1974, we have elected to adopt the “lifo” method of inventory pricing. This method more nearly matches current costs against current revenues, and minimizes inventory “profits” included in reported earnings. Further information on this change is included in the footnotes to our financial statements. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 577-580

To date, our big problem has been Texas. In that state we virtually had to start over during 1973 as the initial management we selected proved incapable of underwriting successfully. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 590-591

The question is whether possible lowered accident frequency because of reduced driving will more than offset continuing inflation in medical and repair costs, as well as jury awards. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 594-595

We had significant unrealized depreciation—over $12 million—in our common stock holdings at year-end, as indicated in our financial statements. Nevertheless, we believe that our common stock portfolio at cost represents good value in terms of intrinsic business worth. In spite of the large unrealized loss at year-end, — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 600-602

Diversified Retailing Company, Inc., through subsidiaries, operates a chain of popular-priced women’s apparel stores and also conducts a reinsurance business. In the opinion of your management, its most important asset is 16% of the stock of Blue Chip Stamps. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 613-615

19% of that company’s outstanding shares. Since year-end, we have increased our holdings so that they now represent approximately 22 1/2%; implementation of the proposed merger with Diversified Retailing Company, Inc. would increase this figure to about 38 1/2%. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 615-617

Blue Chip’s trading stamp business has declined drastically over the past year or so, but it has important sources of earning power in its See’s Candy Shops subsidiary as well as Wesco Financial Corporation, a 54% owned subsidiary engaged in the savings and loan business. — Warren Buffett, Berkshire Hathaway Letters to Shareholders, 2013, loc. 630-632

Warren Buffett's Berkshire Hathaway Notes From 1965-2013
Source: Wikimedia Commons

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