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AM 2013 Berkshire Hathaway Annual Meeting With Warren Buffett, Charlie Munger – Full Q&A

Full Q&A morning session from the 2013 Berkshire Hathaway Annual Meeting with the world’s richest man and most successful investor, Warren Buffett and his partner, Charlie Munger.

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2013 Berkshire Hathaway Annual Meeting

AM 2013 Berkshire Hathaway Annual Meeting With Warren Buffett, Charlie Munger - Full Q&A

Transcript

We're going to. Well first of all I want to thank Brad Underwood. He puts the movie together every year does a terrific job Andy Hayward and Amy here are responsible for the cartoon. They also produce the Secret Millionaires Club which has been a huge hit this year. And I really want to thank them for their part in this too. And finally Harry Solo who puts this whole affair together she's four months pregnant she got her MBA I think yesterday her and in addition she she is the ring master for all of this. Let's give Carrie a terrific we'll go through a few figures who slides. I'll introduce the directors and make one or two more announcements and then we'll get on to the questions now. If we could put up the first slide which is the earnings that were released yesterday. As you can see it was a good quarter it wasn't quite as good a quarter as it looks which I'll explain in a second. But really all of our businesses that very well you should focus on operating earnings. Is getting a head start here on the peanut brittle invited so I'll catch up later. It was very good. It was a benign quarter in insurance but are other businesses particularly our big businesses did quite well and I don't I don't remember whether we've ever had operating earnings of more than three point almost eight billion. But but in any event it was quite satisfactory. Now we'll put up a slide to the insurance earnings were helped a bit.

They were still terrific without these factors but they were they were helped a bit by the fact that the dollar was strong and that reduces the liabilities we have on outstanding in foreign currencies. So if we if we have losses we're going to pay in the future and our Babyland pounds or euros and the dollar appreciates against that. Those currencies we get a small benefit from that. We also have it it hurts us in other ways. We have so many different kinds of businesses and then we own other earnings through Coca-Cola that operate around the world that I really never know whether when the dollar goes up or down whether it helps us or not. So I've never been able to figure it out. So we just sort of take it as it comes. We do want to explain that to you in the insurance earnings and then we had another item which is kind of interesting. We've had a disagreement with Swiss Re about a life insurance contract and that's the disagreements probably lasted for well over a year and that was settled in the first quarter. And as you can see we showed a gain of 255 million pretax from settling this disagreement. But interestingly Swiss Re showed a gain of 100 million also from settling the disagreement. So we are working out an arrangement with Swiss Re whether we'll get we'll get in an argument every quarter and both reported higher earnings when we when we settle it. It's magnificent what a county can do one real high point the first quarter was the pick up which I noticed which I noted in the annual report about the gain in the closure rate and the persistency rate at Geico.

These are hugely important factors and it will put up a chart showing a gain of ICOS auto policies. The of the strengths I mentioned in 2012 and not only continued in 2013 but the trend has become even stronger and there's a lot of seasonal to policy gains. But as you can see month by month our gains of eggs and policies have very significantly improved over 2012 and again that's because our closure ratio in other words the number of people that get a quote from us and then go on to buy a policy that rate has improved very significantly this year and with it we also had a gain and persistency. The people that renew the policies with us. And that's a pure gold a policy as a mathematical value to us of at least fifteen hundred dollars so if we add a million policies in a year and I'm hopeful we might do that this year. That's a billion and a half of value that gets built into our intrinsic value which does not show up on the income statement or our balance sheet at all but it does increase the value of Geico versus what we carry it for. And I can't resist a little sales pitch on that because the closure rate which like I say is is at incredible levels means that when people go to our Web site or call us and get a quote they find that they can save a lot of money.

I mean people love our little gecko but they buy the policies because we save them money and it just so happens that in the auditorium right near the exposition hall we have a lot of very friendly people that will help you save money too. So I urge you can you can walk out any time Charlie is talking and go and get a quote and a very high percentage of you could save money by doing that. And you know that is in the Berkshire sphere to save money at every opportunity. So I'm hoping you will check that out and that we will set our record for Podlasie sold and finally our railroad this year is doing very well. You saw the earnings in the in the first quarter report if you've got a chance to look at that and get some figures up that show our gain in car loadings in the first 17 weeks has been three point eight percent whereas the other four major Class 1 railroads in the United States have had a gain of four tenths of a percent. That's significant money. And we don't have the Canadian railroads here that operate in the United States. They both come down Canadian national in any specific but but this is representative of what's been happening. We've been helped by the fact that that fortunately a lot of oil wells have been found very very close to our right road tracks. And what better place to find oil. And so we've been moving a lot of that and it's worked and we'll be moving a lot more. The way things are going and as a result of all as we now put up the next slide we're now.