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Warren Buffett And Charlie Munger On Operating Earnings

Miss nothing of the Q&A answers with this edit – we removed only the fluff in between! All Munger and Buffett say is preserved, only gaps and questions have been clipped to save your time. This is the Berkshire Hathaway Shareholders Meeting 2013.

operating earnings

Full Q&A With Warren Buffett And Charlie Munger From The 2013 Berkshire Hathaway Annual Meeting

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Transcript

We'll go through a few figures these 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 and wasn't quite as good a quarter as it looks which I'll explain in a second. But really all of our businesses did very well. You should focus on operating earnings. Charlie's getting a head start here on the peanut brittle budget so I'll catch up later. It was it was very good. It was a benign quarter in insurance. But our other business is perfectly 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 slide to the insurance earnings were. Helped. A bit they were still perfect 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 outstanding in foreign currency. So if we we have losses we're going to pay in the future and they're payable in pounds or euros. And the dollar appreciates against that those currencies we got 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 and we do want to explain that to you. 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 reinsurance 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 two hundred and fifty five million pre-tax. 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 report high earnings one we.

When we settle it. It's a. Magnificent workout accounting can do. One real high point. Of the first quarter. Was the. Pick up which I noticed which I noted in the annual report. About the gain in both the closure rate and the persistency rate at Geico. These are hugely important factors. And it will put up a. Chart. Showing the gain of DIKEOS auto policies. This is the strengths I mentioned in 2012. And not only continued in 2013 but the trend has become even stronger and there is a lot of seasonal to policy gains but as you can see month by month, our gains of IGs and policies have.

Been significantly improved over 2012. And again it'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 is improving. Very significantly this year and with it. We also had a gain in 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 balance sheet at all but it does increase the value of. Of GEICO versus what we carry it for. And I can't resist a little sales pitch on that because. There's closure rate which like I say is. As at incredible levels means that. When people go to. Our website 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.