Berkshire's Corporate Performance vs. the S&P 500
| Year | Annual Percentage Change | Relative Results (1)-(2) | ||
| in Per-Share Book Value of Berkshire (1) | in S&P 500 with Dividends Included (2) | |||
| 1965 | ...... | 23.8 | 10.0 | 13.8 |
| 1966 | ...... | 20.3 | (11.7) | 32.0 |
| 1967 | ...... | 11.0 | 30.9 | (19.9) |
| 1968 | ...... | 19.0 | 11.0 | 8.0 |
| 1969 | ...... | 16.2 | (8.4) | 24.6 |
| 1970 | ...... | 12.0 | 3.9 | 8.1 |
| 1971 | ...... | 16.4 | 14.6 | 1.8 |
| 1972 | ...... | 21.7 | 18.9 | 2.8 |
| 1973 | ...... | 4.7 | (14.8) | 19.5 |
| 1974 | ...... | 5.5 | (26.4) | 31.9 |
| 1975 | ...... | 21.9 | 37.2 | (15.3) |
| 1976 | ...... | 59.3 | 23.6 | 35.7 |
| 1977 | ...... | 31.9 | (7.4) | 39.3 |
| 1978 | ...... | 24.0 | 6.4 | 17.6 |
| 1979 | ...... | 35.7 | 18.2 | 17.5 |
| 1980 | ...... | 19.3 | 32.3 | (13.0) |
| 1981 | ...... | 31.4 | (5.0) | 36.4 |
| 1982 | ...... | 40.0 | 21.4 | 18.6 |
| 1983 | ...... | 32.3 | 22.4 | 9.9 |
| 1984 | ...... | 13.6 | 6.1 | 7.5 |
| 1985 | ...... | 48.2 | 31.6 | 16.6 |
| 1986 | ...... | 26.1 | 18.6 | 7.5 |
| 1987 | ...... | 19.5 | 5.1 | 14.4 |
| 1988 | ...... | 20.1 | 16.6 | 3.5 |
| 1989 | ...... | 44.4 | 31.7 | 12.7 |
| 1990 | ...... | 7.4 | (3.1) | 10.5 |
| 1991 | ...... | 39.6 | 30.5 | 9.1 |
| 1992 | ...... | 20.3 | 7.6 | 12.7 |
| 1993 | ...... | 14.3 | 10.1 | 4.2 |
| 1994 | ...... | 13.9 | 1.3 | 12.6 |
| 1995 | ...... | 43.1 | 37.6 | 5.5 |
| 1996 | ...... | 31.8 | 23.0 | 8.8 |
| 1997 | ...... | 34.1 | 33.4 | .7 |
| 1998 | ...... | 48.3 | 28.6 | 19.7 |
| 1999 | ...... | .5 | 21.0 | (20.5) |
| 2000 | ...... | 6.5 | (9.1) | 15.6 |
| 2001 | ...... | (6.2) | (11.9) | 5.7 |
| Average Annual Gain – 1965-2001 | 22.6% | 11.0% | 11.6% | |
| Overall Gain – 1964-2001 | 194,936% | 4,742% | 190,194% | |
Notes: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31.
Starting in 1979, accounting rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously the requirement. In this table, Berkshire's results through 1978 have been restated to conform to the changed rules. In all other respects, the results are calculated using the numbers originally reported.
The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporation such as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years when that index showed a positive return, but would have exceeded the S&P in years when the index showed a negative return. Over the years, the tax costs would have caused the aggregate lag to be substantial.
BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Berkshire’s loss in net worth during 2001 was \$3.77 billion, which decreased the per-share book value of both our Class A and Class B stock by 6.2%. Over the last 37 years (that is, since present management took over) per-share book value has grown from \$19 to \$37,920, a rate of 22.6% compounded annually.*
Per-share intrinsic grew somewhat faster than book value during these 37 years, and in 2001 it probably decreased a bit less. We explain intrinsic value in our Owner's Manual, which begins on page 62. I urge new shareholders to read this manual to become familiar with Berkshire's key economic principles.
Two years ago, reporting on 1999, I said that we had experienced both the worst absolute and relative performance in our history. I added that “relative results are what concern us,” a viewpoint I’ve had since forming my first investment partnership on May 5, 1956. Meeting with my seven founding limited partners that evening, I gave them a short paper titled “The Ground Rules” that included this sentence: “Whether we do a good job or a poor job is to be measured against the general experience in securities.” We initially used the Dow Jones Industrials as our benchmark, but shifted to the S&P 500 when that index became widely used. Our comparative record since 1965 is chronicled on the facing page; last year Berkshire’s advantage was 5.7 percentage points.
Some people disagree with our focus on relative figures, arguing that “you can’t eat relative performance.” But if you expect – as Charlie Munger, Berkshire’s Vice Chairman, and I do – that owning the S&P 500 will produce reasonably satisfactory results over time, it follows that, for long-term investors, gaining small advantages annually over that index must prove rewarding. Just as you can eat well throughout the year if you own a profitable, but highly seasonal, business such as See’s (which loses considerable money during the summer months) so, too, can you regularly feast on investment returns that beat the averages, however variable the absolute numbers may be.
Though our corporate performance last year was satisfactory, my performance was anything but. I manage most of Berkshire's equity portfolio, and my results were poor, just as they have been for several years. Of even more importance, I allowed General Re to take on business without a safeguard I knew was important, and on September $11^{\text{th}}$ , this error caught up with us. I'll tell you more about my mistake later and what we are doing to correct it.
Another of my 1956 Ground Rules remains applicable: “I cannot promise results to partners.” But Charlie and I can promise that your economic result from Berkshire will parallel ours during the period of your ownership: We will not take cash compensation, restricted stock or option grants that would make our results superior to yours.
Additionally, I will keep well over 99% of my net worth in Berkshire. My wife and I have never sold a share nor do we intend to. Charlie and I are disgusted by the situation, so common in the last few years, in which shareholders have suffered billions in losses while the CEOs, promoters, and other higher-ups who fathered these disasters have walked away with extraordinary wealth. Indeed, many of these people were urging investors to buy shares while concurrently dumping their own, sometimes using methods that hid their actions. To their shame, these business leaders view shareholders as patsies, not partners.
Though Enron has become the symbol for shareholder abuse, there is no shortage of egregious conduct elsewhere in corporate America. One story I've heard illustrates the all-too-common attitude of managers toward owners: A gorgeous woman slinks up to a CEO at a party and through moist lips purrs, “I’ll do anything – anything – you want. Just tell me what you would like.” With no hesitation, he replies, “Reprice my options.”
One final thought about Berkshire: In the future we won't come close to replicating our past record. To be sure, Charlie and I will strive for above-average performance and will not be satisfied with less. But two conditions at Berkshire are far different from what they once were: Then, we could often buy businesses and securities at much lower valuations than now prevail; and more important, we were then working with far less money than we now have. Some years back, a good \$10 million idea could do wonders for us (witness our investment in Washington Post in 1973 or GEICO in 1976). Today, the combination of ten such ideas and a triple in the value of each would increase the net worth of Berkshire by only $\frac{1}{4}$ of 1%. We need “elephants” to make significant gains now – and they are hard to find.
On the positive side, we have as fine an array of operating managers as exists at any company. (You can read about many of them in a new book by Robert P. Miles: The Warren Buffett CEO.) In large part, moreover, they are running businesses with economic characteristics ranging from good to superb. The ability, energy and loyalty of these managers is simply extraordinary. We now have completed 37 Berkshire years without having a CEO of an operating business elect to leave us to work elsewhere.
Our star-studded group grew in 2001. First, we completed the purchases of two businesses that we had agreed to buy in 2000 – Shaw and Johns Manville. Then we acquired two others, MiTek and XTRA, and contracted to buy two more: Larson-Juhl, an acquisition that has just closed, and Fruit of the Loom, which will close shortly if creditors approve our offer. All of these businesses are led by smart, seasoned and trustworthy CEOs.
Additionally, all of our purchases last year were for cash, which means our shareholders became owners of these additional businesses without relinquishing any interest in the fine companies they already owned. We will continue to follow our familiar formula, striving to increase the value of the excellent businesses we have, adding new businesses of similar quality, and issuing shares only grudgingly.
Acquisitions of 2001
A few days before last year's annual meeting, I received a heavy package from St. Louis, containing an unprepossessing chunk of metal whose function I couldn't imagine. There was a letter in the package, though, from Gene Toombs, CEO of a company called MiTek. He explained that MiTek is the world's leading producer of this thing I'd received, a “connector plate,” which is used in making roofing trusses. Gene also said that the U.K. parent of MiTek wished to sell the company and that Berkshire seemed to him the ideal buyer. Liking the sound of his letter, I gave Gene a call. It took me only a minute to realize that he was our kind of manager and MiTek our kind of business. We made a cash offer to the U.K. owner and before long had a deal.
Gene's managerial crew is exceptionally enthusiastic about the company and wanted to participate in the purchase. Therefore, we arranged for 55 members of the MiTek team to buy $10\%$ of the company, with each putting up a minimum of \$100,000 in cash. Many borrowed money so they could participate.
As they would not be if they had options, all of these managers are true owners. They face the downside of decisions as well as the upside. They incur a cost of capital. And they can't “reprice” their stakes: What they paid is what they live with.
Charlie and I love the high-grade, truly entrepreneurial attitude that exists at MiTek, and we predict it will be a winner for all involved.
* * * * * * * * * * * *
In early 2000, my friend, Julian Robertson, announced that he would terminate his investment partnership, Tiger Fund, and that he would liquidate it entirely except for four large holdings. One of these was XTRA, a leading lessor of truck trailers. I then called Julian, asking whether he might consider selling his XTRA block or whether, for that matter, the company's management might entertain an offer for the entire company. Julian referred me to Lew Rubin, XTRA's CEO. He and I had a nice conversation, but it was apparent that no deal was to be done.
Then in June 2001, Julian called to say that he had decided to sell his XTRA shares, and I resumed conversations with Lew. The XTRA board accepted a proposal we made, which was to be effectuated through a tender offer expiring on September 11 $^{th}$ . The tender conditions included the usual “out,” allowing us to withdraw if the stock market were to close before the offer's expiration. Throughout much of the $11^{\text{th}}$ , Lew went through a particularly wrenching experience: First, he had a son-in-law working in the World Trade Center who couldn't be located; and second, he knew we had the option of backing away from our purchase. The story ended happily: Lew's son-in-law escaped serious harm, and Berkshire completed the transaction.
Trailer leasing is a cyclical business but one in which we should earn decent returns over time. Lew brings a new talent to Berkshire, and we hope to expand in leasing.
* * * * * * * * * * * *
On December $3^{rd}$ , I received a call from Craig Ponzio, owner of Larson-Juhl, the U.S. leader in custom-made picture frames. Craig had bought the company in 1981 (after first working at its manufacturing plant while attending college) and thereafter increased its sales from \$3 million to \$300 million. Though I had never heard of Larson-Juhl before Craig's call, a few minutes talk with him made me think we would strike a deal. He was straightforward in describing the business, cared about who bought it, and was realistic as to price. Two days later, Craig and Steve McKenzie, his CEO, came to Omaha and in ninety minutes we reached an agreement. In ten days we had signed a contract.
Larson-Juhl serves about 18,000 framing shops in the U.S. and is also the industry leader in Canada and much of Europe. We expect to see opportunities for making complementary acquisitions in the future.
* * * * * * * * * * *
As I write this letter, creditors are considering an offer we have made for Fruit of the Loom. The company entered bankruptcy a few years back, a victim both of too much debt and poor management. And, a good many years before that, I had some Fruit of the Loom experience of my own.
In August 1955, I was one of five employees, including two secretaries, working for the three managers of Graham-Newman Corporation, a New York investment company. Graham-Newman controlled Philadelphia and Reading Coal and Iron (“P&R”), an anthracite producer that had excess cash, a tax loss carryforward, and a declining business. At the time, I had a significant portion of my limited net worth invested in P&R shares, reflecting my faith in the business talents of my bosses, Ben Graham, Jerry Newman and Howard (Micky) Newman.
This faith was rewarded when P&R purchased the Union Underwear Company from Jack Goldfarb for \$15 million. Union (though it was then only a licensee of the name) produced Fruit of the Loom underwear. The company possessed \$5 million in cash – \$2.5 million of which P&R used for the purchase – and was earning about \$3 million pre-tax, earnings that could be sheltered by the tax position of P&R. And, oh yes: Fully \$9 million of the remaining \$12.5 million due was satisfied by non-interest-bearing notes, payable from 50% of any earnings Union had in excess of \$1 million. (Those were the days; I get goosebumps just thinking about such deals.)
Subsequently, Union bought the licensor of the Fruit of the Loom name and, along with P&R, was merged into Northwest Industries. Fruit went on to achieve annual pre-tax earnings exceeding \$200 million.
John Holland was responsible for Fruit's operations in its most bountiful years. In 1996, however, John retired, and management loaded the company with debt, in part to make a series of acquisitions that proved disappointing. Bankruptcy followed. John was then rehired, and he undertook a major reworking of operations. Before John's return, deliveries were chaotic, costs soared and relations with key customers deteriorated. While correcting these problems, John also reduced employment from a bloated 40,000 to 23,000. In short, he's been restoring the old Fruit of the Loom, albeit in a much more competitive environment.
Stepping into Fruit's bankruptcy proceedings, we made a proposal to creditors to which we attached no financing conditions, even though our offer had to remain outstanding for many months. We did, however, insist on a very unusual proviso: John had to be available to continue serving as CEO after we took over. To us, John and the brand are Fruit's key assets.
I was helped in this transaction by my friend and former boss, Micky Newman, now 81. What goes around truly does come around.
* * * * * * * * * * * *
Our operating companies made several “bolt-on” acquisitions during the year, and I can’t resist telling you about one. In December, Frank Rooney called to tell me H.H. Brown was buying the inventory and trademarks of Acme Boot for \$700,000.
That sounds like small potatoes. But – would you believe it? – Acme was the second purchase of P&R, an acquisition that took place just before I left Graham-Newman in the spring of 1956. The price was \$3.2 million, part of it again paid with non-interest bearing notes, for a business with sales of \$7 million.
After P&R merged with Northwest, Acme grew to be the world's largest bootmaker, delivering annual profits many multiples of what the company had cost P&R. But the business eventually hit the skids and never recovered, and that resulted in our purchasing Acme's remnants.
In the frontispiece to Security Analysis, Ben Graham and Dave Dodd quoted Horace: “Many shall be restored that now are fallen and many shall fall that are now in honor.” Fifty-two years after I first read those lines, my appreciation for what they say about business and investments continues to grow.
* * * * * * * * * * * *
In addition to bolt-on acquisitions, our managers continually look for ways to grow internally. In that regard, here's a postscript to a story I told you two years ago about R.C. Willey's move to Boise. As you may remember, Bill Child, R.C. Willey's chairman, wanted to extend his home-furnishings operation beyond Utah, a state in which his company does more than \$300 million of business (up, it should be noted, from \$250,000 when Bill took over 48 years ago). The company achieved this dominant position, moreover, with a “closed on Sunday” policy that defied conventional retailing wisdom. I was skeptical that this policy could succeed in Boise or, for that matter, anyplace outside of Utah. After all, Sunday is the day many consumers most like to shop.
Bill then insisted on something extraordinary: He would invest \$11 million of his own money to build the Boise store and would sell it to Berkshire at cost (without interest!) if the venture succeeded. If it failed, Bill would keep the store and eat the loss on its disposal. As I told you in the 1999 annual report, the store immediately became a huge success — and it has since grown.
Shortly after the Boise opening, Bill suggested we try Las Vegas, and this time I was even more skeptical. How could we do business in a metropolis of that size and be closed on Sundays, a day that all of our competitors would be exploiting? Buoyed by the Boise experience, however, we proceeded to locate in Henderson, a mushrooming city adjacent to Las Vegas.
The result: This store outsells all others in the R.C. Willey chain, doing a volume of business that far exceeds the volume of any competitor and that is twice what I had anticipated. I cut the ribbon at the grand opening in October – this was after a “soft” opening and a few weeks of exceptional sales – and, just as I did at Boise, I suggested to the crowd that the new store was my idea.
It didn't work. Today, when I pontificate about retailing, Berkshire people just say, "What does Bill think?" (I'm going to draw the line, however, if he suggests that we also close on Saturdays.)
The Economics of Property/Casualty Insurance
Our main business — though we have others of great importance — is insurance. To understand Berkshire, therefore, it is necessary that you understand how to evaluate an insurance company. The key determinants are: (1) the amount of float that the business generates; (2) its cost; and (3) most critical of all, the long-term outlook for both of these factors.
To begin with, float 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.
Historically, Berkshire has obtained its float at a very low cost. Indeed, our cost has been less than zero in about half of the years in which we’ve operated; that is, we’ve actually been paid for holding other people’s money. Over the last few years, however, our cost has been too high, and in 2001 it was terrible.
The table that follows shows (at intervals) the float generated by the various segments of Berkshire's insurance operations since we entered the business 35 years ago upon acquiring National Indemnity Company (whose traditional lines are included in the segment “Other Primary”). For the table we have calculated our float — which we generate in large amounts relative to our premium volume — by adding net loss reserves, loss adjustment reserves, funds held under reinsurance assumed and unearned premium reserves, and then subtracting insurance-related receivables, prepaid acquisition costs, prepaid taxes and deferred charges applicable to assumed reinsurance. (Got that?)
Yearend Float (in \$ millions)
| Year | GEICO | General Re | Other Reinsurance | Other Primary | Total |
| 1967 | 20 | 20 | |||
| 1977 | 40 | 131 | 171 | ||
| 1987 | 701 | 807 | 1,508 | ||
| 1997 | 2,917 | 4,014 | 455 | 7,386 | |
| 1998 | 3,125 | 14,909 | 4,305 | 415 | 22,754 |
| 1999 | 3,444 | 15,166 | 6,285 | 403 | 25,298 |
| 2000 | 3,943 | 15,525 | 7,805 | 598 | 27,871 |
| 2001 | 4,251 | 19,310 | 11,262 | 685 | 35,508 |
Last year I told you that, barring a mega-catastrophe, our cost of float would probably drop from its 2000 level of 6%. I had in mind natural catastrophes when I said that, but instead we were hit by a man-made catastrophe on September 11 $^{th}$ – an event that delivered the insurance industry its largest loss in history. Our float cost therefore came in at a staggering 12.8%. It was our worst year in float cost since 1984, and a result that to a significant degree, as I will explain in the next section, we brought upon ourselves.
If no mega-catastrophe occurs, I – once again – expect the cost of our float to be low in the coming year. We will indeed need a low cost, as will all insurers. Some years back, float costing, say, 4% was tolerable because government bonds yielded twice as much, and stocks prospectively offered still loftier returns. Today, fat returns are nowhere to be found (at least we can’t find them) and short-term funds earn less than 2%. Under these conditions, each of our insurance operations, save one, must deliver an underwriting profit if it is to be judged a good business. The exception is our retroactive reinsurance operation (a business we explained in last year’s annual report), which has desirable economics even though it currently hits us with an annual underwriting loss of about \$425 million.
Principles of Insurance Underwriting
When property/casualty companies are judged by their cost of float, very few stack up as satisfactory businesses. And interestingly – unlike the situation prevailing in many other industries – neither size nor brand name determines an insurer’s profitability. Indeed, many of the biggest and best-known companies regularly deliver mediocre results. What counts in this business is underwriting discipline. The winners are those that unfailingly stick to three key principles:
- They accept only those risks that they are able to properly evaluate (staying within their circle of competence) and that, after they have evaluated all relevant factors including remote loss scenarios, carry the expectancy of profit. These insurers ignore market-share considerations and are sanguine about losing business to competitors that are offering foolish prices or policy conditions.
-
They limit the business they accept in a manner that guarantees they will suffer no aggregation of losses from a single event or from related events that will threaten their solvency. They ceaselessly search for possible correlation among seemingly-unrelated risks.
-
They avoid business involving moral risk: No matter what the rate, trying to write good contracts with bad people doesn't work. While most policyholders and clients are honorable and ethical, doing business with the few exceptions is usually expensive, sometimes extraordinarily so.
The events of September 11 $^{th}$ made it clear that our implementation of rules 1 and 2 at General Re had been dangerously weak. In setting prices and also in evaluating aggregation risk, we had either overlooked or dismissed the possibility of large-scale terrorism losses. That was a relevant underwriting factor, and we ignored it.
In pricing property coverages, for example, we had looked to the past and taken into account only costs we might expect to incur from windstorm, fire, explosion and earthquake. But what will be the largest insured property loss in history (after adding related business-interruption claims) originated from none of these forces. In short, all of us in the industry made a fundamental underwriting mistake by focusing on experience, rather than exposure, thereby assuming a huge terrorism risk for which we received no premium.
Experience, of course, is a highly useful starting point in underwriting most coverages. For example, it's important for insurers writing California earthquake policies to know how many quakes in the state during the past century have registered 6.0 or greater on the Richter scale. This information will not tell you the exact probability of a big quake next year, or where in the state it might happen. But the statistic has utility, particularly if you are writing a huge statewide policy, as National Indemnity has done in recent years.
At certain times, however, using experience as a guide to pricing is not only useless, but actually dangerous. Late in a bull market, for example, large losses from directors and officers liability insurance (“D&O”) are likely to be relatively rare. When stocks are rising, there are a scarcity of targets to sue, and both questionable accounting and management chicanery often go undetected. At that juncture, experience on high-limit D&O may look great.
But that's just when exposure is likely to be exploding, by way of ridiculous public offerings, earnings manipulation, chain-letter-like stock promotions and a potpourri of other unsavory activities. When stocks fall, these sins surface, hammering investors with losses that can run into the hundreds of billions. Juries deciding whether those losses should be borne by small investors or big insurance companies can be expected to hit insurers with verdicts that bear little relation to those delivered in bull-market days. Even one jumbo judgment, moreover, can cause settlement costs in later cases to mushroom. Consequently, the correct rate for D&O “excess” (meaning the insurer or reinsurer will pay losses above a high threshold) might well, if based on exposure, be five or more times the premium dictated by experience.
Insurers have always found it costly to ignore new exposures. Doing that in the case of terrorism, however, could literally bankrupt the industry. No one knows the probability of a nuclear detonation in a major metropolis this year (or even multiple detonations, given that a terrorist organization able to construct one bomb might not stop there). Nor can anyone, with assurance, assess the probability in this year, or another, of deadly biological or chemical agents being introduced simultaneously (say, through ventilation systems) into multiple office buildings and manufacturing plants. An attack like that would produce astronomical workers' compensation claims.
Here's what we do know:
(a) The probability of such mind-boggling disasters, though likely very low at present, is not zero.
(b) The probabilities are increasing, in an irregular and immeasurable manner, as knowledge and materials become available to those who wish us ill. Fear may recede with time, but the danger won't – the war against terrorism can never be won. The best the nation can achieve is a long succession of stalemates. There can be no checkmate against hydra-headed foes.
(c) Until now, insurers and reinsurers have blithely assumed the financial consequences from the incalculable risks I have described.
(d) Under a “close-to-worst-case” scenario, which could conceivably involve \$1 trillion of damage, the insurance industry would be destroyed unless it manages in some manner to dramatically limit its assumption of terrorism risks. Only the U.S. Government has the resources to absorb such a blow. If it is unwilling to do so on a prospective basis, the general citizenry must bear its own risks and count on the Government to come to its rescue after a disaster occurs.
Why, you might ask, didn't I recognize the above facts before September $11^{\text{th}}$ ? The answer, sadly, is that I did – but I didn't convert thought into action. I violated the Noah rule: Predicting rain doesn't count; building arks does. I consequently let Berkshire operate with a dangerous level of risk – at General Re in particular. I'm sorry to say that much risk for which we haven't been compensated remains on our books, but it is running off by the day.
At Berkshire, it should be noted, we have for some years been willing to assume more risk than any other insurer has knowingly taken on. That's still the case. We are perfectly willing to lose \$2 billion to $2\frac{1}{2}$ billion in a single event (as we did on September 11 $^{th}$ ) if we have been paid properly for assuming the risk that caused the loss (which on that occasion we weren't).
Indeed, we have a major competitive advantage because of our tolerance for huge losses. Berkshire has massive liquid resources, substantial non-insurance earnings, a favorable tax position and a knowledgeable shareholder constituency willing to accept volatility in earnings. This unique combination enables us to assume risks that far exceed the appetite of even our largest competitors. Over time, insuring these jumbo risks should be profitable, though periodically they will bring on a terrible year.
The bottom-line today is that we will write some coverage for terrorist-related losses, including a few non-correlated policies with very large limits. But we will not knowingly expose Berkshire to losses beyond what we can comfortably handle. We will control our total exposure, no matter what the competition does.
Insurance Operations in 2001
Over the years, our insurance business has provided ever-growing, low-cost funds that have fueled much of Berkshire's growth. Charlie and I believe this will continue to be the case. But we stumbled in a big way in 2001, largely because of underwriting losses at General Re.
In the past I have assured you that General Re was underwriting with discipline – and I have been proven wrong. Though its managers’ intentions were good, the company broke each of the three underwriting rules I set forth in the last section and has paid a huge price for doing so. One obvious cause for its failure is that it did not reserve correctly – more about this in the next section – and therefore severely miscalculated the cost of the product it was selling. Not knowing your costs will cause problems in any business. In long-tail reinsurance, where years of unawareness will promote and prolong severe underpricing, ignorance of true costs is dynamite.
Additionally, General Re was overly-competitive in going after, and retaining, business. While all concerned may intend to underwrite with care, it is nonetheless difficult for able, hard-driving professionals to curb their urge to prevail over competitors. If “winning,” however, is equated with market share rather than profits, trouble awaits. “No” must be an important part of any underwriter’s vocabulary.
At the risk of sounding Pollyannaish, I now assure you that underwriting discipline is being restored at General Re (and its Cologne Re subsidiary) with appropriate urgency. Joe Brandon was appointed General Re's CEO in September and, along with Tad Montross, its new president, is committed to producing underwriting profits. Last fall, Charlie and I read Jack Welch's terrific book, Jack, Straight from the Gut (get a copy!). In discussing it, we agreed that Joe has many of Jack's characteristics: He is smart, energetic, hands-on, and expects much of both himself and his organization.
When it was an independent company, General Re often shone, and now it also has the considerable strengths Berkshire brings to the table. With that added advantage and with underwriting discipline restored, General Re should be a huge asset for Berkshire. I predict that Joe and Tad will make it so.
* * * * * * * * * * * *
At the National Indemnity reinsurance operation, Ajit Jain continues to add enormous value to Berkshire. Working with only 18 associates, Ajit manages one of the world's largest reinsurance operations measured by assets, and the largest, based upon the size of individual risks assumed.
I have known the details of almost every policy that Ajit has written since he came with us in 1986, and never on even a single occasion have I seen him break any of our three underwriting rules. His extraordinary discipline, of course, does not eliminate losses; it does, however, prevent foolish losses. And that's the key: Just as is the case in investing, insurers produce outstanding long-term results primarily by avoiding dumb decisions, rather than by making brilliant ones.
Since September 11 $^{th}$ , Ajit has been particularly busy. Among the policies we have written and retained entirely for our own account are (1) \$578 million of property coverage for a South American refinery once a loss there exceeds \$1 billion; (2) \$1 billion of non-cancelable third-party liability coverage for losses arising from acts of terrorism at several large international airlines; (3) £500 million of property coverage on a large North Sea oil platform, covering losses from terrorism and sabotage, above £600 million that the insured retained or reinsured elsewhere; and (4) significant coverage on the Sears Tower, including losses caused by terrorism, above a \$500 million threshold. We have written many other jumbo risks as well, such as protection for the World Cup Soccer Tournament and the 2002 Winter Olympics. In all cases, however, we have attempted to avoid writing groups of policies from which losses might seriously aggregate. We will not, for example, write coverages on a large number of office and apartment towers in a single metropolis without excluding losses from both a nuclear explosion and the fires that would follow it.
No one can match the speed with which Ajit can offer huge policies. After September 11 $^{th}$ , his quickness to respond, always important, has become a major competitive advantage. So, too, has our unsurpassed financial strength. Some reinsurers – particularly those who, in turn, are accustomed to laying off much of their business on a second layer of reinsurers known as retrocessionaires – are in a weakened condition and would have difficulty surviving a second mega-cat. When a daisy chain of retrocessionaires exists, a single weak link can pose trouble for all. In assessing the soundness of their reinsurance protection, insurers must therefore apply a stress test to all participants in the chain, and must contemplate a catastrophe loss occurring during a very unfavorable economic environment. After all, you only find out who is swimming naked when the tide goes out. At Berkshire, we retain our risks and depend on no one. And whatever the world’s problems, our checks will clear.
Ajit's business will ebb and flow – but his underwriting principles won't waver. It's impossible to overstate his value to Berkshire.
* * * * * * * * * * * *
GEICO, by far our largest primary insurer, made major progress in 2001, thanks to Tony Nicely, its CEO, and his associates. Quite simply, Tony is an owner's dream.
GEICO’s premium volume grew 6.6% last year, its float grew \$308 million, and it achieved an underwriting profit of \$221 million. This means we were actually paid that amount last year to hold the \$4.25 billion in float, which of course doesn’t belong to Berkshire but can be used by us for investment.
The only disappointment at GEICO in 2001 – and it’s an important one – was our inability to add policyholders. Our preferred customers (81% of our total) grew by 1.6% but our standard and non-standard policies fell by 10.1%. Overall, policies in force fell .8%.
New business has improved in recent months. Our closure rate from telephone inquiries has climbed, and our Internet business continues its steady growth. We, therefore, expect at least a modest gain in policy count during 2002. Tony and I are eager to commit much more to marketing than the \$219 million we spent last year, but at the moment we cannot see how to do so effectively. In the meantime, our operating costs are low and far below those of our major competitors; our prices are attractive; and our float is cost-free and growing.
* * * * * * * * * * * *
Our other primary insurers delivered their usual fine results last year. These operations, run by Rod Eldred, John Kizer, Tom Nerney, Michael Stearns, Don Towle and Don Wurster had combined premium volume of \$579 million, up 40% over 2000. Their float increased 14.5% to \$685 million, and they recorded an underwriting profit of \$30 million. In aggregate, these companies are one of the finest insurance operations in the country, and their 2002 prospects look excellent.
"Loss Development" and Insurance Accounting
Bad terminology is the enemy of good thinking. When companies or investment professionals use terms such as “EBITDA” and “pro forma,” they want you to unthinkingly accept concepts that are dangerously flawed. (In golf, my score is frequently below par on a pro forma basis: I have firm plans to “restructure” my putting stroke and therefore only count the swings I take before reaching the green.)
In insurance reporting, “loss development” is a widely used term – and one that is seriously misleading. First, a definition: Loss reserves at an insurer are not funds tucked away for a rainy day, but rather a liability account. If properly calculated, the liability states the amount that an insurer will have to pay for all losses (including associated costs) that have occurred prior to the reporting date but have not yet been paid. When calculating the reserve, the insurer will have been notified of many of the losses it is destined to pay, but others will not yet have been reported to it. These losses are called IBNR, for incurred but not reported. Indeed, in some cases (involving, say, product liability or embezzlement) the insured itself will not yet be aware that a loss has occurred.
It’s clearly difficult for an insurer to put a figure on the ultimate cost of all such reported and unreported events. But the ability to do so with reasonable accuracy is vital. Otherwise the insurer’s managers won’t know what its actual loss costs are and how these compare to the premiums being charged. GEICO got into huge trouble in the early 1970s because for several years it severely underreserved, and therefore believed its product (insurance protection) was costing considerably less than was truly the case. Consequently, the company sailed blissfully along, underpricing its product and selling more and more policies at ever-larger losses.
When it becomes evident that reserves at past reporting dates understated the liability that truly existed at the time, companies speak of “loss development.” In the year discovered, these shortfalls penalize reported earnings because the “catch-up” costs from prior years must be added to current-year costs when results are calculated. This is what happened at General Re in 2001: a staggering \$800 million of loss costs that actually occurred in earlier years, but that were not then recorded, were belatedly recognized last year and charged against current earnings. The mistake was an honest one, I can assure you of that. Nevertheless, for several years, this underreserving caused us to believe that our costs were much lower than they truly were, an error that contributed to woefully inadequate pricing. Additionally, the overstated profit figures led us to pay substantial incentive compensation that we should not have and to incur income taxes far earlier than was necessary.
We recommend scrapping the term “loss development” and its equally ugly twin, “reserve strengthening.” (Can you imagine an insurer, upon finding its reserves excessive, describing the reduction that follows as “reserve weakening”?) “Loss development” suggests to investors that some natural, uncontrollable event has occurred in the current year, and “reserve strengthening” implies that adequate amounts have been further buttressed. The truth, however, is that management made an error in estimation that in turn produced an error in the earnings previously reported. The losses didn’t “develop” – they were there all along. What developed was management’s understanding of the losses (or, in the instances of chicanery, management’s willingness to finally fess up).
A more forthright label for the phenomenon at issue would be “loss costs we failed to recognize when they occurred” (or maybe just “oops”). Underreserving, it should be noted, is a common – and serious – problem throughout the property/casualty insurance industry. At Berkshire we told you of our own problems with underestimation in 1984 and 1986. Generally, however, our reserving has been conservative.
Major underreserving is common in cases of companies struggling for survival. In effect, insurance accounting is a self-graded exam, in that the insurer gives some figures to its auditing firm and generally doesn't get an argument. (What the auditor gets, however, is a letter from management that is designed to take his firm off the hook if the numbers later look silly.) A company experiencing financial difficulties – of a kind that, if truly faced, could put it out of business – seldom proves to be a tough grader. Who, after all, wants to prepare his own execution papers?
Even when companies have the best of intentions, it's not easy to reserve properly. I've told the story in the past about the fellow traveling abroad whose sister called to tell him that their dad had died. The brother replied that it was impossible for him to get home for the funeral; he volunteered, however, to shoulder its cost. Upon returning, the brother received a bill from the mortuary for \$4,500, which he promptly paid. A month later, and a month after that also, he paid \$10 pursuant to an add-on invoice. When a third \$10 invoice came, he called his sister for an explanation. "Oh," she replied, "I forgot to tell you. We buried dad in a rented suit."
There are a lot of “rented suits” buried in the past operations of insurance companies. Sometimes the problems they signify lie dormant for decades, as was the case with asbestos liability, before virulently manifesting themselves. Difficult as the job may be, it’s management’s responsibility to adequately account for all possibilities. Conservatism is essential. When a claims manager walks into the CEO’s office and says “Guess what just happened,” his boss, if a veteran, does not expect to hear it’s good news. Surprises in the insurance world have been far from symmetrical in their effect on earnings.
Because of this one-sided experience, it is folly to suggest, as some are doing, that all property/casualty insurance reserves be discounted, an approach reflecting the fact that they will be paid in the future and that therefore their present value is less than the stated liability for them. Discounting might be acceptable if reserves could be precisely established. They can't, however, because a myriad of forces – judicial broadening of policy language and medical inflation, to name just two chronic problems – are constantly working to make reserves inadequate. Discounting would exacerbate this already-serious situation and, additionally, would provide a new tool for the companies that are inclined to fudge.
I'd say that the effects from telling a profit-challenged insurance CEO to lower reserves through discounting would be comparable to those that would ensue if a father told his 16-year-old son to have a normal sex life. Neither party needs that kind of push.
Sources of Reported Earnings
The table that follows shows the main sources of Berkshire's reported earnings. In this presentation, purchase-accounting adjustments (primarily relating to “goodwill”) are not assigned to the specific businesses to which they apply, but are instead aggregated and shown separately. This procedure lets you view the earnings of our businesses as they would have been reported had we not purchased them. In recent years, our “expense” for goodwill amortization has been large. Going forward, generally accepted accounting principles (“GAAP”) will no longer require amortization of goodwill. This change will increase our reported earnings (though not our true economic earnings) and simplify this section of the report.
| (in millions) | ||||
| Pre-Tax Earnings | Berkshire’s Share of Net Earnings(after taxes and Minority interests) | |||
| 2001 | 2000 | 2001 | 2000 | |
| Operating Earnings: | ||||
| Insurance Group: | ||||
| Underwriting – Reinsurance | $(4,318) | $(1,416) | $(2,824) | $(911) |
| Underwriting – GEICO | 221 | (224) | 144 | (146) |
| Underwriting – Other Primary | 30 | 25 | 18 | 16 |
| Net Investment Income | 2,824 | 2,773 | 1,968 | 1,946 |
| Building Products(1) | 461 | 34 | 287 | 21 |
| Finance and Financial Products Business | 519 | 530 | 336 | 343 |
| Flight Services | 186 | 213 | 105 | 126 |
| MidAmerican Energy (76% owned) | 600 | 197 | 230 | 109 |
| Retail Operations | 175 | 175 | 101 | 104 |
| Scott Fetzer (excluding finance operation) | 129 | 122 | 83 | 80 |
| Shaw Industries(2) | 292 | -- | 156 | -- |
| Other Businesses | 179 | 221 | 103 | 133 |
| Purchase-Accounting Adjustments | (726) | (881) | (699) | (843) |
| Corporate Interest Expense | (92) | (92) | (60) | (61) |
| Shareholder-Designated Contributions | (17) | (17) | (11) | (11) |
| Other | 25 | 39 | 16 | 30 |
| Operating Earnings | 488 | 1,699 | (47) | 936 |
| Capital Gains from Investments | 1,320 | 3,955 | 842 | 2,392 |
| Total Earnings – All Entities | $1,808 | $5,654 | $ 795 | $3,328 |
(1) Includes Acme Brick from August 1, 2000; Benjamin Moore from December 18, 2000; Johns Manville from February 27, 2001; and MiTek from July 31, 2001.
$^{(2)}$ From date of acquisition, January 8, 2001.
Here are some highlights (and lowlights) from 2001 relating to our non-insurance activities:
- Our shoe operations (included in “other businesses”) lost \$46.2 million pre-tax, with profits at H.H. Brown and Justin swamped by losses at Dexter.
I've made three decisions relating to Dexter that have hurt you in a major way: (1) buying it in the first place; (2) paying for it with stock and (3) procrastinating when the need for changes in its operations was obvious. I would like to lay these mistakes on Charlie (or anyone else, for that matter) but they were mine. Dexter, prior to our purchase – and indeed for a few years after – prospered despite low-cost foreign competition that was brutal. I concluded that Dexter could continue to cope with that problem, and I was wrong.
We have now placed the Dexter operation – which is still substantial in size – under the management of Frank Rooney and Jim Issler at H.H. Brown. These men have performed outstandingly for Berkshire, skillfully contending with the extraordinary changes that have bedeviled the footwear industry. During part of 2002, Dexter will be hurt by unprofitable sales commitments it made last year. After that, we believe our shoe business will be reasonably profitable.
- MidAmerican Energy, of which we own 76% on a fully-diluted basis, had a good year in 2001. Its reported earnings should also increase considerably in 2002 given that the company has been shouldering a large charge for the amortization of goodwill and that this “cost” will disappear under the new GAAP rules.
Last year MidAmerican swapped some properties in England, adding Yorkshire Electric, with its 2.1 million customers. We are now serving 3.6 million customers in the U.K. and are its $2^{nd}$ largest electric utility. We have an equally important operation in Iowa as well as major generating facilities in California and the Philippines.
At MidAmerican – this may surprise you – we also own the second-largest residential real estate brokerage business in the country. We are market-share leaders in a number of large cities, primarily in the Midwest, and have recently acquired important firms in Atlanta and Southern California. Last year, operating under various names that are locally familiar, we handled about 106,000 transactions involving properties worth nearly \$20 billion. Ron Peltier has built this business for us, and it’s likely he will make more acquisitions in 2002 and the years to come.
- Considering the recessionary environment plaguing them, our retailing operations did well in 2001. In jewelry, same-store sales fell 7.6% and pre-tax margins were 8.9% versus 10.7% in 2000. Return on invested capital remains high.
Same-store sales at our home-furnishings retailers were unchanged and so was the margin - 9.1% pre-tax - these operations earned. Here, too, return on invested capital is excellent.
We continue to expand in both jewelry and home-furnishings. Of particular note, Nebraska Furniture Mart is constructing a mammoth 450,000 square foot store that will serve the greater Kansas City area beginning in the fall of 2003. Despite Bill Child's counter-successes, we will keep this store open on Sundays.
- The large acquisitions we initiated in late 2000 – Shaw, Johns Manville and Benjamin Moore – all came through their first year with us in great fashion. Charlie and I knew at the time of our purchases that we were in good hands with Bob Shaw, Jerry Henry and Yvan Dupuy, respectively – and we admire their work even more now. Together these businesses earned about \$659 million pre-tax.
Shortly after yearend we exchanged 4,740 Berkshire A shares (or their equivalent in B shares) for the $12.7\%$ minority interest in Shaw, which means we now own $100\%$ of the company. Shaw is our largest non-insurance operation and will play a big part in Berkshire's future.
- All of the income shown for Flight Services in 2001 – and a bit more – came from FlightSafety, our pilot-training subsidiary. Its earnings increased 2.5%, though return on invested capital fell slightly because of the \$258 million investment we made last year in simulators and other fixed assets. My 84-year-old friend, Al Ueltschi, continues to run FlightSafety with the same enthusiasm and competitive spirit that he has exhibited since 1951, when he invested \$10,000 to start the company. If I line Al up with a bunch of 60-year-olds at the annual meeting, you will not be able to pick him out.
After September 11 $^{th}$ , training for commercial airlines fell, and today it remains depressed. However, training for business and general aviation, our main activity, is at near-normal levels and should continue to grow. In 2002, we expect to spend \$162 million for 27 simulators, a sum far in excess of our annual depreciation charge of \$95 million. Those who believe that EBITDA is in any way equivalent to true earnings are welcome to pick up the tab.
Our NetJets® fractional ownership program sold a record number of planes last year and also showed a gain of 21.9% in service income from management fees and hourly charges. Nevertheless, it operated at a small loss, versus a small profit in 2000. We made a little money in the U.S., but these earnings were more than offset by European losses. Measured by the value of our customers' planes, NetJets accounts for about half of the industry. We believe the other participants, in aggregate, lost significant money.
Maintaining a premier level of safety, security and service was always expensive, and the cost of sticking to those standards was exacerbated by September 11 $^{th}$ . No matter how much the cost, we will continue to be the industry leader in all three respects. An uncompromising insistence on delivering only the best to his customers is embedded in the DNA of Rich Santulli, CEO of the company and the inventor of fractional ownership. I'm delighted with his fanaticism on these matters for both the company's sake and my family's: I believe the Buffetts fly more fractional-ownership hours – we log in excess of 800 annually – than does any other family. In case you're wondering, we use exactly the same planes and crews that serve NetJet's other customers.
NetJets experienced a spurt in new orders shortly after September 11 $^{th}$ , but its sales pace has since returned to normal. Per-customer usage declined somewhat during the year, probably because of the recession.
Both we and our customers derive significant operational benefits from our being the runaway leader in the fractional ownership business. We have more than 300 planes constantly on the go in the U.S. and can therefore be wherever a customer needs us on very short notice. The ubiquity of our fleet also reduces our “positioning” costs below those incurred by operators with smaller fleets.
These advantages of scale, and others we have, give NetJets a significant economic edge over competition. Under the competitive conditions likely to prevail for a few years, however, our advantage will at best produce modest profits.
- Our finance and financial products line of business now includes XTRA, General Re Securities (which is in a run-off mode that will continue for an extended period) and a few other relatively small operations. The bulk of the assets and liabilities in this segment, however, arise from a few fixed-income strategies, involving highly-liquid AAA securities, that I manage. This activity, which only makes sense when certain market relationships exist, has produced good returns in the past and has reasonable prospects for continuing to do so over the next year or two.
Investments
Below we present our common stock investments. Those that had a market value of more than \$500 million at the end of 2001 are itemized.
| 12/31/01 | |||
| Shares | Company | Cost | Market |
| (dollars in millions) | |||
| 151,610,700 | American Express Company | $ 1,470 | $ 5,410 |
| 200,000,000 | The Coca-Cola Company | 1,299 | 9,430 |
| 96,000,000 | The Gillette Company | 600 | 3,206 |
| 15,999,200 | H&R Block, Inc. | 255 | 715 |
| 24,000,000 | Moody’s Corporation | 499 | 957 |
| 1,727,765 | The Washington Post Company | 11 | 916 |
| 53,265,080 | Wells Fargo & Company | 306 | 2,315 |
| Others | 4,103 | 5,726 | |
| Total Common Stocks | $8,543 | $28,675 | |
We made few changes in our portfolio during 2001. As a group, our larger holdings have performed poorly in the last few years, some because of disappointing operating results. Charlie and I still like the basic businesses of all the companies we own. But we do not believe Berkshire's equity holdings as a group are undervalued.
Our restrained enthusiasm for these securities is matched by decidedly lukewarm feelings about the prospects for stocks in general over the next decade or so. I expressed my views about equity returns in a speech I gave at an Allen and Company meeting in July (which was a follow-up to a similar presentation I had made two years earlier) and an edited version of my comments appeared in a December 10 $^{th}$ Fortune article. I’m enclosing a copy of that article. You can also view the Fortune version of my 1999 talk at our website www.berkshirehathaway.com.
Charlie and I believe that American business will do fine over time but think that today's equity prices presage only moderate returns for investors. The market outperformed business for a very long period, and that phenomenon had to end. A market that no more than parallels business progress, however, is likely to leave many investors disappointed, particularly those relatively new to the game.
Here's one for those who enjoy an odd coincidence: The Great Bubble ended on March 10, 2000 (though we didn't realize that fact until some months later). On that day, the NASDAQ (recently 1,731) hit its all-time high of 5,132. That same day, Berkshire shares traded at \$40,800, their lowest price since mid-1997.
* * * * * * * * * * * *
During 2001, we were somewhat more active than usual in “junk” bonds. These are not, we should emphasize, suitable investments for the general public, because too often these securities live up to their name. We have never purchased a newly-issued junk bond, which is the only kind most investors are urged to buy. When losses occur in this field, furthermore, they are often disastrous: Many issues end up at a small fraction of their original offering price and some become entirely worthless.
Despite these dangers, we periodically find a few – a very few – junk securities that are interesting to us. And, so far, our 50-year experience in distressed debt has proven rewarding. In our 1984 annual report, we described our purchases of Washington Public Power System bonds when that issuer fell into disrepute. We’ve also, over the years, stepped into other apparent calamities such as Chrysler Financial, Texaco and RJR Nabisco – all of which returned to grace. Still, if we stay active in junk bonds, you can expect us to have losses from time to time.
Occasionally, a purchase of distressed bonds leads us into something bigger. Early in the Fruit of the Loom bankruptcy, we purchased the company's public and bank debt at about $50\%$ of face value. This was an unusual bankruptcy in that interest payments on senior debt were continued without interruption, which meant we earned about a $15\%$ current return. Our holdings grew to $10\%$ of Fruit's senior debt, which will probably end up returning us about $70\%$ of face value. Through this investment, we indirectly reduced our purchase price for the whole company by a small amount.
In late 2000, we began purchasing the obligations of FINOVA Group, a troubled finance company, and that, too, led to our making a major transaction. FINOVA then had about \$11 billion of debt outstanding, of which we purchased 13% at about two-thirds of face value. We expected the company to go into bankruptcy, but believed that liquidation of its assets would produce a payoff for creditors that would be well above our cost. As default loomed in early 2001, we joined forces with Leucadia National Corporation to present the company with a prepackaged plan for bankruptcy.
The plan as subsequently modified (and I'm simplifying here) provided that creditors would be paid 70% of face value (along with full interest) and that they would receive a newly-issued 7½% note for the 30% of their claims not satisfied by cash. To fund FINOVA's 70% distribution, Leucadia and Berkshire formed a jointly-owned entity – mellifluently christened Berkadia – that borrowed \$5.6 billion through FleetBoston and, in turn, re-lent this sum to FINOVA, concurrently obtaining a priority claim on its assets. Berkshire guaranteed 90% of the Berkadia borrowing and also has a secondary guarantee on the 10% for which Leucadia has primary responsibility. (Did I mention that I am simplifying?).
There is a spread of about two percentage points between what Berkadia pays on its borrowing and what it receives from FINOVA, with this spread flowing 90% to Berkshire and 10% to Leucadia. As I write this, each loan has been paid down to \$3.9 billion.
As part of the bankruptcy plan, which was approved on August 10, 2001, Berkshire also agreed to offer 70% of face value for up to \$500 million principal amount of the \$3.25 billion of new 7½% bonds that were issued by FINOVA. (Of these, we had already received \$426.8 million in principal amount because of our 13% ownership of the original debt.) Our offer, which was to run until September 26, 2001, could be withdrawn under a variety of conditions, one of which became operative if the New York Stock Exchange closed during the offering period. When that indeed occurred in the week of September 11 $^{th}$ , we promptly terminated the offer.
Many of FINOVA's loans involve aircraft assets whose values were significantly diminished by the events of September $11^{\text{th}}$ . Other receivables held by the company also were imperiled by the economic consequences of the attack that day. FINOVA's prospects, therefore, are not as good as when we made our proposal to the bankruptcy court. Nevertheless we feel that overall the transaction will prove satisfactory for Berkshire. Leucadia has day-to-day operating responsibility for FINOVA, and we have long been impressed with the business acumen and managerial talent of its key executives.
* * * * * * * * * * * *
It's déjà vu time again: In early 1965, when the investment partnership I ran took control of Berkshire, that company had its main banking relationships with First National Bank of Boston and a large New York City bank. Previously, I had done no business with either.
Fast forward to 1969, when I wanted Berkshire to buy the Illinois National Bank and Trust of Rockford. We needed \$10 million, and I contacted both banks. There was no response from New York. However, two representatives of the Boston bank immediately came to Omaha. They told me they would supply the money for our purchase and that we would work out the details later.
For the next three decades, we borrowed almost nothing from banks. (Debt is a four-letter word around Berkshire.) Then, in February, when we were structuring the FINOVA transaction, I again called Boston, where First National had morphed into FleetBoston. Chad Gifford, the company's president, responded just as Bill Brown and Ira Stepanian had back in 1969 – “you’ve got the money and we’ll work out the details later.”
And that's just what happened. FleetBoston syndicated a loan for \$6 billion (as it turned out, we didn't need \$400 million of it), and it was quickly oversubscribed by 17 banks throughout the world. Sooooo . . . if you ever need \$6 billion, just give Chad a call – assuming, that is, your credit is AAA.
* * * * * * * * * * * *
One more point about our investments: The media often report that “Buffett is buying” this or that security, having picked up the “fact” from reports that Berkshire files. These accounts are sometimes correct, but at other times the transactions Berkshire reports are actually being made by Lou Simpson, who runs a \$2 billion portfolio for GEICO that is quite independent of me. Normally, Lou does not tell me what he is buying or selling, and I learn of his activities only when I look at a GEICO portfolio summary that I receive a few days after the end of each month. Lou’s thinking, of course, is quite similar to mine, but we usually end up in different securities. That’s largely because he’s working with less money and can therefore invest in smaller companies than I. Oh, yes, there’s also another minor difference between us: In recent years, Lou’s performance has been far better than mine.
Charitable Contributions
Berkshire follows a highly unusual policy in respect to charitable contributions – but it’s one that Charlie and I believe is both rational and fair to owners.
First, we let our operating subsidiaries make their own charitable decisions, requesting only that the owners/managers who once ran these as independent companies make all donations to their personal charities from their own funds, instead of using company money. When our managers are using company funds, we trust them to make gifts in a manner that delivers commensurate tangible or intangible benefits to the operations they manage. Last year contributions from Berkshire subsidiaries totaled \$19.2 million.
At the parent company level, we make no contributions except those designated by shareholders. We do not match contributions made by directors or employees, nor do we give to the favorite charities of the Buffetts or the Mungers. However, prior to our purchasing them, a few of our subsidiaries had employee-match programs and we feel fine about their continuing them: It’s not our style to tamper with successful business cultures.
To implement our owners' charitable desires, each year we notify registered holders of A shares (A's represent 86.6% of our equity capital) of a per-share amount that they can instruct us to contribute to as many as three charities. Shareholders name the charity; Berkshire writes the check. Any organization that qualifies under the Internal Revenue Code can be designated by shareholders. Last year Berkshire made contributions of \$16.7 million at the direction of 5,700 shareholders, who named 3,550 charities as recipients. Since we started this program, our shareholders' gifts have totaled \$181 million.
Most public corporations eschew gifts to religious institutions. These, however, are favorite charities of our shareholders, who last year named 437 churches and synagogues to receive gifts. Additionally, 790 schools were recipients. A few of our larger shareholders, including Charlie and me, designate their personal foundations to get gifts, so that those entities can, in turn, disburse their funds widely.
I get a few letters every week criticizing Berkshire for contributing to Planned Parenthood. These letters are usually prompted by an organization that wishes to see boycotts of Berkshire products. The letters are invariably polite and sincere, but their writers are unaware of a key point: It’s not Berkshire, but rather its owners who are making charitable decisions – and these owners are about as diverse in their opinions as you can imagine. For example, they are probably on both sides of the abortion issue in roughly the same proportion as the American population. We’ll follow their instructions, whether they designate Planned Parenthood or Metro Right to Life, just as long as the charity possesses 501(c)(3) status. It’s as if we paid a dividend, which the shareholder then donated. Our form of disbursement, however, is more tax-efficient.
In neither the purchase of goods nor the hiring of personnel, do we ever consider the religious views, the gender, the race or the sexual orientation of the persons we are dealing with. It would not only be wrong to do so, it would be idiotic. We need all of the talent we can find, and we have learned that able and trustworthy managers, employees and suppliers come from a very wide spectrum of humanity.
* * * * * * * * * * *
To participate in our future charitable contribution programs, you must own Class A shares that are registered in the name of the actual owner, not the nominee name of a broker, bank or depository. Shares not so registered on August 31, 2002 will be ineligible for the 2002 program. When you get the contributions form from us, return it promptly. Designations received after the due date will not be honored.
The Annual Meeting
This year's annual meeting will be on Saturday, May 4, and we will again be at the Civic Auditorium. The doors will open at 7 a.m., the movie will begin at 8:30, and the meeting itself will commence at 9:30. There will be a short break at noon for food. (Sandwiches can be bought at the Civic's concession stands.) Except for that interlude, Charlie and I will answer questions until 3:30. Give us your best shot.
For at least the next year, the Civic, located downtown, is the only site available to us. We must therefore hold the meeting on either Saturday or Sunday to avoid the traffic and parking nightmare sure to occur on a weekday. Shortly, however, Omaha will have a new Convention Center with plenty of parking facilities. Assuming that we then head for the Center, I will poll shareholders to see whether you wish to return to the Monday meeting that was standard until 2000. We will decide that vote based on a count of shareholders, not shares. (This is not a system, however, we will ever institute to decide who should be CEO.)
An attachment to the proxy material that is enclosed with this report explains how you can obtain the credential you will need for admission to the meeting and other events. As for plane, hotel and car reservations, we have again signed up American Express (800-799-6634) to give you special help. They do a terrific job for us each year, and I thank them for it.
In our usual fashion, we will run buses from the larger hotels to the meeting. Afterwards, the buses will make trips back to the hotels and to Nebraska Furniture Mart, Borsheim's and the airport. Even so, you are likely to find a car useful.
We have added so many new companies to Berkshire this year that I'm not going to detail all of the products that we will be selling at the meeting. But come prepared to carry home everything from bricks to candy. And underwear, of course. Assuming our Fruit of the Loom purchase has closed by May 4, we will be selling Fruit's latest styles, which will make you your neighborhood's fashion leader. Buy a lifetime supply.
GEICO will have a booth staffed by a number of its top counselors from around the country, all of them ready to supply you with auto insurance quotes. In most cases, GEICO will be able to give you a special shareholder discount (usually 8%). This special offer is permitted by 41 of the 49 jurisdictions in which we operate. Bring the details of your existing insurance and check out whether we can save you money.
At the Omaha airport on Saturday, we will have the usual array of aircraft from NetJets® available for your inspection. Just ask a representative at the Civic about viewing any of these planes. If you buy what we consider an appropriate number of items during the weekend, you may well need your own plane to take them home. And, if you buy a fraction of a plane, we might even throw in a three-pack of briefs or boxers.
At Nebraska Furniture Mart, located on a 75-acre site on 72 $^{nd}$ Street between Dodge and Pacific, we will again be having “Berkshire Weekend” pricing, which means we will be offering our shareholders a discount that is customarily given only to employees. We initiated this special pricing at NFM five years ago, and sales during the “Weekend” grew from \$5.3 million in 1997 to \$11.5 million in 2001.
To get the discount, you must make your purchases on Thursday, May 2 through Monday, May 6 and also present your meeting credential. The period's special pricing will even apply to the products of several prestigious manufacturers that normally have ironclad rules against discounting but that, in the spirit of our shareholder weekend, have made an exception for you. We appreciate their cooperation. NFM is open from 10 a.m. to 9 p.m. on weekdays and 10 a.m. to 6 p.m. on Saturdays and Sundays.
Borsheim's — the largest jewelry store in the country except for Tiffany's Manhattan store — will have two shareholder-only events. The first will be a cocktail reception from 6 p.m. to 10 p.m. on Friday, May 3. The second, the main gala, will be from 9 a.m. to 5 p.m. on Sunday, May 5. Shareholder prices will be available Thursday through Monday, so if you wish to avoid the large crowds that will assemble on Friday evening and Sunday, come at other times and identify yourself as a shareholder. On Saturday, we will be open until 6 p.m. Borsheim's operates on a gross margin that is fully twenty percentage points below that of its major rivals, so the more you buy, the more you save (or at least that's what my wife and daughter tell me). Come by and let us perform a waletectomy on you.
In the mall outside of Borsheim's, we will have some of the world's top bridge experts available to play with our shareholders on Sunday afternoon. We expect Bob and Petra Hamman along with Sharon Osberg to host tables. Patrick Wolff, twice U.S. chess champion, will also be in the mall, taking on all comers — blindfolded!
Last year, Patrick played as many as six games simultaneously — with his blindfold securely in place — and this year will try for seven. Finally, Bill Robertie, one of only two players who have twice won the backgammon world championship, will be on hand to test your skill at that game. Come to the mall on Sunday for the Mensa Olympics.
Gorat's — my favorite steakhouse — will again be open exclusively for Berkshire shareholders on Sunday, May 5, and will be serving from 4 p.m. until 10 p.m. Please remember that to come to Gorat's on Sunday, you must have a reservation. To make one, call 402-551-3733 on April 1 (but not before). If Sunday is sold out, try Gorat's on one of the other evenings you will be in town. Show your sophistication by ordering a rare T-bone with a double order of hash browns.
The usual baseball game will be held at Rosenblatt Stadium at 7 p.m. on Saturday night. This year the Omaha Royals will play the Oklahoma RedHawks. Last year, in an attempt to emulate the career switch of Babe Ruth, I gave up pitching and tried batting. Bob Gibson, an Omaha native, was on the mound and I was terrified, fearing Bob's famous brush-back pitch. Instead, he delivered a fast ball in the strike zone, and with a Mark McGwire-like swing, I managed to connect for a hard grounder, which inexplicably died in the infield. I didn't run it out: At my age, I get winded playing a hand of bridge.
I'm not sure what will take place at the ballpark this year, but come out and be surprised. Our proxy statement contains instructions for obtaining tickets to the game. Those people ordering tickets to the annual meeting will receive a booklet containing all manner of information that should help you enjoy your visit in Omaha. There will be plenty of action in town. So come for Woodstock Weekend and join our Celebration of Capitalism at the Civic.
* * * * * * * * * * * *
Finally, I would like to thank the wonderful and incredibly productive crew at World Headquarters (all 5,246.5 square feet of it) who make my job so easy. Berkshire added about 40,000 employees last year, bringing our workforce to 110,000. At headquarters we added one employee and now have 14.8. (I've tried in vain to get JoEllen Rieck to change her workweek from four days to five; I think she likes the national recognition she gains by being .8.)
The smooth handling of the array of duties that come with our current size and scope – as well as some additional activities almost unique to Berkshire, such as our shareholder gala and designated-gifts program – takes a very special group of people. And that we most definitely have.
February 28, 2002
Warren E. Buffett
Chairman of the Board
伯克希尔公司业绩 vs. 标普500
| 年份 | 年度百分比变化 | 相对业绩（1）-（2） | ||
| 伯克希尔每股账面价值（1） | 标普500含股息（2） | |||
| 1965 | ...... | 23.8 | 10.0 | 13.8 |
| 1966 | ...... | 20.3 | (11.7) | 32.0 |
| 1967 | ...... | 11.0 | 30.9 | (19.9) |
| 1968 | ...... | 19.0 | 11.0 | 8.0 |
| 1969 | ...... | 16.2 | (8.4) | 24.6 |
| 1970 | ...... | 12.0 | 3.9 | 8.1 |
| 1971 | ...... | 16.4 | 14.6 | 1.8 |
| 1972 | ...... | 21.7 | 18.9 | 2.8 |
| 1973 | ...... | 4.7 | (14.8) | 19.5 |
| 1974 | ...... | 5.5 | (26.4) | 31.9 |
| 1975 | ...... | 21.9 | 37.2 | (15.3) |
| 1976 | ...... | 59.3 | 23.6 | 35.7 |
| 1977 | ...... | 31.9 | (7.4) | 39.3 |
| 1978 | ...... | 24.0 | 6.4 | 17.6 |
| 1979 | ...... | 35.7 | 18.2 | 17.5 |
| 1980 | ...... | 19.3 | 32.3 | (13.0) |
| 1981 | ...... | 31.4 | (5.0) | 36.4 |
| 1982 | ...... | 40.0 | 21.4 | 18.6 |
| 1983 | ...... | 32.3 | 22.4 | 9.9 |
| 1984 | ...... | 13.6 | 6.1 | 7.5 |
| 1985 | ...... | 48.2 | 31.6 | 16.6 |
| 1986 | ...... | 26.1 | 18.6 | 7.5 |
| 1987 | ...... | 19.5 | 5.1 | 14.4 |
| 1988 | ...... | 20.1 | 16.6 | 3.5 |
| 1989 | ...... | 44.4 | 31.7 | 12.7 |
| 1990 | ...... | 7.4 | (3.1) | 10.5 |
| 1991 | ...... | 39.6 | 30.5 | 9.1 |
| 1992 | ...... | 20.3 | 7.6 | 12.7 |
| 1993 | ...... | 14.3 | 10.1 | 4.2 |
| 1994 | ...... | 13.9 | 1.3 | 12.6 |
| 1995 | ...... | 43.1 | 37.6 | 5.5 |
| 1996 | ...... | 31.8 | 23.0 | 8.8 |
| 1997 | ...... | 34.1 | 33.4 | .7 |
| 1998 | ...... | 48.3 | 28.6 | 19.7 |
| 1999 | ...... | .5 | 21.0 | (20.5) |
| 2000 | ...... | 6.5 | (9.1) | 15.6 |
| 2001 | ...... | (6.2) | (11.9) | 5.7 |
| 年均收益 – 1965-2001 | 22.6% | 11.0% | 11.6% | |
| 累计收益 – 1964-2001 | 194,936% | 4,742% | 190,194% | |
注：数据按日历年度统计，但以下年份除外：1965和1966年截至9月30日；1967年为截至12月31日的15个月。
自1979年起，会计准则要求保险公司以市价而非之前的成本与市价孰低法来计量所持权益证券。本表中，伯克希尔1978年之前的业绩已按变更后的规则重新列示。其他方面，结果均按原始报告数字计算。
标普500的收益率为税前数据，而伯克希尔的收益率为税后数据。如果像伯克希尔这样的公司只是持有标普500指数并计提相应税费，那么在这指数显示正回报的年份，其业绩会落后于标普500；而在指数显示负回报的年份，则会超过标普500。多年来，税费成本会导致累计落后幅度相当可观。
伯克希尔·哈撒韦公司
致伯克希尔·哈撒韦公司股东：
2001年，伯克希尔的净资产损失为37.7亿美元，使我们的A类股和B类股的每股账面价值均减少了6.2%。在过去37年间（即自现任管理层接手以来），每股账面价值从19美元增长至37,920美元，年复合增长率为22.6%。*
在这37年里，每股内在价值的增长略快于账面价值，而2001年其下降幅度可能也略小一些。我们在《所有者手册》中解释了内在价值，该手册始于第62页。我敦促新股东阅读这本手册，以熟悉伯克希尔的关键经济原则。
两年前，在报告1999年业绩时，我曾说我们经历了历史上最差的绝对业绩和相对业绩。我补充说“我们关注的正是相对业绩”——这一观点自1956年5月5日我成立第一个投资合伙企业以来就一直持有。当晚，我会见了七位创始有限合伙人，给了他们一份名为《基本原则》的简短文件，其中包含这样一句话：“我们的工作做得好坏，应当以证券市场的普遍表现来衡量。”我们最初以道琼斯工业平均指数作为基准，但后来转用标普500指数，因为该指数被广泛采用。自1965年以来的对比记录记载在对面页上；去年伯克希尔的优势是5.7个百分点。
有些人不同意我们对相对数字的关注，认为“你没法吃掉相对业绩”。但如果你像伯克希尔副董事长查理·芒格和我一样，预期长期持有标普500指数会产生相当令人满意的结果，那么结论是：对于长期投资者而言，每年在该指数上获得小幅优势，最终必然证明是有益的。正如你拥有一家盈利但季节性很强的企业——比如喜诗糖果（它在夏季几个月亏损严重）——却仍能全年吃好一样，只要投资回报超越市场平均水平，无论绝对数字如何变动，你都能定期享用丰硕成果。
尽管我们公司去年的业绩令人满意，但我的表现却完全相反。我管理着伯克希尔的大部分股票投资组合，而我的结果很差，就像过去几年一样。更重要的是，我让通用再保险公司在缺乏一项我明知重要的保障措施的情况下承接业务，而9月11日，这个错误让我们吃了苦头。稍后我会详细谈谈我的错误以及我们正在采取的纠正措施。
我1956年的另一条《基本原则》仍然适用：“我无法向合伙人承诺结果。”但查理和我保证，在你持有伯克希尔期间，你的经济结果将与我们的同步：我们不会接受现金薪酬、限制性股票或股票期权，从而使我们的结果优于你们。
此外，我本人将把99%以上的个人净资产留在伯克希尔。我和妻子从未卖出过一股股份，也无意这么做。查理和我都对近年来常见的一种情形感到厌恶：股东们承受了数十亿美元的损失，而酿成这些灾难的首席执行官、推销者（promoters）以及其他高层人物却带着惊人的财富一走了之。事实上，这些人中许多一边敦促投资者购买股票，一边自己偷偷抛售，有时还使用隐蔽手法。可耻的是，这些企业领袖把股东当傻瓜，而不是合伙人。
尽管安然已经成了侵害股东权益的象征，但美国企业界恶劣行径比比皆是。我听过一个故事，它典型地反映了经理人对公司所有者的常见态度：一位绝色美女在派对上扭到一个CEO面前，湿润的嘴唇轻声细语：“我愿意为你做任何事——任何事——只要你开口。告诉奴家你想要什么。”CEO毫不犹豫地回答：“给我的期权重新定价。”
关于伯克希尔的最后一点想法：未来我们绝不可能复制过去的成绩。当然，查理和我会努力追求超越平均水平的业绩，不会满足于更低的目标。但如今伯克希尔有两个条件与过去截然不同：那时，我们常常能以远低于现在的估值买入企业和证券；更重要的是，那时我们动用的资金规模远小于现在。若干年前，一个1000万美元的好主意就能给我们带来奇迹（看看我们1973年投资华盛顿邮报，或者1976年投资GEICO的例子就知道了）。今天，即使有十个这样的好主意，并且每个价值翻三倍，也只能让伯克希尔的净资产增加1%的四分之一。我们现在需要“大象”才能实现显著盈利——而它们很难找到。
积极的一面是，我们拥有一批不输于任何公司的优秀运营经理人。（Robert P. Miles的新书《沃伦·巴菲特致CEO的信》讲述了许多他们的故事）。而且，他们经营的企业大多拥有从良好到卓越的经济特征。这些经理人的能力、精力和忠诚度简直非凡。我们已经走过了37年的伯克希尔岁月，没有一位运营业务的CEO选择离开我们去别处工作。
2001年，我们的明星阵容壮大了。首先，我们完成了两家约好于2000年收购的企业——Shaw（肖氏）和Johns Manville（约翰斯·曼维尔）。随后又收购了另外两家：MiTek和XTRA，并签约增购两家：拉森-朱尔（Larson-Juhl，刚完成收购）和鲜果布衣（Fruit of the Loom，如果债权人批准我们的出价，很快就会完成交割）。所有这些企业都由聪明、经验丰富且值得信赖的CEO领导。
此外，我们去年所有的收购都是用现金完成的，这意味着我们的股东在没有放弃任何原有优秀公司权益的情况下，成为了这些新增公司的所有者。我们将继续遵循我们熟悉的准则：努力提高现有优秀企业的价值，增购类似质量的新企业，并在万不得已时才发行股份。
2001年的收购
去年股东大会前几天，我收到一个来自圣路易斯的厚重包裹，里面装着一块不起眼的金属疙瘩，我完全想不出它的用途。不过包裹里有一封信，来自MiTek公司的CEO Gene Toombs。他解释说MiTek是我收到的这个东西——“连接板（connector plate）”——的世界领先生产商，用于制造屋顶桁架。Gene还说，MiTek的英国母公司有意出售公司，而他觉得伯克希尔是理想买家。我喜欢他信里的语气，就给他打了个电话。只聊了一分钟我就意识到，他就是我们想要的那种经理人，MiTek就是我们想要的那种企业。我们向英国股东提出了现金收购要约，不久就达成了交易。
吉恩的管理团队对公司充满热情，希望参与此次收购。因此，我们安排了美泰克团队55名成员购买公司10%的股份，每人至少投入10万美元现金。许多人借钱才得以参与。
与拥有期权不同，这些经理人都是真正的所有者。他们既要承担决策的风险，也要享受决策的收益。他们承担资金成本。而且无法"重新定价"自己的股权：他们付出的价格就是永远伴随的价格。
查理和我非常欣赏美泰克这种高水平、真正企业家的精神，我们预测这对所有参与者而言都将是一场胜利。
* * * * * * * * * * * *
2000年初，我的朋友朱利安·罗伯逊宣布将终止他的投资合伙企业——老虎基金，并将在持有四个大仓位的前提下彻底清算。其中之一是XTRA，一家领先的拖车租赁公司。我当时致电朱利安，询问他是否有意出售XTRA的股份，或者公司管理层是否会考虑接受对整个公司的收购要约。朱利安让我联系XTRA的CEO卢·鲁宾。我们谈得很愉快，但显然交易并未达成。
随后在2001年6月，朱利安来电说他决定出售XTRA股票，我重新与卢展开对话。XTRA董事会接受了我们的提案，该提案将通过要约收购实施，要约截止日为9月11日。要约条件包含通常的"退出条款"，允许我们在此要约到期前若股市关闭则撤回。在9月11日的大部分时间里，卢经历了尤其痛苦的煎熬：首先，他有一位在世贸中心工作的女婿失联；其次，他知道我们有权退出这笔交易。故事结局是圆满的：卢的女婿安然无恙，伯克希尔也完成了交易。
拖车租赁是一个周期性行业，但长期来看我们应能获得不错的回报。卢为伯克希尔带来了新的人才，我们希望能在租赁领域有所拓展。
* * * * * * * * * * * *
12月3日，我接到克雷格·庞齐奥的来电，他是美国定制相框行业领军企业Larson-Juhl的老板。克雷格于1981年收购了该公司（当年他先是在大学期间在制造厂工作），随后使销售额从300万美元增长到3亿美元。虽然此前我从未听说过Larson-Juhl，但与克雷格交谈几分钟后，我就觉得我们可能达成交易。他坦诚地描述业务，关心收购方是谁，对价格也很务实。两天后，克雷格及其CEO史蒂夫·麦肯齐来到奥马哈，九十分钟内我们便达成了协议。十天内签订了合同。
Larson-Juhl为美国约18,000家装裱店提供服务，也是加拿大和欧洲大部分地区的行业领导者。我们预计未来将有机会进行互补性收购。
* * * * * * * * * * *
在我写这封信时，债权人正在考虑我们针对Fruit of the Loom提出的收购要约。该公司几年前因债务过重和管理不善而申请破产。而更早很多年前，我自己也曾有过Fruit of the Loom的经历。
1955年8月，我是纽约投资公司格雷厄姆-纽曼公司三名经理手下五名员工之一（包括两名秘书）。格雷厄姆-纽曼控制着费城雷丁煤铁公司（"P&R"），一家无烟煤生产商，拥有过剩现金、可结转的税务亏损以及日渐萎缩的业务。当时，我把自己有限的净资产中相当一部分投在了P&R股票上，这反映了我对老板本·格雷厄姆、杰里·纽曼和霍华德（米奇）·纽曼商业才能的信任。
这一信念得到了回报：P&R 以 1500 万美元从 Jack Goldfarb 手中收购了 Union Underwear 公司。Union（虽然当时只是该品牌的被许可方）生产 Fruit of the Loom 内衣。该公司拥有 500 万美元现金——其中 P&R 用了 250 万美元用于收购——且税前利润约为 300 万美元，这些利润可以通过 P&R 的税务状况被抵消。哦对了：剩余应支付的 1250 万美元中，整整 900 万美元是用无息票据支付的，还款来源是 Union 超过 100 万美元利润部分的 50%。（那是怎样的年代啊；一想到这样的交易，我就起鸡皮疙瘩。）
随后，Union 买下了 Fruit of the Loom 品牌的许可方，并与 P&R 一起被并入 Northwest Industries。Fruit 后来实现了年税前利润超过 2 亿美元。
John Holland 在 Fruit 最辉煌的几年里负责运营。然而，1996 年 John 退休后，管理层给公司背上了沉重的债务，部分用于进行一系列令人失望的收购。随后公司破产。John 被重新聘用，并对运营进行了大刀阔斧的整改。在 John 回归之前，交货混乱，成本飙升，与关键客户的关系恶化。在纠正这些问题的同时，John 还将臃肿的 4 万名员工裁减至 2.3 万人。简而言之，他正在恢复昔日 Fruit of the Loom 的风采，尽管竞争环境已大不如前。
在介入 Fruit 的破产程序时，我们向债权人提出了一个不附加任何融资条件的方案，尽管我们的报价必须悬而未决好几个月。但我们坚持了一条非常不寻常的前提条件：在我们接手后，John 必须可以继续担任 CEO。对我们来说，John 和品牌就是 Fruit 的核心资产。
这笔交易得到了我的朋友兼前老板 Micky Newman 的帮助，他现已 81 岁。因果循环，果真不虚。
* * * * * * * * * * * *
我们的运营公司在年内进行了几笔“补强型”收购，我忍不住要告诉你其中一笔。12 月，Frank Rooney 打电话告诉我，H.H. Brown 正在以 70 万美元收购 Acme Boot 的库存和商标。
听起来像小打小闹。但你信吗？——Acme 是 P&R 的第二笔收购，这笔交易就发生在 1956 年春天我离开 Graham-Newman 之前。收购价是 320 万美元，其中一部分再次用无息票据支付，而这家公司的销售额是 700 万美元。
在 P&R 与 Northwest 合并后，Acme 成长为全球最大的靴子制造商，每年贡献的利润是其收购成本的数倍。但这家企业最终还是走了下坡路，一蹶不振，于是我们买下了 Acme 的残余资产。
在《证券分析》的卷首语中，Ben Graham 和 Dave Dodd 引用了贺拉斯的话：“许多如今倒下的将会复兴，许多如今受尊崇的将会倒下。”在我第一次读到这些文字 52 年后，我对它们关于商业和投资的真谛的感悟仍在不断加深。
* * * * * * * * * * * *
除了补强型收购，我们的经理人还在不断寻找内部增长的方式。在这方面，我要补充两年前给你们讲过的关于 R.C. Willey 迁往博伊西的故事。你可能还记得，R.C. Willey 的董事长 Bill Child 希望将他的家居用品业务扩展到犹他州以外——在犹他州，他的公司年销售额超过 3 亿美元（请注意，这比 48 年前 Bill 接手时的 25 万美元增长了）。更难得的是，该公司凭借“周日关门”的政策取得了这一主导地位，这一政策背离了传统的零售智慧。我曾对这种政策能否在博伊西成功持怀疑态度，更不用说犹他州以外的地方了。毕竟，周日是许多消费者最爱购物的日子。
比尔随后坚持了一件非同寻常的事：他愿意自掏腰包1100万美元盖博伊西门店，如果项目成功，就按成本价（不计利息！）卖给伯克希尔；如果失败，店铺归他，亏损也由他承担。正如我在1999年年报中告诉你们的，这家店很快就大获成功——此后更是不断壮大。
博伊西开业不久，比尔提议试试拉斯维加斯，这回我更加怀疑了。在那么大的都会区做生意，我们却要在所有竞争对手都争相营业的星期天关门，这怎么行？不过，博伊西的成功给了我底气，于是我们把店开在了亨德森——拉斯维加斯旁边一个快速扩张的城市。
结果：这家店的销售额在全美R.C. Willey连锁中排名第一，远超所有竞争对手，也比我预期的翻了一番。十月份盛大开业时（此前已试营业，且连续数周销售异常火爆），我亲手剪了彩，而且跟博伊西那次一样，我对众人说新店全是我的主意。
这招不管用了。如今，每当我高谈阔论零售业时，伯克希尔的人只会问：“比尔怎么看？”（不过，要是他提议周六也关门，我可要划清界限了。）
财产/意外保险的经济学
我们的主业是保险——尽管还有其他重要业务。因此，要理解伯克希尔，你必须先懂得如何评估一家保险公司。关键因素有：(1) 业务产生的浮存金规模；(2) 浮存金的成本；(3) 最关键的，这两项因素的长期前景。
首先，浮存金是我们持有但并不拥有的钱。在保险业务中，浮存金产生于保费收取与损失赔付之间的时间差，这个间隔有时长达数年。在此期间，保险公司将这笔钱用于投资。这种美事通常伴随着一个坏处：保险公司收取的保费往往不足以覆盖最终必须赔付的损失和费用。这就导致了“承销亏损”，也就是浮存金的成本。如果一家保险公司长期以来的浮存金成本低于该公司另行获取资金的成本，那么这项业务就有价值；但如果浮存金成本高于市场利率，那它就是个柠檬（不值钱的烂货）。
历史上，伯克希尔的浮存金成本极低。事实上，在我们经营的年份中，大约有一半时间成本低于零——也就是说，我们持有别人的钱反而还能收钱。然而，最近几年成本太高了，2001年更是糟透了。
下表显示了自35年前我们收购National Indemnity Company（国家赔偿公司）（其传统业务归入“其他主险”板块）进入保险业以来，伯克希尔各保险板块产生的浮存金（按年列出）。我们在表中计算的浮存金——相对于保费规模而言数额巨大——是通过加总未决赔款准备金、理赔调整准备金、再保险摊回项下的持有资金和未到期保费准备金，再减去与保险相关的应收款项、预付佣金、预缴税款以及适用于再保险摊回的递延费用得出。（明白了吗？）
年末浮存金（单位：百万美元）
| 年份 | GEICO | General Re | 其他再保险 | 其他直接保险 | 合计 |
|------|-------|------------|------------|--------------|------|
| 1967 | | | | 20 | 20 |
| 1977 | | | 40 | 131 | 171 |
| 1987 | | | 701 | 807 | 1,508 |
| 1997 | 2,917 | | 4,014 | 455 | 7,386 |
| 1998 | 3,125 | 14,909 | 4,305 | 415 | 22,754 |
| 1999 | 3,444 | 15,166 | 6,285 | 403 | 25,298 |
| 2000 | 3,943 | 15,525 | 7,805 | 598 | 27,871 |
| 2001 | 4,251 | 19,310 | 11,262 | 685 | 35,508 |
去年我告诉过你们，除非发生超级巨灾，否则我们的浮存金成本很可能要从2000年的6%水平降下来。我这么说时心里想的是自然灾害，但结果我们在9月11日遭到了人为灾难的打击——这个事件给保险业带来了有史以来最大的损失。因此，我们的浮存金成本达到了惊人的12.8%。这是1984年以来浮存金成本表现最差的一年，而且在很大程度上，是我下面要解释的——我们咎由自取。
如果今年不发生超级巨灾，我——再次——预计来年浮存金成本会很低。我们确实需要低成本，所有保险公司都如此。几年前，浮存金成本假设为4%还是可以容忍的，因为国债收益率比这高一倍，股票潜在回报更高。如今，高回报无处可寻（至少我们找不到），短期资金收益率不到2%。在这种情况下，除了一个业务，我们的每一项保险业务都必须实现承保盈利，才能算是一项好生意。例外是我们的追溯再保险业务（这一业务我们在去年年报中解释过），它虽然目前每年给我们带来约4.25亿美元的承保亏损，但经济效益却很诱人。
保险承保原则
当用浮存金成本来评判财产/意外险公司时，很少有公司能称得上是令人满意的生意。有趣的是——与许多其他行业的情况不同——规模大小和品牌知名度都无法决定一家保险公司的盈利能力。事实上，许多规模最大、最知名的公司经常交出平庸的成绩单。这门生意靠的是承销纪律。胜者是那些始终坚守三条关键原则的公司：
- 它们只接受自己能正确评估的风险（待在能力圈内），并且在评估了所有相关因素（包括罕见的损失情景）后，这些风险有望带来利润。这些保险公司无视市场份额的考量，对于把业务拱手让给那些报出愚蠢价格或保单条款的竞争对手也处之泰然。
- 它们以某种方式限制所接受的业务，确保不会因单一事件或相关事件造成损失累积，从而威胁到偿付能力。它们不断寻找看似不相关的风险之间可能存在的相关性。
- 它们避免涉及道德风险的业务：无论费率如何，试图与坏人签订好合同是行不通的。虽然大多数保单持有人和客户是正直、讲道德的，但与少数例外打交道通常代价高昂，有时甚至是极其高昂。
9月11日的事件清楚地表明，我们在General Re贯彻原则1和原则2方面存在危险的薄弱环节。在定价以及评估累积风险时，我们要么忽视、要么排除了大规模恐怖袭击损失的可能性。这是一个相关的承销因素，而我们忽略了它。
在财产险定价方面，我们过去习惯于回顾历史，只考虑可能因风暴、火灾、爆炸和地震产生的成本。但有史以来最大的一笔财产险赔付（加上相关的业务中断索赔）却并非源于上述任何一种力量。简言之，我们整个行业犯了一个根本性的承销错误——过于依赖经验，而非关注风险暴露，从而承担了巨大的恐怖主义风险，却未收到一分钱保费。
当然，在大多数险种的承销中，经验都是一个极有用的出发点。例如，对承保加州地震险的保险公司来说，了解过去一个世纪该州发生过多少次里氏6.0级及以上地震至关重要。这些信息不能告诉你明年发生大地震的确切概率，也无法预测会在加州哪个地方发生。但这项数据仍有参考价值，尤其当你像National Indemnity近年所做的那样，承保一份覆盖全州的巨额保单时。
然而，在某些时候，以经验作为定价依据不仅毫无用处，甚至危险。比如在牛市后期，董事及高管责任险（“D&O”）的大额赔案往往较少。当股市上涨时，可供起诉的目标稀缺，可疑的会计处理和经理人的欺诈行为常常不为人知。在那个节点上，高保额D&O险的经验数据看起来可能非常漂亮。
但恰恰在此时，风险暴露可能正急剧膨胀——荒唐的IPO、操纵利润、传销式的股票推销，以及五花八门的其他肮脏勾当。当股市下跌时，这些罪孽就会暴露出来，给投资者带来成百上千亿美元的损失。陪审团在判定这些损失应由小投资者还是大型保险公司承担时，很可能做出与牛市时代大相径庭的裁决。而且，即使只有一个巨额判决，后续案件的赔付成本也会因此飙升。因此，D&O“超赔”（即保险公司或再保险公司赔付超过高额免赔额以上的损失）的正确费率，如果基于风险暴露来定价，很可能比基于经验得出的保费高出五倍甚至更多。
忽视新的风险暴露，历来令保险公司付出沉重代价。而在恐怖主义问题上这样做，则可能让整个行业真正破产。没有人知道今年一座大都市发生核爆炸的概率（甚至多次爆炸的概率——因为一个能制造一枚炸弹的恐怖组织，可能不会就此止步）。也没有人能可靠地评估今年或某一年，致命的生物或化学制剂被同时引入（比如通过通风系统）多栋办公楼和工厂的概率。一旦发生这样的袭击，将带来天文数字般的工人赔偿索赔。
以下是我们确实知道的情况：
(a) 这种令人瞠目结舌的灾难，目前发生的概率可能极低，但绝非零。
(b) 随着知识和材料落入对我们心怀不轨者手中，这种概率正在以不规则且无法衡量的方式上升。恐惧或许会随时间消退，但危险不会——反恐战争永远无法打赢。这个国家所能达到的最好结果，不过是一连串漫长的僵局。面对多头怪物般的敌人，不可能一劳永逸地将其斩首。
(c) 迄今为止，保险公司和再保险公司一直轻率地承担着我所描述的这些不可估算风险带来的财务后果。
(d) 在"接近最坏情况"的情景下——可能涉及1万亿美元的损失——除非保险业设法大幅限制其对恐怖主义风险的承担，否则整个行业将被摧毁。只有美国政府拥有吸收如此重创的资源。如果它不愿在未来主动承担这一责任，那么普通民众就必须自己承担风险，并指望灾难发生后政府会出手救援。
你可能会问，为什么我在9月11日之前没有认识到上述事实？可悲的是，答案是我确实认识到了——但我没有将想法付诸行动。我违反了诺亚规则：预测下雨不算数，建造方舟才算。结果，我让伯克希尔（尤其是通用再保险）以危险的风险水平运营。很遗憾地说，大量我们未获补偿的风险仍然存在于账面上，但每天都在逐渐消退。
需要指出的是，在伯克希尔，多年来我们一直愿意承担比任何其他保险公司已知的、有意识承担的风险更多的风险。这一点至今未变。如果我们在承担导致损失的风险时获得了合理的补偿（而在9月11日那次并没有），我们完全愿意在单一事件中损失20亿至25亿美元（正如9月11日我们所做的那样）。
事实上，由于我们对巨额损失的承受能力，我们拥有一个重大的竞争优势。伯克希尔拥有庞大的流动性资源、可观的非保险业务收益、有利的税收状况，以及一群愿意接受收益波动的理性股东。这种独特的组合使我们能够承担甚至远超最大竞争对手承受能力的风险。随着时间的推移，为这些巨型风险承保应该是有利可图的，尽管它们会周期性地带来可怕的年份。
今天的底线是：我们将为一些与恐怖主义相关的损失提供承保，包括少数限额极高的非关联保单。但我们不会有意识地让伯克希尔暴露在超出我们从容应对能力的损失之下。无论竞争对手做什么，我们都会控制我们的总风险敞口。
2001年的保险业务
多年来，我们的保险业务提供了不断增长的低成本资金，推动了伯克希尔的大部分增长。查理和我相信这种情况将继续下去。但我们在2001年摔了一个大跟头，主要是由于通用再保险的承保亏损。
过去我曾向你保证，通用再保险的承保是有纪律的——事实证明我错了。尽管其管理层的意图是好的，但公司违反了我上一节提出的三条承保规则中的每一条，并为此付出了巨大代价。其失败的一个明显原因是准备金计提不正确——下一节会详细说明——因此严重误判了其所售产品的成本。在任何行业中，不了解自己的成本都会带来问题。在长尾再保险业务中，多年对真实成本的无知会助长并延长严重定价过低的情况，这种无知无异于炸药。
此外，通用再保险在争取和保留业务时过于咄咄逼人。尽管相关人员都打算谨慎承保，但对于能干且干劲十足的专业人士来说，要克制他们战胜竞争对手的冲动，仍然很困难。然而，如果将“获胜”等同于市场份额而非利润，那么麻烦就在眼前。“不”必须成为每个承销商词汇中的重要组成部分。
尽管这么说听起来有点过于乐观，但我现在向你们保证，通用再保险（及其子公司科隆再保险）正以适当的紧迫感恢复承销纪律。乔·布兰登于九月份被任命为通用再保险的CEO，他与新任总裁塔德·蒙特罗斯共同致力于实现承销利润。去年秋天，查理和我读了杰克·韦尔奇那本精彩的自传《杰克·韦尔奇自传》（找一本看看！）。在讨论这本书时，我们一致认为乔具有许多杰克的特点：聪明、精力充沛、亲力亲为，并且对自己和团队都期望很高。
当通用再保险还是一家独立公司时，它往往表现出色，而现在它还获得了伯克希尔带来的巨大优势。凭借这一额外优势以及承销纪律的恢复，通用再保险应该会成为伯克希尔的一项巨大资产。我预测乔和塔德会实现这一点。
* * * * * * * * * * * *
在国民保险公司的再保险业务中，阿吉特·贾因持续为伯克希尔创造巨大价值。仅与18名同事一起，阿吉特管理者按资产规模计全球最大的再保险业务之一，并且按单个承保风险规模计，则是全球最大的。
自1986年阿吉特加入我们以来，我几乎了解他承保的每一份保单的细节，并且从未见过他哪怕一次违反我们的三条承销规则。当然，他非凡的纪律性并不能消除损失，但它能防止愚蠢的损失。而这正是关键：就像投资一样，保险公司取得卓越的长期业绩，主要靠避免愚蠢的决策，而不是靠做出精明的决策。
自9月11日以来，阿吉特特别忙碌。在我们完全自留承保的保单中，包括：(1) 为一家南美炼油厂提供的5.78亿美元财产保险，当损失超过10亿美元时启动赔付；(2) 为几家大型国际航空公司因恐怖主义行为造成的损失提供的10亿美元不可取消第三方责任险；(3) 为北海一座大型石油平台提供的5亿英镑财产保险，承保恐怖主义和蓄意破坏造成的损失，但需在被保险人自行保留或向其他再保险公司投保的6亿英镑以上部分起赔；(4) 为西尔斯大厦提供的大额保险，包括恐怖主义造成的损失，起赔点为5亿美元。我们还承保了许多其他巨额风险，例如为世界杯足球赛和2002年冬奥会提供的保障。但在所有情况下，我们都尽量避免承保可能导致损失严重累积的保单组合。例如，我们不会为一个大都市的大量办公楼和公寓楼提供保险，除非排除核爆炸及其引发的火灾造成的损失。
没有人能像阿吉特那样，以如此快的速度开出巨额保单。“9·11”事件之后，他快速响应的能力——这一直都很重要——已成为一项重大的竞争优势。同样，我们无与伦比的财务实力也成了优势。一些再保险公司——尤其是那些习惯将大量业务转分保给第二层再保人（即所谓转分保接受人）的——如今处境虚弱，一旦第二次超级巨灾来袭，恐难幸存。当存在一环扣一环的转分保链条时，任何一个薄弱环节都会给整个链条带来麻烦。因此，保险人在评估其再保险保障的稳健性时，必须对链条中的所有参与者进行压力测试，并且必须考虑在非常不利的经济环境下发生巨灾损失的可能性。毕竟，只有退潮时才知道谁在裸泳。在伯克希尔，我们自留风险，不依赖任何人。无论世界遭遇何种问题，我们的支票总能兑现。
阿吉特的业务会有起有落——但他的承销原则不会动摇。他对伯克希尔的价值无论怎样强调都不为过。
GEICO（政府员工保险公司）是我们最大的直接保险业务，2001年取得了重大进展，这要归功于其CEO托尼·奈斯利和他的同事们。简单来说，托尼是所有者梦寐以求的管理者。
去年，GEICO的保费收入增长了6.6%，浮存金增加了3.08亿美元，并实现了2.21亿美元的承销利润。这意味着，去年我们实际上等于被付费持有42.5亿美元的浮存金——当然，这笔钱并不属于伯克希尔，但我们可以用于投资。
2001年GEICO唯一令人失望的地方——但这一点很重要——是我们未能增加保单持有人。我们的优质客户（占总数的81%）增长了1.6%，但标准和非标准保单却下降了10.1%。总体而言，有效保单下降了0.8%。
近几个月来，新业务有所改善。电话咨询的成交率有所上升，互联网业务也持续稳步增长。因此，我们预计2002年的保单数量至少会有小幅增长。托尼和我都渴望在营销上投入比去年2.19亿美元更多的资金，但目前我们看不到有效的方法。与此同时，我们的运营成本很低，远低于主要竞争对手；我们的价格具有吸引力；我们的浮存金不仅零成本而且还在增长。
去年，我们的其他直接保险业务也一如往常，交出了漂亮的成绩单。这些业务由罗德·埃尔德雷德、约翰·基泽、汤姆·纳尼、迈克尔·斯特恩斯、唐·托尔和唐·沃斯特管理，它们的总保费收入为5.79亿美元，比2000年增长了40%。它们的浮存金增长了14.5%，达到6.85亿美元，并录得3000万美元的承销利润。总的来说，这些公司是美国最优秀的保险运营机构之一，它们2002年的前景看起来非常出色。
"损失发展"与保险会计
糟糕的术语是良好思考的敌人。当公司或投资专业人士使用"EBITDA（息税折旧摊销前利润）"和"备考"这类术语时，他们是希望你不动脑筋地接受那些存在危险缺陷的概念。（在高尔夫球场上，按"备考"口径，我的成绩经常低于标准杆：我已经制定了"重组"推杆动作的坚定计划，因此只计算我上果岭之前的挥杆次数。）
在保险报告术语中，“损失发展”是一个被广泛使用的词——而且它很有误导性。首先，给一个定义：保险公司的损失准备金并不是为应对不时之需而预留的资金，而是一项负债账户。如果计算得当，这项负债应反映出保险公司在报告日之前已发生但尚未支付的所有损失（包括相关费用）所需支付的金额。在计算准备金时，保险公司已经知悉许多它注定要赔付的损失，但另一些损失则尚未报告给它。这些损失被称为IBNR，即已发生但未报告。的确，在某些情况下（比如产品责任或贪污），被保人自己都还不知道损失已经发生。
对一家保险公司来说，要精确估算所有这些已报告和未报告事件的最终成本显然很难。但能够合理准确地做到这一点至关重要。否则，保险公司的管理层就不知道实际损失成本是多少，也不知道这些成本与所收取的保费相比如何。GEICO在20世纪70年代初期曾陷入巨大麻烦，因为在连续几年里，它严重低估了准备金，从而认为自己产品（保险保障）的成本远低于实际水平。结果，公司沉浸在喜悦中一路高歌，给产品定价过低，卖出的保单越来越多，亏损也越来越大。
当发现过去报告日的准备金低估了当时实际存在的负债时，公司就会称之为“损失发展”。在发现问题的当年，这些缺口会惩罚报告利润，因为在计算业绩时，往年积累的“追赶”成本必须加到当年的成本中。这正是2001年通用再保险发生的情况：有高达8亿美元的损失成本实际上发生在更早的年份，但当时并未记录，直到去年才被推迟确认，并计入当年利润。这个错误是无心的，我可以向你们保证。然而，在好几年的时间里，准备金计提不足让我们以为自己的成本远低于实际水平，这个错误导致了我们定价低得令人痛心。此外，利润虚增还让我们支付了本不该支付的大额激励薪酬，并且过早地缴纳了所得税。
我们建议废除“损失发展”这个术语，以及它同样丑陋的表亲“准备金增强”。（你能想象一家保险公司发现自己准备金过多时，把随之而来的调低描述为“准备金减弱”吗？）“损失发展”向投资者暗示，今年发生了一些自然的、不可控的事件；而“准备金增强”则暗示充足的金额得到了进一步加固。然而事实是，管理层在估算中犯了错误，转而导致此前报告的利润出现错误。损失并没有“发展”——它们一直都在那里。发展的是管理层对损失的理解（或者，在耍花招的情况下，管理层最终承认错误的意愿）。
对于这个现象，一个更直白的标签应该是“损失成本发生时我们未能确认”（或者干脆就叫“哎呀”）。值得注意的是，准备金计提不足在财产/意外险行业是一个普遍且严重的问题。在伯克希尔，我们在1984年和1986年曾向你们披露过自己低估的问题。不过总体而言，我们的准备金计提一直比较保守。
许多陷入生存困境的公司普遍存在准备金计提严重不足的情况。实际上，保险会计就像一场自评分考试——保险公司给审计公司提供一些数字，通常不会招来质疑。（不过，审计公司会收到管理层写的一封信，目的是一旦日后数字变得荒唐可笑，好让审计公司摆脱责任。）一家财务困难的公司——如果这些困难被如实面对，可能让它关门大吉——通常不会是个严格的阅卷人。毕竟，谁想给自己准备死刑判决书呢？
即使公司初衷再好，恰当计提准备金也绝非易事。我以前讲过这样一个故事：一位旅居国外的男子，他姐姐打电话告诉他说父亲去世了。弟弟回复说自己不可能赶回家参加葬礼；不过他主动提出承担葬礼费用。回家后，弟弟收到殡仪馆寄来的4,500美元账单，他立刻付清了。一个月后，又一个月后，他又分别按追加账单付了10美元。当第三张10美元账单寄来时，他打电话问姐姐怎么回事。“哦，”姐姐回答道，“我忘了告诉你。我们给爸爸租了一套西装下葬的。”
保险公司以往的运营中，埋着许多“租来的西装”。有时它们所预示的问题会潜伏几十年，就像石棉责任索赔一样，直到后来才猛烈爆发。尽管这项工作困难重重，但充分估算所有可能的风险是管理层的责任。保守至关重要。当理赔经理走进CEO的办公室说“猜猜刚才出了什么事”时，如果老板是个老手，他不会指望听到好消息。保险界的意外事件对盈利的影响远非对称。
正因为这种单向经验，像有些人提议的那样对所有财产/意外险准备金进行折现，简直是愚蠢之举。这种做法的理由在于，这些准备金将在未来支付，因此它们的现值低于报表上列示的负债。如果准备金能够精确确定，折现或许可以接受。但事实并非如此，因为无数因素——例如司法对保单条款的扩大解释和医疗通胀，仅举两个长期存在的问题——不断使准备金变得不足。折现会加剧本已严峻的局面，此外还会为那些倾向于糊弄的公司提供新的工具。
依我看，让一家盈利困难的保险CEO通过折现来降低准备金，其效果就好比让一位父亲告诉他16岁的儿子过正常的性生活。两边都不需要这种推力。
报告盈利的来源
下表列示了伯克希尔报告盈利的主要来源。在本表中，购并会计调整（主要与"商誉"相关）并不分配到具体业务中，而是汇总单独列示。这一做法可以让您看到，如果我们没有购买这些业务，它们原本应报告的盈利情况。近些年来，我们的商誉摊销"费用"一直很高。今后，美国通用会计准则（GAAP）将不再要求摊销商誉。这一变化会增加我们的报告盈利（尽管不会增加真实经济盈利），并使本报告的这部分内容得以简化。
| （单位：百万美元） | ||||
| 税前利润 | 伯克希尔应占净利润（税后及扣除少数股东权益） | |||
| 2001 | 2000 | 2001 | 2000 | |
| 经营利润： | ||||
| 保险集团： | ||||
| 承销 – 再保险 | $(4,318) | $(1,416) | $(2,824) | $(911) |
| 承销 – GEICO | 221 | (224) | 144 | (146) |
| 承销 – 其他一级保险 | 30 | 25 | 18 | 16 |
| 净投资收入 | 2,824 | 2,773 | 1,968 | 1,946 |
| 建材业务(1) | 461 | 34 | 287 | 21 |
| 金融及金融产品业务 | 519 | 530 | 336 | 343 |
| 航空服务 | 186 | 213 | 105 | 126 |
| 中美能源（持股76%） | 600 | 197 | 230 | 109 |
| 零售业务 | 175 | 175 | 101 | 104 |
| Scott Fetzer（不含金融业务） | 129 | 122 | 83 | 80 |
| Shaw Industries(2) | 292 | -- | 156 | -- |
| 其他业务 | 179 | 221 | 103 | 133 |
| 购买会计调整 | (726) | (881) | (699) | (843) |
| 公司利息支出 | (92) | (92) | (60) | (61) |
| 股东指定捐赠 | (17) | (17) | (11) | (11) |
| 其他 | 25 | 39 | 16 | 30 |
| 经营利润 | 488 | 1,699 | (47) | 936 |
| 投资资本利得 | 1,320 | 3,955 | 842 | 2,392 |
| 全部实体总利润 | $1,808 | $5,654 | $ 795 | $3,328 |
(1) 包括2000年8月1日起的Acme Brick；2000年12月18日起的Benjamin Moore；2001年2月27日起的Johns Manville；以及2001年7月31日起的MiTek。
$^{(2)}$ 自收购日2001年1月8日起计算。
以下是2001年非保险业务的几个亮点（和低点）：
- 我们的鞋业业务（计入"其他业务"）税前亏损4620万美元，H.H. Brown和Justin的利润被Dexter的亏损完全吞噬。
关于Dexter，我做了三个伤及你们利益的重大决定：(1) 当初就不该买；(2) 不该用股票支付；(3) 在运营明显需要变革时一再拖延。我很想把这些错误推到查理（或任何人）头上，但它们都是我的。在收购之前——甚至在收购后的几年里——Dexter一直能在低成本外国对手的残酷竞争下过得不错。我当时断定Dexter能继续应对这个问题，但我错了。
我们现在已将规模仍然不小的Dexter业务交由H.H. Brown的Frank Rooney和Jim Issler管理。这两位为伯克希尔做出了卓越贡献，老练地应对了困扰鞋业的巨变。2002年部分时段，Dexter还会受去年签下的无利可图的销售承诺拖累。在那之后，我们相信鞋业业务会实现可观的盈利。
- 我们按完全摊薄持股76%的中美能源，2001年表现不错。由于该公司一直承担着大额的商誉摊销费用，而这一"成本"将在新会计准则下消失，所以公司2002年的报告利润应该会大幅增长。
去年，中美能源将其在英国的部分物业进行了置换，从而将拥有210万客户的约克郡电力纳入囊中。如今，我们在英国的服务客户已达360万，成为该国第二大电力公司。我们在爱荷华州拥有同等重要的业务，并在加利福尼亚和菲律宾拥有大型发电设施。
在中美能源——这或许让你感到惊讶——我们还拥有全美第二大住宅房地产经纪业务。我们在中西部地区的多个大城市占据市场份额领先地位，最近又在亚特兰大和南加州收购了重要公司。去年，我们以当地客户熟知的各种品牌名义，处理了约10.6万笔交易，涉及房产价值近200亿美元。Ron Peltier为我们一手打造了这项业务，他很可能在2002年及未来几年继续展开更多收购。
- 考虑到困扰它们的衰退环境，我们的零售业务在2001年表现不错。珠宝业务方面，同店销售额下降7.6%，税前利润率为8.9%，而2000年为10.7%。投入资本回报率仍然很高。
我们的家居用品零售商同店销售额持平，这些业务的利润率（税前9.1%）也未变。同样，其投入资本回报率也极为出色。
我们继续在珠宝和家居用品领域扩张。值得一提的是，内布拉斯加家具城正在建造一座占地45万平方英尺的巨型卖场，从2003年秋季开始服务于大堪萨斯城地区。尽管Bill Child屡次成功抵制，我们仍将保持这家卖场在周日营业。
- 我们在2000年底发起的大型收购——Shaw、Johns Manville和Benjamin Moore——加盟我们的第一年表现出色。查理和我在收购时就知道，我们分别将公司托付给了Bob Shaw、Jerry Henry和Yvan Dupuy这些可靠的人——如今我们更加钦佩他们的工作。这三家公司合计税前收入约为6.59亿美元。
在2000年结束不久后，我们用4740股伯克希尔A股（或等值的B股）交换了Shaw的12.7%少数股权，这意味着我们现在拥有该公司100%的股权。Shaw是我们最大的非保险业务，将在伯克希尔的未来扮演重要角色。
- 2001年飞行服务业务所显示的全部收入——甚至还多出一点点——都来自我们的飞行员培训子公司FlightSafety。其盈利增长了2.5%，不过由于去年我们投资了2.58亿美元用于模拟器及其他固定资产，投入资本回报率略有下降。我84岁的老友Al Ueltschi继续以1951年他投资1万美元创办公司以来所展现的热情和竞争精神经营着FlightSafety。如果我在年会上让Al和一群60岁的人站在一起，你绝对分辨不出他来。
9月11日之后，商业航空公司的培训业务有所下滑，至今仍处于低迷状态。然而，作为我们主要业务领域的公务及通用航空培训，已接近正常水平，并应会持续增长。2002年，我们预计将花费1.62亿美元购买27台模拟器，这一数字远超我们每年9500万美元的折旧费用。那些认为EBITDA在某种程度上等同于真实收益的人，欢迎来买单。
我们的NetJets®产权共享计划去年销售了创纪录数量的飞机，并且来自管理费和小时费的服务收入增长了21.9%。尽管如此，该业务仍小幅亏损，而2000年则略有盈利。我们在美国市场赚了点钱，但这些盈利被欧洲市场的亏损所抵消。按客户飞机的价值衡量，NetJets占据了该行业约一半的份额。我们相信，其他参与者总体上亏损惨重。
维护最高水准的安全、保障和服务向来代价高昂，而坚持这些标准在"9·11"事件后成本更高。但无论代价多高，我们在安全、保障和服务这三个方面都将继续保持行业领先。将最好的服务毫无保留地交付给客户，这一理念深植于公司CEO Rich Santulli（里奇·桑图利）的基因中——他正是分时所有权模式的创始人。我很高兴他在这些事上近乎偏执的坚持，这不仅为了公司，也为了我自己的家庭：我相信巴菲特家族乘坐分时所有权飞机的时间比任何其他家族都多——我们每年飞行超过800小时。顺便说一句，我们用的飞机和机组人员与NetJets的其他客户完全一样。
"9·11"事件后不久，NetJets的订单曾一度激增，但此后销售速度已恢复正常。当年每位客户的飞行时长略有下降，很可能是经济衰退所致。
我们和客户都从NetJets在分时所有权业务中遥遥领先的龙头地位中获得了显著的运营效益。我们在美国拥有超过300架飞机持续运营，因此能在极短时间内将飞机调度到客户需要的任何地点。机队的广泛分布也降低了我们的"调机成本"，使其低于机队规模较小的运营商。
这些规模优势以及其他竞争优势，为NetJets赋予了显著的经济护城河。然而，在可能持续数年的竞争环境下，我们的优势最多只能带来微薄利润。
——我们的金融与金融产品业务线目前包括XTRA（XTRA公司）、General Re Securities（通用再保险证券，正处于长期收尾模式）以及其他几项规模相对较小的业务。但该板块的大部分资产和负债来自我管理的几项固定收益策略，这些策略主要涉及高流动性的AAA级证券。这项活动只有在特定市场关系存在时才有意义，过去曾带来不错的回报，未来一两年也仍有合理前景维持这一表现。
投资
以下列示我们的普通股投资组合。截至2001年底，市值超过5亿美元的项目单独列示。
| 持股数量 | 公司 | 2001年12月31日 |
|---|---|---|
| 成本 | ||
| (单位：百万美元) | ||
| 151,610,700 | 美国运通公司 | $ 1,470 |
| 200,000,000 | 可口可乐公司 | 1,299 |
| 96,000,000 | 吉列公司 | 600 |
| 15,999,200 | H&R布洛克公司 | 255 |
| 24,000,000 | 穆迪公司 | 499 |
| 1,727,765 | 华盛顿邮报公司 | 11 |
| 53,265,080 | 富国银行 | 306 |
| 其他 | 4,103 | |
| 普通股合计 | $8,543 |
2001年我们投资组合变动不大。整体而言，我们持有的大型重仓股在过去几年表现不佳，有些是因为经营业绩令人失望。查理和我仍然喜欢我们持有所有公司的基本业务，但我们并不认为伯克希尔的股权投资整体上被低估。
我们对这些证券的克制热情，与对接下来十年左右股市整体前景的明显冷淡感受如出一辙。在七月艾伦公司的一次会议上，我阐述了对股权回报的看法（这是对我两年前类似演讲的延续），随后我评论的编辑版出现在12月10日的《财富》杂志上。随信附上该文章副本。您也可以在我们网站www.berkshirehathaway.com上查看我1999年演讲的《财富》版本。
查理和我相信美国企业长期会表现良好，但认为当前的股价预示着投资者只能获得中等回报。市场表现超越企业表现的时间已经很长，这种现象必然终结。然而，一个仅仅与企业进步同步的市场，很可能会让许多投资者失望，尤其是那些相对较晚入场的玩家。
给喜欢巧合的朋友讲一件巧事：大泡沫在2000年3月10日终结（尽管我们是在几个月后才意识到这一点）。那天，纳斯达克指数（近期为1,731点）触及了5,132点的历史高位。同一天，伯克希尔的股票交易于40,800美元，这是自1997年中期以来的最低价。
2001年期间，我们在“垃圾”债券方面比往常更活跃一些。我们必须强调，这些债券不适合普通大众投资，因为这类证券往往名不副实。我们从未购买过新发行的垃圾债券——而这也是大多数投资者被鼓动去购买的唯一一种。此外，在这个领域一旦发生损失，往往是灾难性的：许多债券最终价值只有原始发行价的一小部分，有些则变得一文不值。
尽管有这些风险，我们仍会定期发现少数——非常少数的——垃圾证券让我们感兴趣。到目前为止，我们在困境债务领域50年的经验证明是丰厚的。在1984年的年报中，我们描述了购买华盛顿公共电力系统债券的经历，当时该发行人声名狼藉。这些年来，我们还介入过其他明显的危机，例如克莱斯勒金融、德士古和RJR纳贝斯克——这些公司最终都恢复了元气。不过，如果我们在垃圾债券领域保持活跃，你们可以预期我们时不时会遭遇损失。
有时，购买困境债券会引向更大的交易。在鲜果布衣破产初期，我们以面值约50%的价格购买了该公司的公开和银行债务。这是一起不寻常的破产案，因为其优先债务的利息支付从未中断，这意味着我们获得了约15%的当期收益率。我们持有的份额增长到鲜果布衣优先债务的10%，这笔投资最终可能会让我们收回约70%的面值。通过这项投资，我们间接地将整个公司的收购成本降低了很小一部分。
在2000年末，我们开始购买FINOVA集团（一家陷入困境的金融公司）的债务，这也促使我们完成了一笔重大交易。当时FINOVA约有110亿美元的未偿还债务，我们以面值约三分之二的价格买入了其中的13%。我们预期该公司会进入破产程序，但我们相信其资产清算后支付给债权人的金额将远高于我们的成本。随着2001年初违约的临近，我们与Leucadia National Corporation联手，向该公司提出了一项预先打包的破产计划。
原计划后来做了修改（我这里简化了）：债权人将获得面值70%的现金（外加全额利息），剩余30%的债权则由公司新发行的7½%利率债券支付。为了给FINOVA这笔70%的分配提供资金，Leucadia和伯克希尔共同成立了一个实体——取了个悦耳的“Berkadia”——该实体从FleetBoston借款56亿美元，再把这笔钱借给FINOVA，同时取得对FINOVA资产的优先求偿权。伯克希尔为Berkadia的借款担保90%，另外10%由Leucadia承担主要担保责任（由伯克希尔提供次级担保）。（我说过我简化了吧？）
Berkadia借款利率与它从FINOVA收取的利率之间约有2个百分点的利差，这利差的90%归伯克希尔，10%归Leucadia。在我写这封信时，两笔贷款的本金都已偿还至39亿美元。
作为2001年8月10日获批破产重组方案的一部分，伯克希尔还同意按面值70%的报价收购FINOVA新发行的32.5亿美元7½%债券中本金总额不超过5亿美元的份额（由于我们持有原债务13%的份额，已因此获得了4.268亿美元本金的新债券）。该收购要约原定持续到2001年9月26日，但在多种条件下可以撤销，其中一项条件是：收购期间纽约证券交易所如果停牌，则要约自动失效。当9月11日那一周纽交所真的停牌时，我们立即终止了要约。
FINOVA的许多贷款涉及飞机资产，这些资产的价值因9月11日事件大幅缩水。公司持有的其他应收款也因那次袭击的经济后果而岌岌可危。因此，FINOVA的前景不如当初我们向破产法院提出方案时那么乐观。不过，我们仍然认为整体交易对伯克希尔的结果是令人满意的。Leucadia负责FINOVA的日常运营管理，我们对其核心管理层的商业头脑和管理才能一向印象深刻。
又是似曾相识的一幕：1965年初，当我管理的投资合伙取得伯克希尔控股权时，那家公司主要的银行关系是波士顿第一国民银行和纽约市一家大银行。此前我与这两家银行都没有业务往来。
快进到1969年，我想让伯克希尔收购伊利诺伊州罗克福德的国民银行与信托公司。我们需要1000万美元，我联系了这两家银行。纽约那边没有回应。但波士顿银行的两位代表立刻来到奥马哈。他们告诉我钱没问题，细节以后再商量。
此后三十年间，我们几乎没向银行借过一分钱（债务在伯克希尔是个四字忌词）。接着，今年2月，当我们筹划FINOVA交易时，我再次打电话给波士顿——当年的第一国民银行已演变为FleetBoston。公司总裁Chad Gifford的反应和1969年的Bill Brown与Ira Stepanian如出一辙：“钱你拿去，细节以后再说。”
事情就是这样。FleetBoston为我们牵头组织了一笔60亿美元的银团贷款（结果我们没用到其中4亿美元），而且迅速被全球17家银行超额认购。所以……如果你哪天需要60亿美元，只需给Chad打个电话——前提是，你的信用评级得是AAA。
关于我们的投资，还有一点要说：媒体经常报道“巴菲特正在买入”某只证券，他们声称是从伯克希尔提交的报告中获得这则“消息”。这些报道有时是对的，但另一些时候，伯克希尔报告的交易其实是Lou Simpson操作的——他管理着GEICO旗下20亿美元的投资组合，且完全独立于我。通常情况下，Lou不会告诉我他在买什么或卖什么，我只有在每月结束后几天收到GEICO的投资组合摘要时，才知道他的操作。当然，Lou的投资思路和我非常相似，但我们最终购买的证券往往不同。这很大程度上是因为他管理的资金规模较小，因此可以投资那些比我能投的更小的公司。哦对了，我们之间还有另一个小区别：近几年来，Lou的业绩远比我出色。
慈善捐赠
伯克希尔在慈善捐赠方面奉行一套极不寻常的政策——但查理和我认为，这对所有者来说是既合理又公平的。
首先，我们让各运营子公司自行决定慈善捐赠事宜，只要求那些曾以独立公司身份经营这些业务的老板/经理人，在向个人慈善机构捐款时，使用自己的资金，而不是公司的钱。当我们的经理人使用公司资金时，我们相信他们能以对自身业务产生相应有形或无形利益的方式进行捐赠。去年，伯克希尔子公司的捐款总额为1,920万美元。
在母公司层面，除股东指定的捐款外，我们不做任何捐赠。我们不匹配董事或员工的捐款，也不向巴菲特家族或芒格家族偏爱的慈善机构捐款。不过，在我们收购之前，部分子公司就已设有员工配捐计划，我们很乐意让它们继续执行：干预成功的企业文化不是我们的风格。
为了实现所有者的慈善意愿，每年我们都会通知A类股（A类股占我们股权资本的86.6%）的登记股东，告诉他们每股可指示我们向最多三家慈善机构捐款的金额。股东指定慈善机构，伯克希尔开具支票。股东可以指定任何符合《国内税收法》条件的组织。去年，伯克希尔根据5,700名股东的指示，向3,550家慈善机构捐款1,670万美元。自该项目启动以来，股东的捐赠总额已达1.81亿美元。
大多数上市公司会回避向宗教机构捐款。然而，这些恰恰是我股东们偏爱的慈善对象——去年，他们指定了437家教堂和犹太会堂接受捐赠。此外，还有790所学校成为受赠方。包括查理和我在内的一些大股东，会指定自己的个人基金会接受捐赠，这样这些实体就可以再将资金广泛地分配出去。
我每周都会收到几封批评伯克希尔向“计划生育组织”捐款的信。这些信通常是由某个希望抵制伯克希尔产品的组织所煽动的。来信者无一例外都彬彬有礼且态度真诚，但他们忽略了一个关键点：做出慈善决定的不是伯克希尔，而是它的所有者——而这些所有者在观点上的分歧之大，超乎你的想象。例如，他们在堕胎问题上的立场可能与美国整体人口比例大致相同——两边都有人支持。我们只会遵照他们的指示，无论他们指定的是“计划生育”还是“大都会生命权组织”，只要该慈善机构拥有501(c)(3)资格。这就好比我们支付了一笔股息，然后股东再将股息捐赠出去。不过，我们的这种支付方式在税务上效率更高。
在采购商品或聘用人员时，我们从不考虑对方的宗教观点、性别、种族或性取向。这样做不仅错误，而且愚蠢。我们需要尽可能寻找所有人才，而且我们深知，能干且值得信赖的经理人、员工和供应商来自非常广泛的人群。
* * * * * * * * * * *
要参与我们未来的慈善捐赠计划，您必须持有A类股，且股票登记在真实所有者的名下，而非经纪人、银行或存管机构的代名人名下。2002年8月31日之后仍未按此登记的股份，将不具备参加2002年计划的资格。收到我们的捐赠表格后请及时寄回。逾期提交的指定将不予受理。
年度股东大会
今年的股东大会将于5月4日（星期六）在市政礼堂举行。上午7点开门，8:30放映影片，会议本身于9:30开始。中午短暂休息用餐（可在礼堂小吃摊购买三明治）。除中场休息外，查理和我会一直回答问题到下午3:30。尽管放马过来。
至少在接下来一年内，位于市中心的市政礼堂是我们唯一可用的场地。因此，我们必须将会议安排在周六或周日，以避免工作日必定出现的交通和停车噩梦。不过，奥马哈很快将建成一座全新的会议中心，配有充足的停车设施。假设届时我们迁往会议中心，我将向股东们进行意向调查，看看大家是否希望恢复2000年以前的周一会议惯例。我们将根据股东人数（而非持股数）来决定投票结果。（不过，我们可不会用这套系统来决定谁该当CEO。）
随本报告附上的股东委托书材料中，有一份附件说明了如何获取参加会议及其他活动的入场凭证。至于航班、酒店和汽车预订，我们再次委托美国运通（800-799-6634）为您提供特别协助。他们每年都为我们出色地完成这项工作，我在此表示感谢。
按照惯例，我们会从各大酒店安排班车前往会场。会议结束后，班车将返回各酒店，并开往内布拉斯加家具城、波仙珠宝和机场。即便如此，您可能还是会觉得有辆车更方便。
今年伯克希尔新增了这么多新公司，我就不一一罗列会上将出售的所有产品了。但请做好准备，从砖块到糖果，您可能都要搬回家。当然，还有内衣。假设我们对Fruit of the Loom（鲜果布衣）的收购在5月4日前完成，我们将出售该品牌的最新款式——穿上它，您就是邻里间的时尚先锋。买够一辈子的用量吧。
GEICO（政府雇员保险公司）将设有展位，由来自全国各地的数位顶级顾问坐镇，随时准备为您提供车险报价。在大多数情况下，GEICO能给您特别的股东折扣（通常为8%）。在我们开展业务的49个州中，有41个州允许这项特别优惠。请带上您现有保险的详细信息，看看我们能否为您省钱。
周六在奥马哈机场，NetJets®将照例展出各式飞机供您参观。只需向市政礼堂的工作人员询问即可安排参观。如果您在周末购买了我们认为足够数量的商品，您很可能需要一架私人飞机才能把东西运回家。而如果您买了一架飞机的部分产权，我们甚至可能附赠三包三角裤或平角裤。
在内布拉斯加家具城（Nebraska Furniture Mart，位于72街与道奇街及太平洋街之间的75英亩地块），我们将再次举办“伯克希尔周末”特价活动，这意味着股东可享受通常仅限员工享有的折扣。我们五年前在NFM推出这项特价，周末销售额从1997年的530万美元增长至2001年的1150万美元。
要享受折扣，您必须在5月2日（周四）至5月6日（周一）期间购物，并出示参会凭证。该期间的特价同样适用于多个知名品牌的产品——这些厂家通常有铁律禁止打折，但鉴于我们股东周末的精神，破例为您提供优惠。感谢他们的配合。NFM平日营业时间为上午10点至晚上9点，周六、周日上午10点至下午6点。
波仙珠宝（Borsheim's）——全美仅次于蒂芙尼曼哈顿店的珠宝商——将举办两场股东专属活动。第一场是5月3日（周五）晚6点至10点的鸡尾酒会。第二场是5月5日（周日）上午9点至下午5点的主庆典。股东优惠价格周四至周一全天有效，因此若您想避开周五晚和周日的汹涌人潮，不妨在其他时段光临，并表明股东身份。周六我们营业至下午6点。波仙的毛利率比主要竞争对手整整低20个百分点，所以您买得越多，省得越多（至少我太太和女儿是这么告诉我的）。欢迎光临，让我们帮您做一次“钱包切除术”。
在波仙外的商场中，周日下午将有多位世界顶级桥牌高手与股东对弈。我们预计鲍勃·哈曼（Bob Hamman）和佩特拉·哈曼（Petra Hamman）夫妇以及莎伦·奥斯伯格（Sharon Osberg）将坐镇牌桌。美国两届国际象棋冠军帕特里克·沃尔夫（Patrick Wolff）也会现身，挑战所有来者——而且蒙眼下棋！
去年，帕特里克蒙眼同时下六盘棋——眼罩戴得严严实实——今年他将尝试七盘。此外，两次赢得世界双陆棋锦标赛冠军的比尔·罗伯特（Bill Robertie）（全球仅两人获此成就）也将到场考验您的双陆棋技艺。周日光临商场，参加“门萨奥林匹克”吧。
戈拉特牛排馆（Gorat's）——我最喜欢的牛排馆——将于5月5日（周日）下午4点至晚上10点再次为伯克希尔股东独家营业。请记住，周日光临戈拉特必须提前预订。请于4月1日（切勿提前）致电402-551-3733预约。若周日已满，不妨试试您待在奥马哈的其他晚上光顾戈拉特。点一份三分熟的T骨牛排配双份土豆煎饼，尽显您的品位。
棒球赛照例于周六晚7点在罗森布拉特体育场（Rosenblatt Stadium）举行。今年奥马哈皇家队将对阵俄克拉荷马红鹰队。去年，我试图效仿贝比·鲁斯的职业转型，放弃投球改为击球。奥马哈本地人鲍勃·吉布森站上投手丘，我吓得半死，生怕他那著名的近身球伺候。结果他投了一颗好球区内的快速球，我学着马克·麦圭尔的挥棒姿势，竟打出一记强劲的地滚球，却莫名其妙地在内野停下了。我没跑垒——我这个年纪，打一局桥牌都会喘。
今年球场会发生什么我不确定，但来凑个热闹，等着看惊喜吧。我们的股东委托书内附购票指引。订购年会门票的人将收到一本小册子，内含各类信息，助您在奥马哈玩得尽兴。城里活动多得很。所以，来参加“伍德斯托克周末”吧，加入我们在市政礼堂举行的资本主义庆典。
最后，我想感谢世界总部那支出色且极其高效的团队（整个总部面积只有5246.5平方英尺），正是他们让我的工作变得如此轻松。伯克希尔去年新增约40,000名员工，员工总数达到110,000人。而在总部，我们只增加了一名员工，现在总共有14.8人（按全职当量计算）。（我徒劳地尝试让JoEllen Rieck把周工作四天改成五天，我想她大概很享受因为那0.8的职位而获得的全国知名度吧。）
以我们目前的规模和业务范围，要妥善处理随之而来的各种职责——以及一些几乎为伯克希尔所特有的额外活动，比如我们的股东盛会（股东年会）和定向捐赠计划——需要一群非常特别的人。而我们恰恰拥有这样一支团队。
2002年2月28日
沃伦·E·巴菲特
董事会主席