Berkshire Hathaway 2008 Annual Report Download - page 11

Reinsurance is a business of long-term promises, sometimes extending for fifty years or more. This
past year has retaught clients a crucial principle: A promise is no better than the person or institution making it.
That’s where General Re excels: It is the only reinsurer that is backed by an AAA corporation. Ben Franklin once
said, “It’s difficult for an empty sack to stand upright.” That’s no worry for General Re clients.
Our third major insurance operation is Ajit Jain’s reinsurance division, headquartered in Stamford and
staffed by only 31 employees. This may be one of the most remarkable businesses in the world, hard to
characterize but easy to admire.
From year to year, Ajit’s business is never the same. It features very large transactions, incredible
speed of execution and a willingness to quote on policies that leave others scratching their heads. When there is a
huge and unusual risk to be insured, Ajit is almost certain to be called.
Ajit came to Berkshire in 1986. Very quickly, I realized that we had acquired an extraordinary talent.
So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home.
Of course, I knew the answer before writing. There isn’t anyone like Ajit.
Our smaller insurers are just as outstanding in their own way as the “big three,” regularly delivering
valuable float to us at a negative cost. We aggregate their results below under “Other Primary.” For space
reasons, we don’t discuss these insurers individually. But be assured that Charlie and I appreciate the
contribution of each.
Here is the record for the four legs to our insurance stool. The underwriting profits signify that all four
provided funds to Berkshire last year without cost, just as they did in 2007. And in both years our underwriting
profitability was considerably better than that achieved by the industry. Of course, we ourselves will periodically
have a terrible year in insurance. But, overall, I expect us to average an underwriting profit. If so, we will be
using free funds of large size for the indefinite future.
Underwriting Profit Yearend Float
(in millions)
Insurance Operations 2008 2007 2008 2007
General Re ...................... $ 342 $ 555 $21,074 $23,009
BH Reinsurance .................. 1,324 1,427 24,221 23,692
GEICO ......................... 916 1,113 8,454 7,768
Other Primary ................... 210 279 4,739 4,229
$2,792 $3,374 $58,488 $58,698
Manufacturing, Service and Retailing Operations
Our activities in this part of Berkshire cover the waterfront. Let’s look, though, at a summary balance sheet
and earnings statement for the entire group.
Balance Sheet 12/31/08 (in millions)
Assets
Cash and equivalents ................. $ 2,497
Accounts and notes receivable .......... 5,047
Inventory .......................... 7,500
Other current assets .................. 752
Total current assets ................... 15,796
Goodwill and other intangibles ......... 16,515
Fixed assets ........................ 16,338
Other assets ........................ 1,248
$49,897
Liabilities and Equity
Notes payable ....................... $ 2,212
Other current liabilities ............... 8,087
Total current liabilities ................ 10,299
Deferred taxes ...................... 2,786
Term debt and other liabilities .......... 6,033
Equity ............................. 30,779
$49,897
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