Berkshire Hathaway 2011 Annual Report Download

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B
ERKSHIRE
H
ATHAWAY
INC.
2011
ANNUAL REPORT

Table of contents

  • Page 1
    BERKSHIRE HATHAWAY INC. 2011 ANNUAL REPORT

  • Page 2
    ... real estate brokerage firm. Berkshire's finance and financial products businesses primarily engage in proprietary investing strategies (BH Finance), commercial and consumer lending (Berkshire Hathaway Credit Corporation and Clayton Homes) and transportation equipment and furniture leasing (XTRA and...

  • Page 3
    BERKSHIRE HATHAWAY INC. 2011 ANNUAL REPORT TABLE OF CONTENTS Business Activities ...Inside Front Cover Corporate Performance vs. the S&P 500 ...Chairman's Letter* ...Acquisition Criteria ...Management's Report on Internal Control Over Financial Reporting ...Selected Financial Data for the Past Five...

  • Page 4
    ...: 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...

  • Page 5
    BERKSHIRE HATHAWAY INC. To the Shareholders of Berkshire Hathaway Inc.: The per-share book value of both our Class A and Class B stock increased by 4.6% in 2011. Over the last 47 years (that is, since present management took over), book value has grown from $19 to $99,860, a rate of 19.8% compounded...

  • Page 6
    ... about $102 million since our purchase, the company's ability to pay will soon be exhausted unless gas prices rise substantially. We wrote down our investment by $1 billion in 2010 and by an additional $390 million last year. At yearend, we carried the bonds at their market value of $878 million. If...

  • Page 7
    ...500, we have earned our paychecks. If it doesn't, we are overpaid at any price. We have no way to pinpoint intrinsic value. But we do have a useful, though considerably understated, proxy for it: per-share book value. This yardstick is meaningless at most companies. At Berkshire, however, book value...

  • Page 8
    ...likely repurchase stock aggressively at our price limit or lower. You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets. Nor will we buy shares if our cash-equivalent holdings are below $20 billion. At Berkshire, financial...

  • Page 9
    ... company that has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders. The company has used debt wisely, made value-adding acquisitions almost exclusively for cash and aggressively repurchased its own stock. Today, IBM has 1.16 billion shares...

  • Page 10
    ...Berkshire's benefit. Though individual policies and claims come and go, the amount of float we hold remains remarkably stable in relation to premium volume. Consequently, as our business grows, so does our float. And how we have grown, as the following table shows: Year 1970 1980 1990 2000 2010 2011...

  • Page 11
    ... our premium volume would now be $3.3 billion rather than the $15.4 billion we attained in 2011. The extra value created by Tony and his associates is a major element in Berkshire's excess of intrinsic value over book value. There is still more than 90% of the auto-insurance market left for GEICO to...

  • Page 12
    ... businesses, BNSF and MidAmerican Energy, that have important common characteristics distinguishing them from our many other businesses. Consequently, we assign them their own sector in this letter and also split out their combined financial statistics in our GAAP balance sheet and income statement...

  • Page 13
    .../10; purchase accounting subsequently) Revenues ...Operating earnings ...Interest (Net) ...Pre-Tax earnings ...Net earnings ...(in millions) 2011 2010 $19,548 5,310 560 4,741 2,972 $16,850 4,495 507 3,988 2,459 In the book value recorded on our balance sheet, BNSF and MidAmerican carry substantial...

  • Page 14
    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 12/31/11 (in millions) Assets Cash and equivalents ...Accounts and notes receivable...

  • Page 15
    ... of Tungaloy's management, as well as its staff. They are a wonderful group and deserve your admiration and thanks. McLane, our huge distribution company that is run by Grady Rosier, added important new customers in 2011 and set a pre-tax earnings record of $370 million. Since its purchase in 2003...

  • Page 16
    ... far. This drawing power and our extensive holdings of land at the site should enable us to attract a number of other major stores. (If any high-volume retailers are reading this, contact me.) Our experience with NFM and the Blumkin family that runs it has been a real joy. The business was built by...

  • Page 17
    ...-off had no connection to economic reality. The excess of Marmon's intrinsic value over its carrying value is widened by this meaningless write-down. Finance and Financial Products This sector, our smallest, includes two rental companies, XTRA (trailers) and CORT (furniture), and Clayton Homes, the...

  • Page 18
    ...; GAAP "cost" differs in a few cases because of write-ups or write-downs that have been required. We made few changes in our investment holdings during 2011. But three moves were important: our purchases of IBM and Bank of America and the $1 billion addition we made to our Wells Fargo position. The...

  • Page 19
    ...% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers...

  • Page 20
    ...human. High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments - and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right...

  • Page 21
    ... that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See's Candy meet that double-barreled test. Certain other companies - think of our regulated utilities, for example - fail it...

  • Page 22
    ...'s CEO. And be sure to buy a couple of pairs of limited edition "Berkshire Hathaway Running Shoes." 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...

  • Page 23
    ...Nebraska Furniture Mart, located on a 77-acre site on 72nd Street between Dodge and Pacific, we will again be having "Berkshire Weekend" discount pricing. Last year the store did $32.7 million of business during its annual meeting sale, a volume that exceeds the yearly sales of most furniture stores...

  • Page 24
    ...839-page Federal income tax return - hello, Guinness! - as well as state and foreign returns. Additionally, they respond to countless shareholder and media inquiries, get out the annual report, prepare for the country's largest annual meeting, coordinate the Board's activities - and the list goes on...

  • Page 25
    ... hoping to sell you their cocker spaniels. A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: "When the phone don't ring, you'll know it's me." MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Berkshire Hathaway Inc...

  • Page 26
    BERKSHIRE HATHAWAY INC. and Subsidiaries Selected Financial Data for the Past Five Years (dollars in millions except per-share data) 2011 Revenues: Insurance premiums earned (1) ...Sales and service revenues ...Revenues of railroad, utilities and energy businesses (2) ...Interest, dividend and other...

  • Page 27
    ... ACCOUNTING FIRM To the Board of Directors and Shareholders of Berkshire Hathaway Inc. Omaha, Nebraska We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of...

  • Page 28
    BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED BALANCE SHEETS (dollars in millions) December 31, 2011 2010 ASSETS Insurance and Other: Cash and cash equivalents ...$ 33,513 $ 34,767 Investments: Fixed maturity securities ...31,222 33,803 Equity securities ...76,063 59,819 Other ...13,111 19,...

  • Page 29
    BERKSHIRE HATHAWAY INC. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (dollars in millions except per-share amounts) Year Ended December 31, 2011 2010 2009 Revenues: Insurance and Other: Insurance premiums earned ...Sales and service revenues ...Interest, dividend and other investment income...

  • Page 30
    ... 585 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (dollars in millions) Berkshire Hathaway shareholders' equity Common stock Accumulated and capital in other excess of par comprehensive Retained Treasury value income earnings stock Total Noncontrolling interests Balance at December...

  • Page 31
    ...Acquisitions of businesses, net of cash acquired ...Purchases of property, plant and equipment ...Other ...Net cash flows from investing activities ...Cash flows from financing activities: Proceeds from borrowings of insurance and other businesses ...Proceeds from borrowings of railroad, utilities...

  • Page 32
    ...basis of consolidation Berkshire Hathaway Inc. ("Berkshire") is a holding company owning subsidiaries engaged in a number of diverse business activities, including property and casualty insurance and reinsurance, railroad, utilities and energy, finance, manufacturing, service and retailing. In these...

  • Page 33
    ...and finance receivables include loan securitizations issued when we have the power to direct and the right to receive residual returns. Substantially all of our consumer loans are secured by real or personal property. Allowances for credit losses from manufactured housing and other real estate loans...

  • Page 34
    ...in future rates is probable. Our utility and energy and railroad businesses are very capital intensive and their large base of assets turns over on a continuous basis. Each year, a capital program is developed for the replacement of assets and for the acquisition or construction of assets to enhance...

  • Page 35
    ... due until after the balance sheet date. For contracts containing experience rating provisions, premiums are based upon estimated loss experience under the contracts. Sales revenues derive from the sales of manufactured products and goods acquired for resale. Revenues from sales are recognized upon...

  • Page 36
    ...The unamortized balances of deferred premium acquisition costs are included in other assets and were $1,890 million and $1,768 million at December 31, 2011 and 2010, respectively. (p) Regulated utilities and energy businesses Certain domestic energy subsidiaries prepare their financial statements in...

  • Page 37
    ... currency. Revenues and expenses of these businesses are generally translated into U.S. Dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating the financial statements of...

  • Page 38
    ...our Consolidated Financial Statements. (2) Significant business acquisitions Our long-held acquisition strategy is to purchase businesses with consistent earning power, good returns on equity and able and honest management at sensible prices. On March 13, 2011, Berkshire and The Lubrizol Corporation...

  • Page 39
    ... in Berkshire common stock (80,931 Class A shares and 20,976,621 Class B shares). We accounted for the acquisition using the purchase method and our allocation of the purchase price to BNSF's assets and liabilities was completed as of December 31, 2010. BNSF's financial statements are included...

  • Page 40
    ... Balance Sheets as follows (in millions). December 31, 2011 2010 Insurance and other ...Finance and financial products ... $31,222 966 $32,188 $33,803 1,080 $34,883 Investments in foreign government securities include securities issued by national and provincial government entities as well...

  • Page 41
    ...212) 25,749 (6) 11,150 $ (672) $61,513 Investments in equity securities are reflected in our Consolidated Balance Sheets as follows (in millions). December 31, 2011 2010 Insurance and other ...Railroad, utilities and energy * ...Finance and financial products * ... $76,063 488 440 $76,991 $59,819...

  • Page 42
    ... The Dow Chemical Company ("Dow") and Bank of America Corporation ("BAC"). A summary of other investments follows (in millions). Net Unrealized Gains Fair Value Carrying Value Cost December 31, 2011 Other fixed maturity and equity securities: Insurance and other ...Finance and financial products...

  • Page 43
    ...time holding gain of $979 million related to our BNSF acquisition. Net investment gains/losses for each of the three years ending December 31, 2011 are reflected in our Consolidated Statements of Earnings as follows (in millions). 2011 2010 2009 Insurance and other ...Finance and financial products...

  • Page 44
    Notes to Consolidated Financial Statements (Continued) (7) Receivables Receivables of insurance and other businesses are comprised of the following (in millions). December 31, 2011 2010 Insurance premiums receivable ...Reinsurance recoverable on unpaid losses ...Trade and other receivables ......

  • Page 45
    ...in other assets in our Consolidated Balance Sheets and are summarized by type as follows (in millions). December 31, 2011 Gross carrying Accumulated amount amortization December 31, 2010 Gross carrying Accumulated amount amortization Insurance and other ...Railroad, utilities and energy ... $11,016...

  • Page 46
    ... finance and financial products businesses follows (in millions). December 31, 2011 Notional Assets (3) Liabilities Value December 31, 2010 Notional Assets (3) Liabilities Value Equity index put options ...Credit default contracts: High yield indexes ...States/municipalities ...Individual corporate...

  • Page 47
    ...Derivative contracts (Continued) Derivative gains/losses of our finance and financial products businesses included in our Consolidated Statements of Earnings for each of the three years ending December 31, 2011 were as follows (in millions). 2011 2010 2009 Equity index put options ...Credit default...

  • Page 48
    ...). 2011 2010 2009 Cash paid during the period for: Income taxes ...Interest: Insurance and other businesses ...Railroad, utilities and energy businesses ...Finance and financial products businesses ...Non-cash investing and financing activities: Liabilities assumed in connection with acquisitions...

  • Page 49
    ... tables are the weighted average interest rates on outstanding debt as of December 31, 2011. Maturity date ranges are based on borrowings as of December 31, 2011. Average Interest Rate December 31, 2011 2010 Insurance and other: Issued by Berkshire parent company due 2012-2047 ...Short-term...

  • Page 50
    ... included $1.6 billion in pre-acquisition debt issued by Lubrizol. Average Interest Rate December 31, 2011 2010 Railroad, utilities and energy: Issued by MidAmerican Energy Holdings Company ("MidAmerican") and its subsidiaries: MidAmerican senior unsecured debt due 2012-2037 ...Subsidiary and other...

  • Page 51
    Notes to Consolidated Financial Statements (Continued) (15) Income taxes The liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions). December 31, 2011 2010 Payable currently ...Deferred ...Other ... $ (229) 37,105 928 $37,804 $ (211) 35,558 1,005 $36...

  • Page 52
    ... within the next twelve months. We currently believe that there are no jurisdictions where the outcome of unresolved issues or claims is likely to be material to our Consolidated Financial Statements. At December 31, 2011 and 2010, net unrecognized tax benefits were $928 million and $1,005 million...

  • Page 53
    ... quoted prices for identical assets or liabilities exchanged in active markets. Substantially all of our investments in equity securities are traded on an exchange in active markets and fair values are based on the closing prices as of the balance sheet date. Level 2 - Inputs include directly...

  • Page 54
    ... ...Foreign governments ...Corporate bonds ...Mortgage-backed securities ...Investments in equity securities ...Other investments ...Net derivative contract (assets)/liabilities: Railroad, utilities and energy ...Finance and financial products: Equity index put options ...Credit default obligations...

  • Page 55
    ... the accompanying Consolidated Financial Statements. As of March 31, 2011, we transferred our investment in GS Preferred Stock to Level 2 measurements given the then pending redemption of that investment which occurred on April 18, 2011. As of September 30, 2011, we transferred our investment in GE...

  • Page 56
    .... In September 2011, our Board of Directors approved a common stock repurchase program whereby it authorized Berkshire to repurchase its Class A and Class B shares at prices no higher than a 10% premium over the book value of the shares. Berkshire may repurchase shares in the open market or through...

  • Page 57
    ... Expected return on plan assets ...(579) (528) (417) Other ...102 69 35 Net pension expense ...$ 282 $ 249 $ 235 The accumulated benefit obligation is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. As of December 31, 2011 and 2010, the...

  • Page 58
    ... value with significant unobservable inputs (Level 3) for the years ending December 31, 2011 and 2010 consisted primarily of real estate and limited partnership interests. Pension plan assets are generally invested with the long-term objective of earning sufficient amounts to cover expected benefit...

  • Page 59
    ... average interest rate assumptions used in determining projected benefit obligations and net periodic pension expense were as follows. 2011 2010 Applicable to pension benefit obligations: Discount rate ...Expected long-term rate of return on plan assets ...Rate of compensation increase ...Discount...

  • Page 60
    ...segment amounts to consolidated amounts. Business Identity Business Activity GEICO General Re Berkshire Hathaway Reinsurance Group Berkshire Hathaway Primary Group BNSF BH Finance, Clayton Homes, XTRA, CORT and other financial services ("Finance and financial products") Marmon Underwriting private...

  • Page 61
    ... 2011 2010 2009 Operating Businesses: Insurance group: Underwriting: GEICO ...General Re ...Berkshire Hathaway Reinsurance Group ...Berkshire Hathaway Primary Group ...Investment income ...Total insurance group ...BNSF ...Finance and financial products ...Marmon ...McLane Company ...MidAmerican...

  • Page 62
    ... year-end 2011 2010 Identifiable assets at year-end 2010 2011 2009 Operating Businesses: Insurance group: GEICO ...General Re ...Berkshire Hathaway Reinsurance and Primary Groups ...Total insurance group ...BNSF ...Finance and financial products ...Marmon ...McLane Company ...MidAmerican ...Other...

  • Page 63
    Notes to Consolidated Financial Statements (Continued) (21) Business segment data (Continued) Approximately 96% of our revenues in 2011 from railroad, utilities and energy businesses were in the United States versus 97% in 2010 and 91% in 2009. In each year most of the remainder was attributed to ...

  • Page 64
    .... 2011 2010 2009 Insurance - underwriting ...Insurance - investment income ...Railroad ...Utilities and energy ...Manufacturing, service and retailing ...Finance and financial products ...Other ...Investment and derivative gains/losses ...Net earnings attributable to Berkshire ...(1) (2) $ 154...

  • Page 65
    ...reinsurance contracts specially designed to meet the unique needs of insurance and reinsurance buyers. Underwriting results from our insurance businesses are summarized below. Amounts are in millions. 2011 2010 2009 Underwriting gain (loss) attributable to: GEICO ...General Re ...Berkshire Hathaway...

  • Page 66
    ... over 2010. The increase reflected additional advertising and increased payroll costs related to generating new business and servicing existing business. In 2012, we will adopt a new accounting standard that modifies the types of costs that may be deferred in acquiring or renewing insurance policies...

  • Page 67
    ... and $53 million from casualty/workers' compensation business. The property results in 2010 included $339 million of catastrophe losses incurred primarily from the Chilean and New Zealand earthquakes and weather related losses in Europe, Australia and New England, offset by reductions in liability...

  • Page 68
    ... between January 1, 2008 and December 31, 2012. We currently do not anticipate that the Swiss Re quota-share contract will be renewed or extended. BHRG's underwriting activities also include life reinsurance as well as a life annuity business. BHRG's underwriting results are summarized in the...

  • Page 69
    ... 2010 and $2.8 billion in 2009 from the Swiss Re 20% quota-share contract. Underwriting results of our other multi-line property/casualty business can be significantly impacted by the timing and magnitude of catastrophe losses and fluctuations in foreign currency exchange rates. In 2011, other multi...

  • Page 70
    ... specialty insurance coverages; a group of companies referred to internally as "Berkshire Hathaway Homestate Companies," providers of standard commercial multi-line insurance; Central States Indemnity Company, a provider of credit and disability insurance to individuals nationwide through financial...

  • Page 71
    ...our insurance businesses as of December 31, 2011 and 2010 follows. Other investments include investments in Wrigley, Goldman Sachs, General Electric, Dow Chemical and Bank of America (See Note 5 to the Consolidated Financial Statements). Amounts are in millions. December 31, 2011 2010 Cash and cash...

  • Page 72
    ...-related costs, as well as salaries and benefits inflation, increased personnel training costs and flood-related costs. Purchased services expenses increased $49 million due primarily to volume-related and flood-related costs, offset by lower locomotive maintenance costs. In 2010, purchased services...

  • Page 73
    ... power projects and the second-largest residential real estate brokerage firm in the United States. Revenues and earnings of MidAmerican are summarized below. Amounts are in millions. 2011 Revenues 2010 2009 2011 Earnings 2010 2009 PacifiCorp ...MidAmerican Energy Company ...Natural gas pipelines...

  • Page 74
    ... in 2011, down 4% from $1,046 million in 2010, primarily due to a 4% decrease in average home sale prices. EBIT of the real estate brokerage business of $39 million was 7% lower than the $42 million in 2010 which was relatively unchanged as compared to 2009. Manufacturing, Service and Retailing...

  • Page 75
    ... stores and restaurants. McLane's business is marked by high sales volume and very low profit margins. McLane's significant customers include Wal-Mart, 7-Eleven and Yum! Brands. Approximately 30% of McLane's annual revenues are attributable to Wal-Mart. A curtailment of purchasing by Wal-Mart...

  • Page 76
    ... Queen, which licenses and services a system of over 6,100 stores that offer prepared dairy treats and food; Buffalo News, a publisher of a daily and Sunday newspaper; and businesses that provide management and other services to insurance companies. At the end of 2011, we acquired the Omaha World...

  • Page 77
    ...finance ("Clayton Homes"), transportation equipment leasing ("XTRA"), furniture leasing ("CORT") as well as various miscellaneous financing activities. A summary of revenues and earnings from our finance and financial products businesses follows. Amounts are in millions. 2011 Revenues 2010 2009 2011...

  • Page 78
    .... 2011 2010 2009 Investment gains/losses Sales and other disposals of investments Insurance and other ...Finance and financial products ...Other-than-temporary impairment losses on investments ...Other ...Derivative gains/losses Credit default contracts ...Equity index put option contracts ...Other...

  • Page 79
    ... Sheets or on our consolidated shareholders' equity as of any given balance sheet date. Although we have periodically recorded OTTI losses in earnings in 2011, 2010 and 2009, we continue to hold positions in certain of the related securities. In cases where the market values of these investments...

  • Page 80
    ...the Consolidated Financial Statements. In late September 2011, our Board of Directors authorized Berkshire Hathaway to repurchase Class A and Class B shares of Berkshire at prices no higher than a 10% premium over the book value of the shares. Berkshire may repurchase shares in open market purchases...

  • Page 81
    ... company and through our railroad, utilities and energy and the finance and financial products businesses. Restricted access to credit markets at affordable rates in the future could have a significant negative impact on our operations. On July 21, 2010, President Obama signed into law financial...

  • Page 82
    ...in the Consolidated Balance Sheets without discounting for time value, regardless of the length of the claim-tail. Amounts are in millions. Gross unpaid losses Dec. 31, 2011 Dec. 31, 2010 Net unpaid losses * Dec. 31, 2011 Dec. 31, 2010 GEICO ...General Re ...BHRG ...Berkshire Hathaway Primary Group...

  • Page 83
    ... by policy coverage, rated state, reporting date and occurrence date, among other ways. A brief discussion of each reserve component follows. We establish average reserve amounts for reported auto damage claims and new liability claims prior to the development of an individual case reserve. The...

  • Page 84
    ..., such as to new legal precedents, class action suits or recent catastrophes. Consequently, supplemental IBNR reserves for these types of events may be established through the collaborative effort of actuarial, claims and other management. For each significant coverage, we test the adequacy of the...

  • Page 85
    ... losses or property catastrophe losses may not vary significantly from primary insurance. Under contracts where periodic premium and claims reports are required from ceding companies, such reports are generally required at quarterly intervals which in the U.S. range from 30 to 90 days after the end...

  • Page 86
    ...as of December 31, 2011 are summarized below. Amounts are in millions. Type Line of business Reported case reserves ...IBNR reserves ...Gross reserves ...Ceded reserves and deferred charges ...Net reserves ... $ 8,528 7,760 16,288 (1,021) $15,267 Workers' compensation (1) ...Professional liability...

  • Page 87
    ... IBNR reserve assumptions during the course of the year. In 2011, our reported claims for prior years' workers' compensation losses were less than expected by $148 million. However, further analysis of the workers' compensation reserve cells by segment indicated the need for maintaining IBNR. These...

  • Page 88
    ... indemnified or contracts that indemnify all losses paid by the counterparty after the policy effective date. We paid retroactive reinsurance losses and loss adjustment expenses of approximately $1.6 billion in 2011. The classification "reported case reserves" has no practical analytical value with...

  • Page 89
    ...Derivative contract liabilities Our Consolidated Balance Sheets include significant amounts of derivative contract liabilities that are measured at fair value. Our significant derivative contract exposures are concentrated in credit default and equity index put option contracts. These contracts were...

  • Page 90
    ... put option contracts based on the widely used Black-Scholes based option valuation model. Inputs to the model include the current index value, strike price, discount rate, dividend rate and contract expiration date. The weighted average discount and dividend rates used as of December 31, 2011 were...

  • Page 91
    ... to acquire such securities that are attractively priced in relation to the perceived credit risk. Management recognizes and accepts that losses may occur with respect to assets. We also strive to maintain high credit ratings so that the cost of our debt is minimized. We utilize derivative products...

  • Page 92
    ... and other borrowings: Insurance and other ...Railroad, utilities and energy ...Finance and financial products ...Equity index put option contracts ...December 31, 2010 Assets: Investments in fixed maturity securities ...Other investments (1) ...Loans and finance receivables ...Liabilities: Notes...

  • Page 93
    ... Increase (Decrease) in Shareholders' Equity Fair Value Hypothetical Price Change December 31, 2011 Assets: Equity securities ...Other investments (1) ...Liabilities: Equity index put option contracts ...December 31, 2010 Assets: Equity securities ...Other investments (1) ...Liabilities: Equity...

  • Page 94
    ... our commodity price risk on energy derivative contracts of MidAmerican as of December 31, 2011 and 2010 and shows the effects of a hypothetical 10% increase and a 10% decrease in forward market prices by the expected volumes for these contracts as of each date. The selected hypothetical change...

  • Page 95
    ... goal by directly owning a diversified group of businesses that generate cash and consistently earn above-average returns on capital. Our second choice is to own parts of similar businesses, attained primarily through purchases of marketable common stocks by our insurance subsidiaries. The price and...

  • Page 96
    ... stock market is likely to present us with significant advantages. For one thing, it tends to reduce the prices at which entire companies become available for purchase. Second, a depressed market makes it easier for our insurance companies to buy small pieces of wonderful businesses - including...

  • Page 97
    ...own portfolios through direct purchases in the stock market. Charlie and I are interested only in acquisitions that we believe will raise the per-share intrinsic value of Berkshire's stock. The size of our paychecks or our offices will never be related to the size of Berkshire's balance sheet. 9. We...

  • Page 98
    ...company during that holding period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire's stock price at a fair level than a high...

  • Page 99
    .... What our annual reports do supply, though, are the facts that we ourselves use to calculate this value. Meanwhile, we regularly report our per-share book value, an easily calculable number, though one of limited use. The limitations do not arise from our holdings of marketable securities, which...

  • Page 100
    ...74 B 2008 2009 2010 2011 * ** Cumulative return for the Standard and Poor's indices based on reinvestment of dividends. It would be difficult to develop a peer group of companies similar to Berkshire. The Corporation owns subsidiaries engaged in a number of diverse business activities of which...

  • Page 101
    ... pre-tax, non-insurance earnings per share is 21.0%. During the same period, Berkshire's stock price increased at a rate of 22.1% annually. Over time, you can expect our stock price to move in rough tandem with Berkshire's investments and earnings. Market price and intrinsic value often follow very...

  • Page 102
    ... the New York Stock Exchange, trading symbol: BRK.A and BRK.B. The following table sets forth the high and low sales prices per share, as reported on the New York Stock Exchange Composite List during the periods indicated: 2011 Class A High Low Class B High Low Class A High Low 2010 Class B High Low...

  • Page 103
    ... Home Furnishings ...2,338 World Book (1) ...172 XTRA ...443 Non-insurance total ...238,916 Corporate Office ...24 270,858 (1) (2) (3) (4) A Scott Fetzer Company A MidAmerican Energy Holdings Company A Fruit of the Loom, Inc. Company Approximately 140 manufacturing and service businesses that...

  • Page 104
    ...III, Co-Chair of the Bill and Melinda Gates Foundation DAVID S. GOTTESMAN, Senior Managing Director of First Manhattan Company, an investment advisory firm. CHARLOTTE GUYMAN, Former Chairman of the Board of Directors of UW Medicine, an academic medical center. DONALD R. KEOUGH, Chairman of Allen and...

  • Page 105
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