Berkshire Hathaway 2015 Annual Report Download - page 28

Think back to 1951 when I first became enthused about GEICO. The company’s average loss-per-policy
was then about $30 annually. Imagine your reaction if I had predicted then that in 2015 the loss costs would increase
to about $1,000 per policy. Wouldn’t such skyrocketing losses prove disastrous, you might ask? Well, no.
Over the years, inflation has caused a huge increase in the cost of repairing both the cars and the humans
involved in accidents. But these increased costs have been promptly matched by increased premiums. So,
paradoxically, the upward march in loss costs has made insurance companies far more valuable. If costs had
remained unchanged, Berkshire would now own an auto insurer doing $600 million of business annually rather than
one doing $23 billion.
Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-
related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years,
which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely –
though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.
As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a
low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major
insurer, climate change should not be on your list of worries.
The Annual Meeting
Charlie and I have finally decided to enter the 21st Century. Our annual meeting this year will be webcast
worldwide in its entirety. To view the meeting, simply go to https://finance.yahoo.com/brklivestream at 9 a.m.
Central Daylight Time on Saturday, April 30th. The Yahoo! webcast will begin with a half hour of interviews with
managers, directors and shareholders. Then, at 9:30, Charlie and I will commence answering questions.
This new arrangement will serve two purposes. First, it may level off or modestly decrease attendance at
the meeting. Last year’s record of more than 40,000 attendees strained our capacity. In addition to quickly filling the
CenturyLink Center’s main arena, we packed its overflow rooms and then spilled into two large meeting rooms at
the adjoining Omaha Hilton. All major hotels were sold out notwithstanding Airbnb’s stepped-up presence. Airbnb
was especially helpful for those visitors on limited budgets.
Our second reason for initiating a webcast is more important. Charlie is 92, and I am 85. If we were
partners with you in a small business, and were charged with running the place, you would want to look in
occasionally to make sure we hadn’t drifted off into la-la land. Shareholders, in contrast, should not need to come to
Omaha to monitor how we look and sound. (In making your evaluation, be kind: Allow for the fact that we didn’t
look that impressive when we were at our best.)
Viewers can also observe our life-prolonging diet. During the meeting, Charlie and I will each consume
enough Coke, See’s fudge and See’s peanut brittle to satisfy the weekly caloric needs of an NFL lineman. Long ago
we discovered a fundamental truth: There’s nothing like eating carrots and broccoli when you’re really hungry –
and want to stay that way.
Shareholders planning to attend the meeting should come at 7 a.m. when the doors open at CenturyLink
Center and start shopping. Carrie Sova will again be in charge of the festivities. She had her second child late last
month, but that did not slow her down. Carrie is unflappable, ingenious and expert at bringing out the best in those
who work with her. She is aided by hundreds of Berkshire employees from around the country and by our entire
home office crew as well, all of them pitching in to make the weekend fun and informative for our owners.
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