Berkshire Hathaway still has three major divisions in 1971...The divisions are banking, insurance, and textile...The bank owned by Berkshire was Illinois National Bank...It had a return on deposits of over two percent for the year 1971...Warren reports that the bank, seldom goes into a borrowed position, except for short term cash management positions, therefore has excess liquidity...The bank has a de minimis amount of charge offs and loan losses, which are below the industry averages...The bank pays its depositors the maximum rates permitted by law...
As usual Warren hedges next year (1972) comments on profits and says it will be very difficult for the bank to have the same kind of returns in 1972 as it has in 1971...Interest rates on investments and loans were down in 1971, but Gene Abegg and Bob Kline did an excellent job managing the bank's net interest margin and operating earnings...
The insurance division also had an excellent year...It is ran basically by Jack Ringwalt...The reinsurance business was extremely profitable this year (1971)...The "homestate" insurance operation of Cornhusker Casualty was started in 1970...It contributed only a small amount to the bottom line...But Warren says they have started "homestate" insurance operations in Minnesota, under the name of Lakeland Fire & Casualty (started in 1971 as a new company)... Texas United Insurance would start in 1972, in Texas...On an even more positive note the Home & Auto Insurance Company of Chicago started by Victor Raab wrote $7.5 million in policies in 1971...The overall outlook for the insurance business for 1972 is positive...
The textile business in 1971 struggled with low margins...Ken Chace is running the textile division and doing an excellent job...Without his management skills the division would have lost much money...Instead it did make a little profit for Berkshire...Cost cutting and expense oversight allowed the textile company to stay profitable, albeit very small...
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