Warren Buffett and Berkshire Hathaway 1982

Warren reports 1982 earnings to be $46.37 million compared to earnings of $62.60 million for 1981...Earnings from operations only are $31.50 million for 1982 and $39.42 million for 1981...Warren's great investment selection continues to be the reason for the operating earnings number one category to be Net Investment Income...

Warren discusses the percentage of earnings as a percent of net worth...He talks about the percentage of earnings to net worth and how it has dropped...Warren also discusses the accounting issues of owning partial companies...Berkshire has stock holdings of many companies that are not wholly owned...Warren discusses the imperfections of the accounting system, when you own less than a majority of a company or a wholly owned company...He gives his view on when you own twenty percent or more of a company (and when you own less) and how that impacts earnings...

Warren has a table in the annual report that shows the last three years of insurance underwriting...Insurance underwriting has grown no more than six percent (in any of the last three years)...

The largest earnings categories are:

Insurance Group-Includes Insurance Underwriting and Net Investment Income-Insurance

Underwriting lost money in 1982...The loss was $11.35 million...

Net Investment Income $ 35.7 million

See's Candies $ 6.9 million

Blue Chip - Parent $ 2.5 million
Wesco Financial - Parent $ 2.2 million

Mutual Savings & Loan $ 1.52 million

Holdings of $45 million or more by market value of non controlling common stocks:
GEICO, an insurance company $309 million...
R. J. Reynolds Company $159 million...

General Foods $84 million...
The Washington Post $103 million...

Time, Inc $80 million...

Crum & Foster $49 million...

Handy & Harman $47 million...

Warren Buffett and Berkshire Hathaway 1981

Warren reports 1981 earnings to be $62.60 million compared to earnings of $53.12 million for 1980...Earnings from operations only are $39.42 million for 1981 and $41.92 million for 1980...Warren's great investment selection continues to be the reason for the operating earnings number one category to be Net Investment Income...The Illinois National Bank, which Berkshire purchased in 1969 had to be spun off in 1980 (because of the Bank Holding Company Act of 1969)...So now there are now no Illinois National Bank's earnings...

Warren discusses the high interest rates of the long term bond yielding 16%...The long term tax exempt bond is currently earning 14%...He explains with these less risky fixed income securities and these high rates makes common stocks and businesses worth less...

The largest earnings categories are:
Insurance Group-Includes Insurance Underwriting and Net Investment Income-
Insurance Underwriting was only $.80 million (this ranks underwriting the seventh in this years operating earnings for Berkshire)
Net Investment Income $32.4 million
See's Candies $ 6.2 million
Blue Chip - Parent $2.1 million

Wesco Financial - Parent $1.59 million
Mutual Savings & Loan $ 1.54 million

Holdings of $30 million or more by market value of non controlling common stocks:

GEICO, an insurance company $200 million...

R. J. Reynolds Company $83 million...
General Foods $67 million...

The Washington Post $58 million...
Handy & Harman $36 million...
SAFECO Insurance $31 million...

Warren Buffett and Berkshire Hathaway 1980

Warren reports 1980 earnings to be $53.12 million compared to earnings of $42.82 million for 1979...Earnings from operations only are $41.92 million for 1980 and $35.99 million for 1979...
Insurance companies since 1979 must begin reporting their securitites at market value on their balance sheets...In the past the reporting was the lower of either their cost or market value...This would result in a large increase in net worth and book value for Berkshire, because of the large amount of unrealized gains...Warren's great investment selection, of course, was the reason behind these large unrealized gains...
The Illinois National Bank, which Berkshire purchased in 1969 had to be spun off in 1980 (because of the Bank Holding Company Act of 1969)...So in the future this bank's earnings would not be a part of Berskire's earnings...Berskire completed the exchange of 41,086 shares of Rockford Bancorp, which owns 97.7% of Illinois National Bank for a like number of Berkshire Hathaway shares...Warren talks about Gregg Abegg the founder of Illinois National Bank passing away on July 2nd, 1980...Warren tells of him being a great leader, banker, and friend...Warren says Gregg worked harder after Berkshire bought the bank than before Berkshire owned it and Warren said he would miss him...

Warren discusses a company repurchasing its stock and the advantages the company has, especially if the company is purchasing its shares at a low price...Warren also discusses his ideas on being a long term investor and the importance of being a long term investor...

The largest earnings categories are:

Insurance Group-Includes Insurance Underwriting and Net Investment Income-

Insurance Underwriting $3.6 million

Net Investment Income $20.1 million

Illinois National Bank $4.7 million

See's Candies $ 4.2 million

Blue Chip - Parent $3.1 million

Mutual Savings & Loan $ 2.0 million

Holdings of $40 million or more by market value:
GEICO, an insurance company...

General Foods, a food company and food processor...

Handy & Harman, a specialized metals company...

SAFECO, an insurance company...
The Washington Post, a large newpaper organization...

Warren Buffett and Berkshire Hathaway 1979

Warren reports 1979 earnings in to be $42.82 million compared to earnings of $39.24 million for 1978...Earnings from operations only are $35.99 million for 1979 and $30.05 for 1978...

Insurance companies in 1979 now must begin reporting their securities at market value on their balance sheets...In the past the reporting was the lower of either their cost or market value...This would result in a large increase in net worth and book value for Berkshire, because of the large amount of unrealized gains...Warren's great investment selection, of course, was the reason behind these large unrealized gains...

The Illinois National Bank, which Berkshire purchased in 1969 must be spun off in 1980 (because of the Bank Holding Company Act)...So in the future this bank's earnings would not be a part of Berskire's earnings...

Warren mentions the experience and ages of three employees under the Berkshire umbrella...Gregg Abegg at Illinois National is now 82...Ben Rosner of Associated Retail Stores is now 76, and Lois Vincenti of Wesco is 74...Warren would always encourage his experienced managers to continue to work and stay with the companies they worked at and managed...

The largest earnings categories are:
Net Investment Income $20.6 million
Illinois National Bank $5.0 million
See's Candies $ 3.4 million
Mutual Savings & Loan $ 3.3 million
Insurance Underwriting $ 2.2 million

Holdings of $20 million or more by market value:

GEICO, an insurance company...

The Washington Post, a large newpaper organization...

Handy & Harman, a specialized metals company...
SAFECO, an insurance company...

Warren Buffett and Berkshire Hathaway 1978

Warren is now in his second year of a copyrighted annual reports, which began in 1977...There is a demand for his current annual and past annual reports...Earnings for Berkshire Hathaway was reported to be $21.9 million in 1977....Warren now reports 1977 earnings in a table format and to be $30.39 million and for 1978 earnings are $39.2 million...

The largest earnings categories are:

Net Investment Income $16.4 million

Illinois National Bank $ 4.3 million

See's Candies $ 3.1 million

Mutual Savings & Loan $ 3.0 million

Insurance Underwriting $ 1.6 million

Holdings of $8 million or more:
American Broadcasting Company...A television network and radio stations...
GEICO preferred shares, An insurance company...
GEICO common shares, An insurance company...
Interpublic Group of Companies, The largest advertising agency in the world...
Kaiser Aluminum & Chemical, An aluminum and chemical company...
Knight-Ridder Newspapers, Inc, A large newspaper company...

SAFECO, an insurance company...
The Washington Post, Class B, A large newspaper which covers Washington D. C. ...The Washington Post is the largest market holding in the stock portfolio in 1978...

Warren Buffett and Berkshire Hathaway 1977

Warren starts copyrighting his annual reports in 1977...There is a demand for his current and past annual reports...Berkshire would bind his annual reports and sell them...

Earnings for Berkshire Hathaway was 21.9 million...EPS were 22.54...The Illinois National Bank earned $3.6 million...The textile division had a poor year...The insurance underwriting grew substantially...Blue Chip Stamps had large capital gains that help increase earnings for 1977...In Warren's investment portfolio, the insurance division's investment income was $12.3 million in 1977...The realized capital gains were $6.9 million...In the total portfolio in 1977 the unrealized gain in stocks was $74 million...

Warren talks about the importance of owning good businesses...For instance, the textile company may be ran well, but is it a good business...The insurance business is a good business, where you can make a mistake and recover, while the textile company when you make a mistake you suffer longer...Warren tries to buy businesses he understands...He wants companies with strong futures...He looks for good management...And he wants to buy low or at least at the right price...All these concepts, still apply today...Of all his past holdings, most of them had been sold...Warren would retain his 100% subsidiaries, such as See's Candies, National Indemnity, but he many time sold off his stock holdings that he did not 100% own...In 1976 the holdings of Capital Cities, Washington Post (purchased in 1973-4 ), and GEICO would be long term holdings...Capital Cities would later be bought out by Disney, and Warren would liquidate that position...GEICO would be purchased in its entirety in 1996...As of 2008, Berkshire retains its Washington Post position, despite the internet and the immediate publishing of news and the new internet media, pushing all newspaper stocks lower and lower...

The earnings top five divisions in -millions- were:

Net Investment Income $11.4

Illinois National Bank $3.3

Insurance Underwriting $3.0

See's Candies $3.0

Mutual Savings & Loan $1.9

Holdings of $5 million or more:

Capital Cities, A television network and radio stations, This company would be sold and not be included in Berkshire's 1978 totals...

GEICO preferred shares, An insurance company...

GEICO common shares, An insurance company...

Interpublic Group of Companies, The largest advertising agency in the world...

Kaiser Aluminum & Chemical, An aluminum and chemical company...

Kaiser Industries, Holding company of Kaiser Aluminum & Chemical...This company would be sold and not be included on Berkshire's totals in 1978...

Ogilvy & Mather, A large advertising agency....This company would be sold and not be included in the 1978 Berkshire's totals in 1978...

Knight-Ridder Newspapers, Inc, A large newspaper company...

The Washington Post, Class B, A large newspaper which covers Washington D. C.

Warren Buffett and Berkshire Hathaway 1976

The Berkshire cover was pea-green for 1976 and 2,000 of the annual reports were printed...Berkshire still has three major divisions in 1976...The divisions are banking, insurance, and textile, but the company is expanding in different subsidiaries...The return on equity for Berkshire was 17.3%...Operating earnings was $16 million...
The bank owned by Berkshire was Illinois National Bank...It had a return on assets of over 2 percent for the year 1976...Warren report that the bank compared to National City Bank of Cleveland is a well ran bank and returned 1.34% on assets, while Illinois National returned 2%...The bank only had loan losses of approximately $12,000 for the year of 1976...The bank continues to meet the increasing loan demand with its current liquidity...Gene has been with the bank since 1931 and again done an excellent job this year managing the bank...

The insurance division had a very good year after two tough years...The management of Phil Liesche of National Indemnity was outstanding...Traditional auto and general insurance were very good...The Homestate operation under Jack Ringwalt increased substantially...Reinsurance lagged the direct insurance business...Overall the insurance division had a good year...Ken Chace is running the textile division and this division had a weak year...The textile business looks is highly cyclical and he hopes for a better year in 1976...

The Berskshire portfolio now has the following securities with market value of over $3 million each...Most of these below securities were purchased during the 1974 and 1975 bear market...GEICO was purchased by Berkshire and Pinkerton's is being accumulated through Blue Chip Stamps...Berkshire owns 33% of Blue Chip Stamps as of year end 1976...K&W Products, now a subsidiary which was purchased in 1975 had solid earnings in 1976...

These holdings below had a market value of over $3 million:

California Water Service, This company would be sold and not in Berkshire's totals in 1977...

GEICO preferred, this insurance company preferred stock is the largest holding...
GEICO common, an insurance company...

Interpublic, an advertising agency...

Kaiser Shares, a large chemical and aluminum company...

Munsingwear, This company would be sold and not in Berkshire's totals in 1977...

National Presto, an appliance maker...This company would be sold and not in Berkshire's totals in 1977...

Ogilvy & Mather, an advertising agency...

The Washington Post, a newspaper company...

Warren Buffett and Berkshire Hathaway 1975

Berkshire had poor operating results for 1975...

The banking division of Illinois National Bank and Trust of Rockford is one of the most profitable banks in the nation...Eugene Abegg does an outstanding job running the bank...The bank's return on assets was almost four times the average bank's return...The bank remains very liquid...In 1932 Illinois National Bank earned $8,782 in its first full year of operation...Eugene Abegg started the bank in 1931...The bank started in 1931 with $250,000 capital...

The insurance division had its toughest year...The property and casualty had its worst year ever...Again, inflation, inadequate insurance rates, and other insurance companies not reserving enough against losses help produce unsatisfactory results in the division...Warren mentions the that insurance premiums will be up...

The textile division had a bad year...This would carry over into 1976...The textile industry is becoming increasing more difficult to make money...
Despite the textile industry problems, Berkshire buys Waumbec Mills and Waumbec Dyeing and Finishing Company...Two textile mills in New Hampshire...

Warren Buffett and Berkshire Hathaway 1974

The Berkshire Hathaway 1974 annual report was printed with a royal blue cover...Operating results were not satisfactory...Again Warren hedges and says 1975 is not encouraging... Berkshire's stock would go from $93 in 1973 to $40 in 1974...The stock market was tumbling...However, Berkshire had a 10.3% return on equity...This was the lowest return on equity since 1970...This string of shareholder increases could be traced back all the way back to 1956...

The banking division of Illinois National Bank and Trust of Rockford is one of the most profitable banks in the nation...Eugene Abegg does an outstanding job running the bank...With loan totals of $68 million, the bank only had losses of $24,000 or .04%...The bank remains very liquid...

The insurance division had a rough year...The insurance division in the past had produced satisfactory or above results...Inflation, inadequate insurance rates, and other insurance companies not reserving enough against losses help produce unsatisfactory results in the division...Warren mentions the other insurance companies not charging the correct rates and under reserving against losses will hurt the competition's capital position...Because Berkshire is a strong capital company in the future they (Berkshire) will take use this to take advantage of the competition...Warren also discusses the impact interest rate increases and decreases has on bond prices in Berkshires portfolio...

The textile division had three good quarters and a rough fourth quarter...This would carry over into 1975...The textile industry is becoming increasing more difficult to make money...

Warren mentions (not by name) that his stock purchases in the future will increase substantially...The purchase of Washington Post stock continues in 1974...

Warren Buffett and Berkshire Hathaway 1973

The 1973 Berkshire annual report has a light brown cover...Berkshire earned $12 million...Berkshire Hathaway still has three major divisions in 1973...The divisions are banking, insurance, and textile...The bank owned by Berkshire was Illinois National Bank...It had a return on deposits of over 2.1 percent for the year 1973...Warren continues to report that the bank, seldom goes into a borrowed position, except for short term cash management positions, therefore has excess liquidity...The bank continues to meet the increasing loan demand with its current liquidity...Gene Abegg and Bob Kline did an excellent job managing the bank's net interest margin and operating earnings and make Illinois National a leading bank ... Gene has been with the bank since 1931...
Warren announces that Diversified Retailing will be merged into Berkshire Hathaway...The most important asset of Diversified Retailing is its 16% ownership of Blue Chip Stamps...Warren announces that the Sun Newspaper won a Pulitzer Prize...The first time a weekly newspaper has won a Pulitzer...
Ken Chace is running the textile division and this division had a strong year...Ken Chace and Ralph Rigby's made 1973 a better year than last year...The textile business looks is highly cyclical but 1974 should continue as 1973, albeit a tough one because of the nature and the overall textile industry factors...

This year 1973 is the start of the 1973-74 bear market...Warren would take advantage of the lower stock prices and be very active in the bear market...Warren would purchase blocks of the Washington Post, Affiliated Publications (owner of the Boston Globe), Interpublic Group of Companies (the largest advertising agency), and Ogilvy & Mather International (another large advertising agency)...

Warren Buffett and Berkshire Hathaway 1972

Berkshire Hathaway still has three major divisions in 1972...The divisions are banking, insurance, and textile...Operating earnings during 1972 amounted to 19.9% of shareholders equity...The bank owned by Berkshire is Illinois National Bank...It had a return on deposits of over 2.2 percent for the year 1972...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...Loans expanded 38% over last year...His report is much the same and like the last year...
As usual Warren hedges next year (1973) comments on profits and says it will be very difficult for the bank to have the same kind of returns in 1973 as it has in 1972...Gene Abegg and Bob Kline did an excellent job managing the bank's net interest margin and operating earnings and make Illinois National a leading bank...

Warren at Charlie Munger's suggestion in January buys See's Candies...It is bought through the Berkshire affiliate of Blue Chip Stamps...See's was a candy company that had started in 1920...Berkshire also buys Wesco, a savings and loan in 1972 at about $6 per share...

The insurance division also had a solid year...The insurance was the division with the greatest profit increase...The insurance division was absent any frequency of auto accidents, moderating accident frequency, and no major catastrophe...Therefore, profits were above average...It is ran basically by Jack Ringwalt and Phil Lieshe...Texas United Insurance was formed...The insurance company float was $100 million of which only $17 million was invested in stocks, because the overall stock market was high and Warren could not find companies that was the right valuation that provided a margin of safety...The rest of the float was invested in bonds until the market dropped...
The textile business in 1972 struggled with low margins...Ken Chace is running the textile division and doing an excellent job...Ken Chace and Ralph Rigby's made 1972 a better year than last year...The textile business looks for even a better year in 1973, albeit a tough one because of the nature and the overall textile industry factors...