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...