Berkshire Hathaway Earnings Shoot Up

Omaha, NE, Mar. 10--Insurance gains fueled Berkshire Hathaway's $4.2 billion in net income for 2002, one year after it earned only $795 million as it paid out claims in the Sept. 11 terrorist attacks, chairman Warren Buffett said in his annual report to shareholders. Earnings per share for the period ended Dec. 31 were up 436% to $2,795 from $521 per share the previous year. Net worth for the company grew $6 billion last year, a dramatic increase from the $3.77 billion loss in value the year before. Back, too, was Buffett's signature humor, after he apologized to shareholders for dismal earnings in 2001. Thankful there was no catastrophe to bring down insurance earnings and noting that Berkshire benefited from strategies it employed in the bond market, Buffett quoted comedian Jack Benny as saying, “I don't deserve this honor--but then, I have arthritis, and I don't deserve that either.” Berkshire owns businesses and stock in a wide variety of industries, including furniture, flooring, restaurants, candy and newspapers. Those businesses overall did well last year, despite the sluggish economy, Buffett said. In a down market, Berkshire's stock market investments also did relatively well, he said. But Berkshire's main business is insurance, and in 2001 it paid $2.4 billion in claims due to the terrorist attacks. Its insurance companies had underwriting losses totaling $4.3 billion, much of it attributable to poor claims writing practices at reinsurer General Re, which Buffett acquired in 1998. “Indeed, had Gen Re remained independent, the World Trade Center attack alone would have threatened the company's existence,” Buffett said. But underwriting discipline at General Re has been restored, Buffett said. Berkshire also has taken care to minimize potential losses in any future terror attacks, he said. Buffett also credited MidAmerican Energy Holdings Co. with a good year, including acquisitions of two major natural gas pipelines in the West and Midwest. “Berkshire stands ready to inject massive amounts of money into MEHC,” Buffett said. “Already it has $18 billion of assets and delivers our largest stream of noninsurance earnings. It could well grow to be huge.” Widely respected for his business ethics, Buffett also addressed corporate scandals at Enron and other companies accused of dishonest accounting. Buffett suggested that major investors in companies should watch chief executive officers closely and keep boards of directors honest. “The ownership of stock has grown increasingly concentrated in recent decades, and today it would be easy for institutional managers to exert their will on problem situations,” Buffett said.

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