笔记：
- 不喜欢购买长期的债券
- （我自己的总结）企业本质上就是存续期不可知、返利不可知的债券
- 通胀维持在5%----10%之间，投资股票或债券并无太多分别
- 但在高通胀时代，完全不是这么回事，投资股票组合实质上会蒙受重大损失，但已流通在外的债券却可能更惨（所以我们认为所有目前流通在外的债券组合事实上蕴含着极大的风险，所以我们对于债券投资特别谨慎，只有当某项债券比起其它投资机会明显有利时我们才会考虑，而事实上这种情况少之又少）
- 除非经历销售量的巨幅增长，否则一家好的企业定义上应该是指那些可以产生大量现金的公司
- https://xueqiu.com/6217262310/132312634
- https://archive.ph/x9wUb
www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism
巴菲特致股东的信 1984 年
1984 年波克夏的净值约增加了一亿五千万美金，每股约等于 133 美金，
这个数字看起来似乎还不错，不过若考虑所投入的资金，事实上只能算普通，二 十年来我们的净值约以 22.1%年复合成长率增加(从 1965 年的 19.46 到 1984 年的 1,108.77) ，去年则只有 13.6%。
如同我们去年曾提过的，真正重要的是每股内含价值的成长率，不过由于其 涉及太多主观的意见而难以计算，所以以我们的情况，通常用帐面价值当作代替 (虽然通常是有点低估) ，我个人认为在 1984 年内含价值与帐面价值增加的程 度可谓相当。
过去个人以学术角度曾跟各为提到暴增的资本将会托累资本报酬率，不幸的 是今年我们以报导新闻的方式跟各位报告，过去动辄 22%的成长率已成历史， 在往后十年我们大约要赚到 39 亿美金，每年才能以 15%成长(假设我们仍维持 目前的股利政策，后面我会详加讨论)，想要顺利达成目标，必需要有一些极棒 的点子，我跟我的执行合伙人 Charlie Munger 目前并无任何够棒点子，不过我 们的经验是有时它会突然冒出来。
下表显示波克夏帐列盈余的来源，由于年中与 Blue Chips 合并致使我们在 一些长期投资的股权发生变动，
而各个公司资本利得损失并不包含在内而是汇总于下表最后 “已实现出售 证券利得”一栏(我们认为单一年度的出售证券利得并无太大意义，但每年加总 累计的数字却相当重要)，至于商誉的摊销则以单一字段另行列示，虽然本表列 示的方式与一般公认会计原则不尽相同但最后的损益数字却是一致的:
Earnings from Operation Insurance Group
1984
Earnings Before Income Tax
Percent Total Berkshire Share
100.0% (48,060) (48,060) 100.0% 68,903 68,903
Unit:US'000
After Income Tax
Berkshire Share
(25,955) 62,059
226
Berkshire-Waumbec Textiles 100.0%
418 418
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Associated Retail Stores
Nebraska Furniture Mart
See's Candies
Buffalio Evening News
Blue Chip Stamps-Parent
Wesco Financial Corporation-Parent
Mutual Savings and Loan
Presion Steel
Amortization of Goodwill
Interest on Debt
Shareholder's Contribution
Other 4,932
100.0% 80.0% 100.0% 100.0% 100.0% 80.1%
(1,072) 14,511 26,644 27,328 (1,843)
9,777
(1,072) 11,609 26,644 27,328 (1,843)
7,831
1,166
3,278 (1,434) (14,097) (3,179) 4,529
(579) 5,917 13,380 13,317 (899) 4,828
3,151
1,696 (1,434) (7,452) (1,716)
3,476 70,015
78,881 148,896
80.1% 80.1%
1,456
4,092 (1,434) (14,734) (3,179)
87,739 82,021
Realized Securities Gain 112,810 109,272 Total Earnings-all entities 200,549 191,293
比较细心的股东可能会发现 GEICO 特别股利的金额与其分类的位置有变 动，虽然损益数字些微受到影响，但实质上并无太大差别，但背后的故事却相当 有趣。
如同去年我报告过的，(1)1983 年中 GEICO 宣布实施库藏股买回自家股票(2)
同时我们签署协议同意 GEICO 自我们手中买回等比例的股份(3)总结最后我们
卖还给GEICO 35万股，并收到2,100万现金，而我们在GEICO的持股比例则 维持不变(4)我们著名的律师事务所认可这整件交易为减资(5)依税法我们只要缴 交 6.9%的集团企业间股利税(6)最重要的是这 2,100 万现金比我们未认列的未分
配盈余少得多，故经济实质面而言，我们将之视为股利的分配。 但由于这种情况并不常见且金额又不小，所以在去年季报与年报中我们特别
加以分别列示，并且经我们的本地签证会计师认可同意。
而1984年General Foods也发生同样的状况，只是后者是直接自公开市
场中买回，所以我们每天卖出一点股份以使我们在该公司的持股比例维持不变， 同样的双方在交易之前已签订好协议，且我们收到的现金比我们在该公司未认列
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的未分配盈余少得多，总计我们收到 2,100 万现金，而持股比例则维持在 8.75%
不变。 但这时签证会计师的纽约总部却跳出来讲话，否决的其分所的结论，认定我
们与 GEICO 与 General Foods 之间的交易属于股权买卖而非股利分配，在这 种情况下，我们所收到的现金被认定为出售股票收入，在扣除当初的原始投资成 本后，应列示为资本利得，当然这只是会计上的处理与税务无关。
虽然我们并不认同纽约方面的看法，但为免会计师出具保留意见，我们仍勉
强接收，并重编 1983 年的报表，尽管如此，公司实质上未受任何影响，我们在
这两家公司的权益、帐上的现金、所得税与持有股权的市值皆维持不变。 而今年我们又与General Foods签订类似的协议，为了确保在税法上得以 认定为股利分配，我们仍将在该公司维持持有的股权比例不变，当然若后续还有
类似的情况我们一定会跟所有的股东报告。而在参与过这么多次类似的交易后， 我们觉得这种作法对不卖出股份的股东同样有利，当一家经营绩效良好且财务基 础健全的公司发现自家的股价远低于其内含价值时，买回自家股票是保障股东权 益最好的方法了。
但我必须说明我是指那些基于本益比角度的买回，并不包括那种不道德的 green-mail(在这类交易中，甲乙双方为自身私利协议剥削不知情的丙方，甲方-是 指职业股东在刚买下股票后，便对公司经营阶层发出要钱或是要命的勒索，而乙 方-是指息事宁人的公司经营阶层，愿意用高价买回，只要这个钱不要是他出的
就好，丙方-就这样被牺牲，别人花钱他来买单，结果公司经营阶层还信势旦旦
的说要维持公司利益，而不知情的股东只能呆呆的被宰还不自知。 去年我们几个投资部位较大的被投资公司只要其价格与价值差异颇大时，都
努力买回自家股份，而对于身为股东的我们而言，有两点好处 第一点很明显，是一个简单的数学问题，透过买回公司的股票，等于只要花
一块钱的代价便能够获得两块钱的价值的，所以每股的内含价值可大大的提高，
这比花大钱去购并别人的公司的效果要好得多。
第二点较不明显，且没有什么人知道，实际上也很难去衡量，但时间一长其 效果越明显，那就是管理当局可透过买回自家的股票来对外宣示其重视股东权益
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的心而非一昧的要扩张个人经营事业的版图，因为后者往往不但对股东没有帮 助，甚至反而有害股东的利益。如此一来，原有的股东与有兴趣的投资人将会对 公司的前景更具信心，而股价便会向上反应而与其本身的价值更为接近。
相对地那一些成天把维护股东权益的口号挂在嘴边，却对买回自家股票的建 议置之不理的人，很难说服大家他不是口是心非，久而久之，他便会被市场投资 人所离弃。
最近我们靠前三大持股-GEICO、General Foods 与华盛顿邮报大量买回自 家股票(艾克森-我们的第四大持股也积极买回股票，只是因为我们是最近才建立
部位，所以影响不大)，而大发利市，我们对于投资这种具竞争优势同时又真正 注重股东权益的管理阶层感到相当安心。
下表显示我们在 1984 年底，主要的投资部位(所有数字已扣除 Wesco 等公 司的少数股权)
Company Name
Affiliated Publications, Inc. (a)
American Boradcasting (a) Company
Exxon Corporation (a)
General Foods, Inc (b)
GEIGO Corporation (a)
Handy & Harman (a)
Interpublic Group of Companies, (a) Inc
Media General
Northwest Industries (a)
Ogilvy & Mather Int'l, Inc
R.J. Reynolds Industries
Time, Inc (a)
The Washington Post Company (a)
All Other Common Stock
Total Common Stock
Shares 690,975 740,400
3,895,710 4,047,191 6,850,000 2,379,200 818,872
555,949
2,553,488 1,868,600
Cost Market 3,516 32,908 44,416 46,738
173,401 175,307 149,870 226,137 45,713 397,300 27,318 38,662 2,570 28,149
26,581 27,242
89,327 109,162 10,628 149,955 11,634 37,326 584,974 1,268,886
Unrealized 29,392 2,322
1,906 76,267 351,587 11,344 25,579
661
19,835 139,327 25,692 683,912 (55,653)
最近十年来实在很难找得到同时能够符合我们质与量(价格与价值的差距) 4
www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism 标准的投资标的，我们尽量避免降格以求，但你知道什么事都不做才是最困难的
一件事(有一位英国政治家将该国十九世纪的伟大归功于统治者的无为而治，但 历史学家可以随随便便就提议，不过后继统治者却很难真得做得到)
除了先前曾提到的数字，有关 Wesco 的经营理念在 Charlie Munger 写的报告 中会详加描述。
此外我们实际掌控的企业，如 Nebraska 家具店、喜斯糖果、水牛城日报与保 险事业集团的经营，将在稍后加以说明
Nebraska 家具店
去年我曾介绍过 B 太太跟她的家族的优异表现，不过事实上我还低估他们 的管理才能与人格特质，B 太太身为公司的负责人，现年九十一岁，当地的报纸
曾形容她每天工作完便回家吃饭睡觉，每晚等不到天亮便急着要回店里头上班， 每天从早到晚，每周工作七天，她一天所决定的事情可能比一家大公司总裁一年 内决定的事还多(当然是指好的决策)
今年五月 B 太太荣获纽约大学颁赠荣誉博士学位，(她是个跳级生，在她获 得这个学位之前，从来没有到学校上过一天课)，在她之前获颁这项殊荣的包有
括艾克森石油总裁、花旗银行总裁、IBM 总裁与通用汽车总裁等杰出企业人士。 而 B 家族有其母必有其子，由他们的表现可以得知，Louie B 太太的儿子
跟他三个小孩，皆遗传到 B 太太的个性，去年 NFM 单店的营业额增加一千多万 美金，成为一亿一千多万，是全美单店业绩最高的一家家具量贩店，事实上它的
成功不是没有道理的，以下数字说明一切 根据去年财报，全国最大的家具零售商-Levitz 自夸其所卖价格要比当地所
有传统家具店要便宜许多，而该公司的毛利率却高达 44.4%(亦即消费者每付 100
元所买的货品，公司的成本只要 55.6 元)而 NFM 的毛利却只有前者的一半，其所 凭借的便是优异的效率(包含薪资、租金与广告费等成本只占营业额的 16.5%)， 我们不是要批评 Levitz，事实上该公司经营亦颇出色，只是 NFM 的表现实在是
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太好了，(记着这一切的一切都是从 B 太太 1937 年的五百块本钱开始)，靠着精
打细算与大量采购的成本优势，NFM 在供献股东盈余的同时，也替顾客节省了 可观的采购预算，这一点也使得该公司的客户分布越来越广。
人们常常问我，B 太太到底有什么经营诀窍，而其实说穿了也不是什么深奥 的道理，他们整个家族(1)对事业怀抱的热情与冲劲会让富兰克林与 Horatio Alger 看起来像辍学生(2)脚踏实地的去落实并果断的决定要作的事情(3)不受外在 对于公司竞争力没有帮助的诱惑(4)对待所有人皆能保持高尚的人格
我们对于 B 太太家族的人格的信任可从以下交易过程看出，NFM 从来未找 会计师查核，我们也从未对存货进行盘点或核对应收帐款或固定资产，我们便交
给她一张五千五百万的支票，而她给我们的是一句口头的承诺。
我们很荣幸能与 B 太太合伙作生意(1984)
喜斯糖果
下表是该公司自从被 Blue Chips 买下后，对其表现的一段回顾:
1984
1983 (53weeks)
1982
1981
1980
1979
1978
1977
1976 (53weeks)
1975
1974
1973
1972
Sales('000) Profit('000) 135,946 13,380 133,531 13,699 123,662 11,875 112,578 10,779 97,715 7,547 87,314 6,330 73,653 6,178 62,886 6,154 56,333 5,569 50,492 5,132 41,248 3,021 35,050 1,940 31,337 2,083
Pounds('000) Stores 24,759 214 24,651 207 24,216 202 24,052 199 24,065 191 23,985 188 22,407 182 20,921 179 20,553 173 19,134 172 17,883 170 17,813 169 16,954 167
看得出其表现并非处于持续成长的状态，事实上盒装巧克力这行业的获利情 况并不一定，有的品牌赔钱，但有的却颇有赚头，就我们所知只有一家竞争对手
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维持高获利，而喜斯的成功要归功于优秀的产品与杰出的经营人才-Chuck Huggins.
尽管在 1984 年我们产品价格的涨幅不若以往，大约 1.4%，不过还好我们在 过去几年一直困扰我们的成本控制问题上大有进展，除了我们无法控制原料成本 外，其它费用仅较去年增加 2.2%。过去我们由于单店销售数量(指重量，而非金
额)略微下滑，整体销量只能靠增加门市来扩张，当然使得销售成本恶化，1984
年单店销量减少 1.1%，但整体销量因扩点的关系成长 0.6%(两者皆已将 1983 年
53 周的因素列入考量)
喜斯糖果的销售受到季节因素的影响越来越大，在圣诞节到来的前四周，其 业绩与获利分别占全年的四成与七成五，此外复活节与情人节期间的业绩也特别 好，至于平时的生意表现便平平，不过也因为如此使得管理部门与员工在忙季特 别辛苦，须要特别的耐性来处理大量的订单。而即使如此服务态度与产品品质却 一点也没有打折扣，至于其它同业我就不管保证，事实上有的为了降低成本增加 保存期限而添加防腐剂或将成品加以冷冻，我们宁愿大家辛苦一点而拒绝这样的 作法。
此外我们的店在非假日期间遭遇到一些新式食物与零食店的竞争，所幸在
1984 年我们推出六种新式糖果棒加以反击，其效果颇佳广为消费者所接受，目
前我们正在研发新产品预计在不久的未来推出上市。 展望明年我们期望把成本增加幅度压得比通货膨胀率低，当然这比必须要增
加单店的销量来加以配合，预估平均售价将调涨 6-7%，获利将稳定成长。 水牛城晚报
1984 年该报的获利超过我们的预期，与喜斯糖果控制成本一样具成效，不 包括编辑室，整体的工作时数减少约 2.8%，由于生产力的增进，使得整体成本
减少约 4.9%，Stan Lipsey 与其经营团队的表现为业界之最，但我们同时也面临一 项不利的因素，在年中我们与工会签订一项数年的工作合约，使得工资大幅调涨， 基于过去 1977-1982 年该报亏损时，工会与员工一致配合的态度，是使我们战胜
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Courier-express 的关键因素，所以我们认为这种调整尚属合理，若非当时我们及 时将成本降低，现在的结局可能完全相反，而由于这项调整案系分阶段进行，所 以对 1984 年的影响有限，但到明年此时便会全数反应，虽然我们可以努力提高
生产力作为因应，但不可避免的明年的单位劳动成本将大幅增加，而新闻印刷成 本预估也将增加，由于这两项不利因素，明年毛利将略微下滑。
但另外有两点是对公司有利的:
(1)本报发行流通的范围是一个广告效用极高的地区，相对于一般地区性报 纸对广告主的效益极为有限，一个几百英哩远的订户对于位在本地的杂货店来说 一点效用也没有，对于一家报社来说，其揩支主要取决于总发行量，而其广告收
入(约占总营收的七到八成)却要依靠实际有效的发行量。
(2)水牛城报纸的零售业绩特别突出，广告主只要凭着这份报纸便能将信息 传递到所有潜在的客户手中。
去年我曾告诉各位该报优异的读者接受度(在全美前一百大报纸中，我们在 平日排名第一、而假日则排第三) ，最新的资料显示前者仍维持第一、而后者则
跃居第二位(不过我们水牛城的订户数却减少，主要是在平日部份) ，而我们曾 提到高接受度的原因是由于我们丰富的新闻内容(在相同规模的报纸中，我们提 供的新闻量是最多的) ，1984 年的比率是 50.9%(相较于去年的 50.4%)，远较一般
的 35%-40%高出许多，而我们也会继续维持在 50%以上的比率，另外去年我们虽 然减少一般部门的工作时数，但编辑部门的编制却维持不变，虽然编辑室的开支 增加达 9.1%，远较总成本增加 4.9%为高。
在商业社会中，一家强势报纸的优势是极为明显的，老板通常相信惟有努力 地推出最好的产品才能维持高获利，但是这种令人信服的理论却让无法令人信服 的事实打破，当一流的报纸维持高获利时，三流报纸所赚得的钱却一点也不逊色 有时甚至更多，只要你的报纸在当地够强势，当然产品的品质对于一家报纸提高
市场占极为关键，而我们也相信在水牛城也是如此，而且像 Alfred 这样的人能领 先我们的最主要原因亦是如此。
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一旦主宰当地市场，报纸本身而非市场将会决定这份报纸是好还是坏，不过 好或坏，终将大发利市，在一般行业却不是这样，不良品质的产品它的生意一定 不好，但即使是一份内容贫乏的报纸对一般民众来说仍具有布告栏的价值，其它 条件相同时，一份烂报当然无法像一份一流报纸拥有广大的读者，但对一般市民 却仍具用处，而间接使得广告主认同其存在的价值。
因为市场对于报纸品质的要求水准并不高，管理阶层便须自我要求，我们的 报纸在量的方面具体地要求新闻成本须高于一般同业水准，而我们也有信心Stan
Lipsey与Murray Light会继续在质的方面予以加强，Charlie与我皆相信报纸是社 会中的一特殊机构，我们相当引以为傲，也期待在往后的日子更将更上层楼。
Yearly Change in
Premiums Written
Combined Ratio
after Policy-holder Dividends
%%
-
1972 10.2%
-
1973 8.0%
-
1974 6.2%
-
1975 11.0%
-
1976 21.9%
-
1977 19.8%
-
1978 12.8%
-
1979 10.3%
-
1980 6.0%
-
1981 3.9%
-
1982 4.4%
-
1983 (Rev.) 4.5%
-
1984 (Est.) 8.1%
96.2% 99.2% 105.4% 107.9% 102.4% 97.2% 97.5% 100.6% 103.1% 106.0% 109.7% 111.9% 117.7%
上表充份显示出整个产险业所面临到的状况，Combined Ratio 代表保险总 成本(产生的损失与费用)占保费收入的比率，当它低于一百时表示有承保利益，
反之则有承保损失，过去几年我一再强调公司每年惟有保持 10%以上的保费成长 速度方能确保此比率不变，这是基于费用占保费收入的比例不变，而理赔损失将
因为单量、通膨与法院判决扩大理赔范围等原因，而每年成长百分之十的假设。 而不幸的是，实际情况真如我所预言，总计从 1979-1984 年间保费收入约增加
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61%(平均年增率10%)，而Combined Ratio与1979年一样皆是100.6，相较之 下，同业保费平均增加 30%，而 Combined Ratio 则变成 117.7，而到今天我们
仍相信保费收入的年变动率是承保获利趋势的最佳指针。目前显示明年的保费年 增率将超过 10%，所以假设明年不会发生什么特别大的灾害，我们预期
Combined Ratio 将往好的方向发展，然而若依照目前产业损失的估计(及年增 率 10%)保费收入必须连徐续五年成长 15%，才能将 Combined Ratio 降回到 100， 亦即代表到 1989 年时保费须成长整整一倍，这似乎是不太可能的一件事，所以 持平而言，我们预期保费每年将成长约略超过 10%，而 Combined Ratio 在产 业竞争激烈的情况下，将维持在 108-113 区间。
我们自己在 1984 年的 Combined Ratio 是可怜的 134(在这里我不包括 Structured Settlement 在内)这是连续三年我们的表现比同业水准差，我们预
期明年 Combined Ratio 会变好，而且也会比同业表现的好，Mike 自从从我手
中接下保险业务后已改正了不少先前我所犯下的错误，而且过去几年我们的业务 集中在一些表现不如预期的保单上，这种情况将有助于与我们竞争的同业退缩甚 至出局，而当竞争局势打破后，我们就可以提高保费而不怕失去客户。过去几年 我一再告诉各位总有一天我们坚强的财务实力将有助于我们取得保险营运的竞 争优势，而这一天终将来临，无疑的我们是全美产险营运最佳，资金最雄厚的保
险公司(甚至比一些有名规模又大的公司还要好) ，同样重要的是公司的政策便
是要持续维持此优势，保单购买者用钱所换到的只是一纸承诺，而这纸承诺必须 要经得起所有的逆境而非顺境的考验，最低限度，它必须要能够经得起低迷股市 与特别不利的承保状况等双重考验，我们的保险子公司有意愿也有能力确保其承 诺在任何状况下兑现，这是没有多少家保险公司能做得到的。
我们的财务实力对于去年曾提过的 Structured Settlement 与损失准备提 列业务上来说是一项很好用的利器，Structured Settlement 的理培申请户与申 请再保的保险公司必须要百分之百确定在往后的几十年内能顺利获得支付，很少
产险公司能够符合这种要求(事实上只有少数几家公司能让我们有信心将我们自 10
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己的风险再保出去) ，而我们在这方面的业务大有成长，我们持有用以弥补可能
的负债的资金从一千六百万成长至三千万，我们预期这项业务将继续成长且成长 速度更快，为此我们特地为执行该业务的哥伦比亚保险公司办理增资，虽然竞争 颇为激列但获利却也令人满意。
至于GEICO的消息与往常一样大致上都不错，这家公司1984年在其主要业 务的投保户大幅增加，而其投资部们的表现一样优异，虽然承销结果不尽理想， 但仍较同业突出，截至去年底我们拥有该公司 36%的权益，若以其产险总保费收
入亿八千万计，我们的部份约有三亿二千万左右，大约是我们自己承保量的二倍。 过去几年我一再提醒各位 GEICO 的股价涨幅明显超越其本业的表现，虽然 后者一样杰出，GEICO 在我们公司的帐面价值成长幅度大于该公司本身内含价 值的成长幅度，而我同时也警告各位这种情形不会年复一年地一再发生，总有一
天其股价的表现将逊于本业，而这句话在 1984 年应验了，去年 GEICO 在波克夏
的帐面值没什么变动，不过其公司的内含价值却大幅增加，而由于 GEICO 代表 着波克夏 27%的净值，当其市场价值迟滞不前，直接便影响到波克夏净值成长 的表现，但我们对这样的结果并不会觉得有什么不好，我们宁愿要 GEICO 的企 业价值增加 X 倍而股价下跌，也不要公司内含价值减半而股价高涨，以 GEICO 这个 case，乃至于我们所有的投资，我们看得是公司本质的表现而非其股价的 表现，如果我们对公司的看法正确，市场终将还它一个公道。
所有的波克夏股东皆由于 GEICO 的经营团队，包括 Jack Byrne、Bill Snyder
与 Lou Simpson 而获益良多，在他们的核心事业-低成本的汽车与房屋住宅保 险，GEICO 拥有显著且持续的竞争优势，这在一般业界并不多见，可谓投资人 的稀世珍宝(GEICO 本身正说明的这一点，优秀的经营团队将所有的重心放在核
心事业以维持高获利能力) ，GEICO 核心事业所产生的资金大部份皆交由 Lou
Simpson 来投资，Lou 是一个情绪与理性兼具的罕见人才，这项人格特色使其 在长期投资方面有杰出表现，即使承受的较低的风险，其投资报酬却较同业表现 要好的许多，我对以上三位杰出经理人表达赞赏与感谢之意。
我认为所有在产险业有重大投资的股东对于这行业每年盈余报告的一项盲
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点要特别注意，Phil Graham 在担任华盛顿邮报的发行人时曾说: “新闻日报是攥
写历史的第一手草稿”，而很不幸的，产险业者所提供的年度财务报告，也可称 得上是该公司财务与经营状况的第一手草稿。
主要的问题在于成本，保险业最主要的成本是保户的理赔，而对于当年的收 入会发生多少损失实在是很难以去估计，有时损失的发生与其程度要在好几十年
之后才会明朗。一般来说，产险业当年度认列的损失主要包含有下列几项: (1)当 年发生且支付的损失 (2)对于已发生且提报但仍未合解案件的估计损失 (3) 对
于已发生但尚未提报，亦即保险业者尚不知情案件所作的损失估计数字(一般业 界称之为 IBNR-发生了但尚未提报) 以及 (4)对于以前年度对于前述(2)(3)项估
计所作之调整
虽然上述的调整时间可能会拉得很长，但不管怎样，先前在 X 年所估数字
与实际的差异，于以后年度不论是 X+1 或是 X+10 年，一定要修正回来，而这 无可避免地，也将使得以后年度的损益数字遭到误导，举例来说，假设我们的一 位保户在 1979 年受伤，而当时估计的理赔金额为一万美元，所以在当年度我们
便会在帐上提列一万美元的损失与准备，又若后来到了 1984 年商双方以十万美
元合解，结果我们必须还要于 1984 年另行认列九万美元的损失，虽然我们明知
道该项损失系属于 1979 年所发生的，又再假设那是我们在 1979 年所接惟一的个
案，则公司的损益与股东的权益将明显遭到误导。 不管管理当局的意图如何地正当，由于需要广泛地应用”估计”来组合产险
业财务报表上所有看似真确的损益数字，所以无可避免地其中一定隐含着某些错 误。而为了减少这类错误，大部份的保险人运用各种不同的统计方法来调整其对 成千上万的被保险人之损失估算以作为加总估计所有应付义务的基础资料，而除 此之外另外提列的特别准备则称之为补充准备，而调整的目的是要使得损失在真 正确定支付金额之前高估与低估的机率尽量接近百分之五十。
在波克夏我们已另加一项我们认为合理的损失准备，然而近年来它们却显得 不太适当，而在此有必要让各位知道牵涉到这项损失准备提列错误的严重性，如
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此大家便可明了此提列过程是如何地不合理，从而判断公司的财务报表是否存在 某些系统性的偏差。
下表显示近年来我们跟各位报告的保险承销成绩，同时并提供一年之后以” 若当时我们知道则我们认为我们现在认为应该是如何”的基础下的计算数字，而 所谓地”我们认为我们现在认为应该是如何”系因为这其中还包含许多对以前发 生的损失所作的估计调整，然而这些损失却还没有作最后的确定，只是因为一年 的经过使得整个估计过程较为准确而已。
(Structured Settlement 与 loss reserve assumption 等保险业务不包括 其中)
Underwritting Results
as Reported to You
-
1980 6,738,000
-
1981 1,478,000
-
1982 (21,462,000)
-
1983 (33,192,000)
-
1984 (45,413,000)
Corrected Figures Differenciation After One Year Experience
14,887,000 (1,118,000) (25,066,000) (50,974,000) ?
8,149,000 (2,596,000) (3,604,000) (17,782,000) ?
为了让各为近一步了解上表，让我们以 1984 年的数字加以解释，当年的税
前承保损失为四千五百万(这其中包括二千七百万为当年度所发生的损失，加上
前一年度一千七百万估计的差异数) 由此你可以发现，我跟各位报告的数字与实际所发生的数字有很大的出入，
而且这几年的差异数越来越不利，这特别让我觉得非常地懊恼，因为(1)我一向自 认说话算话(2)我和我的保险事业经理人若早发现事情的严重性一定不会坐视不 管(3)我们少估计了损失，等于是多付给国库本来不需付的税金(虽然早晚会修正
回来，只是时间拉得越长，我们损失的利息就越多) 。 而由于我们将整个重心摆在意外险与再保险事业，比起其它产险业者我们在
估计损失这上头隐含更多问题，(当你承保的一栋建筑物烧毁了，你可以很快地 在损失成本上作反应，比起一家向你投保的雇主发现他一名退休的员工在几十年 前因工作关系感染某种疾病)即便如此，我仍对于所犯的错误感到不好意思，在
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直接投保部份，我们大大低估了法院及陪审团不顾事实真相与过去判例对损害赔 偿的认定，而要求我们这些所谓深口袋付钱的群起效应，我们也低估了一般大众 对于受伤者应获得钜额补偿的传染效应。在再保险部份，既然我们自身已低估了 应提列准备，向我们寻求再保的保险公司也犯了相同的错误，由于我们的损失系 依据对方所提供的资料提存，所以他们犯的错也等于是我们犯的错一样。
最近我听到一则故事可以用来说明保险业目前所遇到的会计问题，有一位仁 兄因公赴海外出差，有一天接到他姐姐来电表示父亲因意外身故，由于一时无法 赶回国内参加丧礼，他便交待姐姐处理一切丧葬事宜并允诺负责所有费用，之后 当他回国后不久便收到一张几百块美金的帐单，他马上就把它给付掉，不过隔一
阵子他又收到一张 15 元的帐单，而他也付了，可是没想到一个月过后他再度收
到类似 15 元的帐单，他终于忍不住打电话给他姐姐问一问是怎么回事，只见他
老姐在电话的另一头淡淡地表示: “噢! 没什么，忘了告诉你，那是因为爸爸身
上穿的那套西装是用租的”如果这几年你是从事保险业-尤其是再保险事业的话，
这段故事听下来可能会让你很心痛，尽管我们已尽可能让所有类似前述的西装租 金列入在当期的财务报表上，但过去这几年的结果却令我们感到汗颜，也足以引 起各位的怀疑，在往后的年报中我会持续跟诸位报告每年浮现的差异，不论是有 利或是不利的。
当然在产险业间，不是所有准备提列不当的错误都是无心之过，随着承保绩 效持续恶化，加上管理当局在损失准备提列乃至于财务报表表达上有很大的裁量 权，所以人性黑暗的一面便彰显出来，有些公司若真正认真去评估其可能发生的 损失成本的话，他们可能早已不适合再继续经营下去，在这种情况下，有些被迫 往特别乐观的方向去看待那些还未支付的潜在赔偿款，有些则从事一些可以将损 失暂时隐藏起来的交易行为。当然这些行为可以撑过一阵子，外部独立的会计师 也很难有效地对这类行为加以规范制止，当一家保险公司的实际上的负债大于资 产时，通常必须由公司本身宣告自己死亡，在这种强调自我诚信的制度下，尸体 本身通常会一再给自己翻案复活的机会。
在大部份的公司，倒闭的原因是因为现今周转不灵，但保险公司的情况却不 是如此，你挂掉时可能还脑满肠肥，因为保费是从保户一开始投保时便收到，但
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理赔款却是在损失发生之后许久才须支付，所以一家保险公司可能要在耗尽净值 之后许久才会真正耗用完资金，而事实上这些所谓的活死人，通常更卯尽全力以 任何价格承担任何风险来吸收保单，以始得现金持续流入，这种态度就好象一个 亏空公款去赌博的职员，只能被迫继续污公司的钱再去赌，期望下一把能够幸运 的捞回本钱以弥补以前的亏空，而即使不成功反正污一百万是死罪，污一千万也 是死罪，只要在事情东窗事发之前，他们还是能够继续保有原来的职位与待遇。
别的产险公司所犯的错对波克夏来说，不是只是听听而已，我们不但身受那 些活死人削价竞争之痛，当他们真得倒闭时，我们也要跟着倒霉，因为许多州政 府设立的偿债基金系依照保险业经营状况来征收，波克夏最后可能被迫要来分担 这些损失，且由于通常要很晚才会发现，事件会远比想象中严重，而原本体质 较弱但不致倒闭的公司可能因而倒闭，最后如滚雪球一般，一发不可收拾，当然 如果管理当局发现的早而及时加以防范，强制那些烂公司结束经营，当可防止问 题进一步扩大。
从 1983 年十月到 1984 年六月间，波克夏的保险子公司持续买进大笔的华 盛顿公用电力供应系统的一、二、三期债券(WPPSS 就是那家在 1983 年七月因 无法履约偿还当初发行二十二亿美元债券用以兴建四、五期电厂计划(现已放弃) 的公司，虽然这两种债券在义务人、承诺事项与抵押担保品上有极大不同，但四、 五期问题的发生对于一、二、三期债券来说，已蒙上一层阴影，且有可能对后续 发行债券产生重大问题，此外一、二、三期本身的一些问题也可能摧毁 Bonneville
所提供原先看起来颇具信用基础的保证。尽管有这些负面因素，但 Charlie 跟我 评估以我们当出买进时所承担的风险与购买的价格(远低于现在的市价)来说，其
预期报酬仍足以弥补所要承担的风险。 如你所知我们为保险子公司买进上市公司股票的标准与我们买下整家企业
的标准并无二致，然而这种企业评价模式并未广为基金经理人所应用，甚至还遭 到学术人士批评，尽管如此，对于那些追随者来说却颇为受用(对此有些学者会
说，或许实际上真得可行，但理论上一定行不通，简单地说，若我们能以合理的 价格买到代表一小部份优良企业的经济利益，且能累积一些这样的投资组合的 话，对我们来说也是一件不错的事。而我们甚至把这种评价模式衍伸到像 WPPSS
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www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism 这类的债券投资之上，我们比较在 WPPSS 的一亿四千万期末投资成本与同样金
额的股权投资，前者可产生二千三百万的税后盈余(透过支付利息费用)且都是现
金，只有少数企业每年可赚得 16.3%的税后资本报酬率，就算有其股票价格也高 得吓人，以一般平均购并交易来说，一家无财务杠杆每年可赚得二千三百万的税 后盈余(等于要税前要赚四千五百万)的公司，大约要价二亿五到三亿美元(有时还
更高)，当然对于那种我们了解且特别偏爱的公司，或许真的下得了手，但那还
是等于我们购买 WPPSS 价钱的两倍。
然而在 WPPSS 这个 Case，我们仍然认为存在有在一、二年内一文不值的些
许潜在风险，同时可能也会有暂时付不出利息的风险存在，更重要的是我们所持 有二亿美金面值(大约比我们持有成本高出 48%)的债券。当然获利具有上限也是
一大缺点，但各位必须了解，大部份的事业投资除非持续投入大量的资金，事实 上所谓的获利上限的空间极为有限，这是因为大部份的企业无法有效地提高其股
东权益报酬率-即使是原先一般认定可自动提高报酬率的高通膨环境也是如此。
让我们对这个把债券当作投资的个案进一步作说明，若你决定将每年 12%报 酬的债券利息收入继续买入更多的债券，它就好比你投资一些保留盈余继续再投 资的一般企业一样，就前者而言，若今天你以一千万投资 30 年票票面零利率的
债券，则三十年后即 2015 年你约可得到三亿美元，至于后者，若你同样投资一
千万，则三十年后一样公司市值可增加至三亿美元，两者在最后一年皆可赚得三 千二百万美元。换句话说，我们投资债券就好象把它当成一种特殊的企业投资， 它具备有利的特点，也有不利的特点，但我们相信若你以一般投资的角度来看待
债券的话，将可避免一些头痛的问题。例如在 1946 年二十年期 AAA 级的免税债
券其殖利率约 1%不到，事实上买进这些债券的投资人等于是投资一家每年赚不 到一个百分点的烂企业，若这些投资人有一点商业头脑，面对这样的投资条件， 他一定会大笑地摇头走开，当时有一些具有大好前景且每年可赚得税后 10%、 12%甚至 15%的公司，却以帐面价值进行交易，当时能以帐面价值交易的公司
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大概没有人会怀疑它赚不到 1%的报酬率，但当时习惯买卖债券的投资人仍努力 地在这样的基准下进行交易，在往后的二十年间，虽然情况没有当初那么夸张，
债券投资人持续地以从商业角度来看完全不合理的条件，签下长达二、三十年的 约定，(在至今我个人认为最佳的投资教材- 由葛拉罕所写的 the intelligent investor
书中最后一段提到，最佳的投资是以商业角度来看的投资) 我们必须再次强调投资 WPPSS 一定具有相当风险，且很难加以具体衡量，
但 Charlie 跟我一生若有五十次类似的投资机会，我想我们最后结算的成绩应该 不赖，但我想我们一年大概遇不到五次以上相同的机会，虽然长期累积下来的成 绩铁定会不错，但也难保有一年的结果会很惨(那也是为什么前面所有的句子开
头不是 Charlie 跟我或是我们的原因) 。 大部份的经理人没有太大的动机去作那些-聪明但有时可能会变成白痴的决
策，他们个人的得失利弊太明确不过了，若一个很棒的点子真的成功，上头可能 拍拍他的肩膀以示鼓励，但万一要是失败，却可能要卷铺盖走路(依照老方法而 失败是一条可行之路，就一整个团体而言，旅鼠可能身负臭名，但却没有一只单 独的旅鼠会受到责难) ，但在波克夏却不同，拥有 47%的股权，Charlie 跟我不怕
被炒鱿鱼，我们是以老板而非伙计的身份支领报酬，所以我们把波克夏的钱当作 自己的钱一样看待，这常使得我们在投资行为与管理风格上不遵循老路。
我们不默守成规的作法表现在我们将保险事业的资金集中投资之上(包括 WPPSS 债券投资) ，而这种作法之有当像我们一样具备特别雄厚的财务实力方 能成功，对其它保险公司来说，相同程度的集中持股可能完完全全不适当，因为 它们的资金实力可能无法承受任何重大错误的发生，不管那个投资机会基于或然 率的分析看起来多么吸引人都一样。以我们的财务实力我们可以买下少数一大笔 的我们想要买且用合理的价格投资的股票(Bill Rose 形容过度分散投资的麻烦， 若你拥有四十位妻妾，你一定没有办法对每一个女人认识透彻，长期下来我们集 中持股的政策终会显现出它的优势，虽然多少会受到规模太大的拖累，而就算某 一年度它们表现得特别糟，至少你还能够庆幸我们投入的资金比各位还多。
我们在 WPPSS 的债券投资分几个不同时点与价格买进，若我们决定要调节 17
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有关部份，可能要在变动结束后许久才会知会各位，(在你看到这篇年报时，我 们可能已卖到或加码相关部位) ，由于股票的买卖是属于竞争激烈的零和游戏，
所以即使是因此加入一点竞争到任何一方，也会大大影响我们的获利，所以我们 买进 WPPSS 的债券可以作为最佳范例，从 1983 年十月到 1984 年六月间，我 们试着买进所有第一、二、三期的债券，但到最后我们只买到所有流通在外数量 的百分之三，如果我们在碰到一个头脑清楚的投资人，知道我们要吃货而跟着进
场，结果可能是我们以更高的价格买到更少的债券，(随便一个跟班可能要让我 们多花五百万美金)基于这项理由，我们并不透露我们在股票市场上的进出，不
论是对媒体，或是对股东，甚至对任何人，除非法令上特别要求。
最后我们对 WPPSS 的债券的最后心得是大部份情况下，我们不喜爱购买长
期的债券，事实上近几年来也很少买进，那是因为债券就像美元一样稳固，而我
们对于美元长期的前景看淡，我们相信高通货膨胀摆在眼前，虽然我们无法预测
真正的数字，而且不排除完全失控的可能性。这听起来不大可能会发生，考量到
目前通膨已有下降的趋势，但我们认为以目前的财政政策(特别是预算赤字)相当
危险且很难加以改善(到目前为止两党的政治人物多听从Charlie Brown的建议，
没有什么问题是无法加以控制的)但若不能加以改善，高通膨或许暂时不再发生
(但却无法完全摆脱) ，而且一旦成形，可能会加快速度向上飙涨。其实投资股
票或债券并无太多分别，当通膨维持在 5%-10%之间，但在高通膨时代可就完全 不是那么一回事了，在那种情况下，投资股票组合在实质上将会蒙受重大损失， 但已流通在外的债券却可能更惨，所以我们认为所有目前流通在外的债券组合事 实上隐含着极大的风险，所以我们对于债券投资特别谨慎，只有当某项债券比起 其它投资机会明显有利时我们才会考虑，而事实上这种情况少之又少。
一般公司都会跟股东报告股利政策，但通常不会详加解释，有的公司会说我
们的目标时发放 40%-50%的盈余，同时以消费者物价指数增加的比率发放股利，
就这样而已，没有任何分析解释为何这类的政策会对股东有利，然而资金的配置 对于企业与投资管理来说是相当重要的一环，因此我们认为经理人与所有权人应
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www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism 该要好好想想在什么情况下，将盈余保留或加以分配会是对股东最有利。
首先要了解的是，并非所有的盈余都会产生同样的成果，在许多企业尤其是
那些资本密集(资产/获利比例高)的公司，通膨往往使得帐面盈余变成人为的假
象，这种受限制的盈余往往无法被当作真正的股利来发放而必须加以保留再投资 以维持原有的经济实质，万一要是勉强发放，将会使得公司在以下几方面失去竞
争力: (1)维持原有销售数量的能力(2)维持其长期竞争优势(3)维持其原有财务实
力，所以不论其股利发放比率是如何保守，一家公司要是常此以往将会使得其注 定面临淘汰，除非你一再抑注更多资金。
对公司老板来说受限制的盈余也并非毫无价值，但它们的折现值通常少得可 怜，事实上企业又非用它们不可，不管它们可产生的经济效益有多差，(这种不
管前景多么不乐观一律保留的情况，在十年前由Consolidated Edison无意间所提 出而后令人难以置信的广泛流传着，在当时一项惩罚性的规范政策是使得公司的 股价以远低于帐面价值的价格交易的主要原因，有时甚至以 25%的帐面值交易， 亦即当每一块钱的盈余被予以保留再投资，市场预期其将来所可能产生的经济效 益只有 25 分钱，讽刺的是尽管这种由金变成铜的现象一再发生，大部份的盈余 还是持续的被保留下来再投资。在此同时，在纽约都会区的建筑工地逐渐树起了 企业的标语写到: “我们还要继续挖下去吗?”
对于受限制的盈余我不再多谈，让我们将话题转到更有价值的不受限制的部 份，所谓不受限制的盈余顾名思义可以加以保留，也可以予以分配，我们认为分 配与否主要取决于管理当局判断何者对公司股东较为有利，当然这项原则并未广 为大家所接受，基于某些理由管理当局往往偏好将盈余予以保留以扩大个人的企 业版图，同时使公司的财务更为优渥，但我们仍然相信将盈余保留只有一个理由， 亦即所保留的每一块钱能发挥更有的效益，且必需要有过去的成绩左证或是对未 来有精譬的分析，确定要能够产生大于一般股东自行运用所生的效益。具体而言，
假设有一位股东持有一种 10%无风险永久债券，这种债券有一个特色，那就是投 资人每年有权可选择领取 10%的债息或将此 10%继续买进同类型的债券，假设其
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www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism
中有一年当时长期无分险的殖利率为是 5%，则投资人应当不会笨到选择领取现
金而会将之继续买进同类型的债券，因为后者能够产生更高的价值，事实上若他 真得需要现金的话，他大可以在买进债券后在市场上以更高的价格拋售变现，换 句话说若市场上的投资人够聪明的话，是没有人会选择直接领取现金债息的。相 反的若当时市场的殖利率是 15%，则情况将完全相反，没有人会笨到要去投资
10%的债券，即使他手上的闲钱真得太多，他也会先选择领取现金之后再到市场
上以较低的价格买进相同的债券。 同样的道理也可以运用在股东思考公司的盈余是否应该发放的问题之上，当
然这时候的分析可能较为困难且容易出错，因为再投资所能赚得的报酬率不像债 券那个 case 是白纸黑字的数字，反而可能会变动不一，股东必须去判断在可见
的未来其平均的报酬率是多少，而一旦数字订下来的话，之后的分析就简单多了， 若预期报酬率高便可以再投资，反之则应要求加以分配。许多企业的经理人很理 智地运用上述标准对待旗下子公司，但到了自己所掌管的母公司可就完全不是那 么一回事了，他们很少会站在股东的立场为大家想，这种类似精神分裂症的经理
人，一面要求每年只能产生 5%报酬率的子公司甲将资金分配回母公司，然后转 投资到每年可产生 15%报酬率的子公司乙，这时他从不会忘记以前在商学院所学
到的校训，但若母公司本身预期的报酬率只有 5%(市场上的平均报酬率是 10%)，
他顶多只会依循公司从前或同业平均的现金股利发放率来做而已，当他要求旗下 子公司提出报告对其保留盈余的比例作出解释的同时，他却从来不会想到要对他 公司背后的股东提出任何说明。
在判断是否应将盈余保留在公司，股东不应该只是单纯比较增加的资本所能 增加的边际盈余，因为这种关系会被核心事业的现况所扭曲，在高通膨的时代，
某些具特殊竞争力的核心事业能够运用少量的资金创造极高的报酬率(如同去年 我们曾提过的商誉) ，除非是经历销售量的钜幅成长，否则一家好的企业定义上
应该是指那些可以产生大量现金的公司，相对的如果一家公司将本来的资金投入 低报酬的事业，那么即使它将增加的资本投入较高报酬的新事业，表面上看起来 是不错，但实际上却不怎么样，就好比在高尔夫球配对赛中，虽然大部份的业余
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选手成绩一蹋胡涂，但团体比赛只取最好的成绩却由于部份职业选手的精湛球技 而显得出色。许多表面上持续缴出好绩效的公司事实上把大部份的资金投注在不 具竞争力的事业之上。只是前者掩盖住后者惨不忍睹(通常是用高价购并平庸的 企业)的失败，而经营阶层也一再强调他们从前一次挫败所学到的经验，但同时 马上物色下一次失败的机会。这种情况下，股东们最好把荷包看紧，只留下必要 的资金以扩充高报酬的事业，剩下的部份要嘛就发还给股东，要嘛就用来买回库
藏股(一种暨可以增加股东权益，又可以避免公司乱搞的好方法) 。
以上的讨论并不是指说公司的股利要随着每季盈余或投资机会的些微差异 便要跟着变来变去，上市公司的股东一般偏好公司有一贯稳定的股利政策，因此 股利的发放应该要能够反应公司长期的盈余预期，因为公司的前景通常不会常常 变化，股利政策也应该如此，但长期而言公司经营阶层应该要确保留下的每一块 钱盈余发挥效用，若一旦发现盈余保留下来是错的，那么同样也代表现有经营阶 层留下来是错的。
现在让我们回过头来检视波克夏本身的股利政策，过去记录显示波克夏的保 留盈余可赚得较市场更高的报酬率，亦即每保留一块钱盈余可创造大于一块钱的 价值，在这种情况下，任何发放股利的动作可能都不利于所有波克夏的大小股东。 事实上，以我们过去刚开始经营事业的经验显示，在公司的草创初期发放大量的
现金股利并不是一件好的事情，当时 Charlie 跟我掌控三家企业-波克夏、多元零 售与蓝筹邮票公司(现在已合并为一家公司) ，蓝筹邮票公司只发放一点股利而
其余两家皆未发放，相反的若当时我们把所赚的钱统统发掉，我们现在可能赚不 到什么钱，甚至连一点资本也没有，这三家公司当初各自靠一种事业起家(1) 波
克夏的纺织(2) 多元零售的百货公司(3) 蓝筹邮票的邮票买卖，这些基础事业(特
别要提到的是，那些我跟 Charlie 再三斟酌敲定的一个形容词)目前已(1)幸存下来
但赚不到什么钱(2)规模萎缩并发生大幅亏损(3)只剩当初入主时，5%的营业额。
所以只有将资金投入到更好的事业，我们才能克服先天上的劣势(就好象是在补
救年轻时的荒诞)很明显的，多角化是对的。 我们将持续多角化并支持现有事业的成长，虽然我们一再强调，这些努力的
21
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报酬铁定比过去的成绩逊色，但只要被保留下来的每一块钱能够创造更大的利 益，我们便会持续的这样做，而一旦我们评估留下的盈余无法达到前述的标准， 我们一定会把所有多余的钱发还给股东，当然会同时权衡过去的记录与未来的前 景，当然单一年度的变化颇大，基本上我们会以五年为期来作判断。
我们现今的计划是用保留的盈余来扩充保险事业，我们大部份的竞争对手财 务状况比我们差而不愿大幅的扩充，但此刻正值保费收入大幅成长之际，比起
1983 年的 50 亿，预计 1985 年将成长至 150 亿，这正是我们大捞一笔的难得良机， 当然没有什么事百分之百确定的。
又到了每年我刊登小广告的时候了，去年John Loomis我们一位特别有心的 股东，跟我们提到一家完全符合我们标准的公司，我们马上加以锁定，只可惜最 后因为一项无解的问题而功亏一篑，以下是跟去年一模一样的广告:
(1)钜额交易(每年税后盈余至少有五百万美元)
(2)持续稳定获利(我们对有远景或具转机的公司没兴趣)
(3)高股东报酬率(并甚少举债)
(4)具备管理阶层(我们无法提供)
(5)简单的企业(若牵涉到太多高科技，我们弄不懂)
(6)合理的价格(在价格不确定前，我们不希望浪费自己与对方太多时间)
我们不会进行敌意购并，并承诺完全保密并尽快答复是否感兴趣(通常不超
过五分钟) ，我们倾向采现金交易，除非我们所换得的内含价值跟我们付出的一 样多，否则不考虑发行股份。我们欢迎可能的卖方与那些过去与我们合作过的对 象打听，对于那些好的公司与好的经营阶层，我们可以提供一个好的归属。 (1984)
今年破记录的有 97.2%的有效股权参与 1984 年的股东指定捐赠计划，总 计约三百多万美元捐出的款项分配给 1,519 家慈善机构，股东会的资料包含一 个可以让你表达对这项计划的意见(例如应否继续、每一股应捐赠多少等等)你可 能会有兴趣知道事实上在此之前从未有一家公司是以股东的立场来决定公司捐 款的去向，经理人在信任资本主义的同时，好象不太相信资本家。
我们建议新股东赶快阅读相关信息，若你也想参加的话，我们强烈建议你赶
22
www.buffettism.com 巴菲特研究中心 Research Centre for Buffettism
快把股份从经纪人那儿改登记于自己的名下。
波克夏的股东年会预计于 1985 年五月二十一在奥玛哈举行，我希望各位届
时都能参加，大部份的股东年会都是在浪费股东与经营阶层的时间，有时是因为 经营阶层不愿深入讨论公司的实质面，有时是因为有些股东只顾自己出锋头而未 真正关心公司的事务，本来应该是经营事业的讨论会最后往往变成一场闹剧(这 是件再划算不过的主意，只要买进一股，你就可以让一大群人坐着听你高谈阔 论) ，最后往往是劣币驱逐良币，使得真正关心公司的股东避而远之，剩下一堆 爱现的小丑。
波克夏的股东年会却完全不是那么一回事，虽然与会的股东一年比一年多， 但至今我们却很少遇到什么蠢问题或是以自我为中心的言论，相反的，大家提出 的都是一些有见地的商业问题，正因为大家开会的目的便是为此，因此不管要花 多少时间我跟 Charlie 很乐意为大家解答这类的问题，(然而很抱歉我们无法在 其它的时候用书面或电话回答问题，因为以一家拥有三千名股东的公司，若一一 回答的话实在是太没有效率了) ，而我们惟一无法回答的商业问题是正直要花多 少代价去证明，尤其是我们在股票市场上的进出。
最后我通常要花一点时间来吹嘘我们公司的管理干部有多好，欢迎来参加年 会，你就晓得为什么了，外县市来的可以考虑到 Nebraska 家具店逛逛，若你决 定买些东西，你会发现你所省下的钱足够支付你这趟的旅费，相信我你一定会觉 得不虚此行的。
期后事项，三月十八在报告付梓的一周之后，我们协议以每股 172.5 美金 买进三百万股资本城广拨 Capital Cities Communications，其中有一项附带 要件是资本城必须要能够成功买下 ABC 美国广播公司，否则合约无效，在前几 年的年度我们一再对资本城的领导阶层-包括 Tom Murphy 与 Dan Burke 表示 推崇，原因很简单，因为他们不管在能力与人格方面，皆是一时之选，明年的年 报我将会详加说明这项投资案的始末。
23
To the Shareholders of Berkshire Hathaway Inc.:
Our gain in net worth during 1984 was $152.6 million, or
$133 per share. This sounds pretty good but actually it’s
mediocre. Economic gains must be evaluated by comparison with
the capital that produces them. Our twenty-year compounded
annual gain in book value has been 22.1% (from $19.46 in 1964 to
$1108.77 in 1984), but our gain in 1984 was only 13.6%.
As we discussed last year, the gain in per-share intrinsic
business value is the economic measurement that really counts.
But calculations of intrinsic business value are subjective. In
our case, book value serves as a useful, although somewhat
understated, proxy. In my judgment, intrinsic business value and
book value increased during 1984 at about the same rate.
Using my academic voice, I have told you in the past of the
drag that a mushrooming capital base exerts upon rates of return.
Unfortunately, my academic voice is now giving way to a
reportorial voice. Our historical 22% rate is just that -
history. To earn even 15% annually over the next decade
(assuming we continue to follow our present dividend policy,
about which more will be said later in this letter) we would need
profits aggregating about $3.9 billion. Accomplishing this will
require a few big ideas - small ones just won’t do. Charlie
Munger, my partner in general management, and I do not have any
such ideas at present, but our experience has been that they pop
up occasionally. (How’s that for a strategic plan?)
Sources of Reported Earnings
The table on the following page shows the sources of
Berkshire’s reported earnings. Berkshire’s net ownership
interest in many of the constituent businesses changed at midyear
1983 when the Blue Chip merger took place. Because of these
changes, the first two columns of the table provide the best
measure of underlying business performance.
All of the significant gains and losses attributable to
unusual sales of assets by any of the business entities are
aggregated with securities transactions on the line near the
bottom of the table, and are not included in operating earnings.
(We regard any annual figure for realized capital gains or losses
as meaningless, but we regard the aggregate realized and
unrealized capital gains over a period of years as very
important.)
Furthermore, amortization of Goodwill is not charged against
the specific businesses but, for reasons outlined in the Appendix
to my letter in the 1983 annual report, is set forth as a
separate item.
Operating Earnings:
Insurance Group:
(000s omitted)
----------------------------------------------------------
Net Earnings
Earnings Before Income Taxes After Tax
-------------------------------------- ------------------
Total Berkshire Share Berkshire Share
------------------ ------------------ ------------------ 1984 1983 1984 1983 1984 1983 -------- -------- -------- -------- -------- --------
Underwriting ............ $(48,060) $(33,872) $(48,060) $(33,872) $(25,955) $(18,400)
.CNI YAWAHTAH ERIHSKREB
Net Investment Income ...
Buffalo News ..............
Nebraska Furniture Mart(1)
See’s Candies .............
Associated Retail Stores ..
Blue Chip Stamps(2)
68,903 43,810
27,328 19,352
14,511 3,812
26,644 27,411
697
(1,422)
(798)
3,241 (100)
7,493 (532)
(3,179) (3,066) (3,179) (3,066) (1,716) (1,656)
4,932 10,121 4,529 9,623 3,476 8,490
-------- -------- -------- -------- -------- --------
(1,072)
(1,843)
1,456
4,092
68,903 43,810
27,328 16,547
11,609 3,049
26,644 24,526
697
(1,876)
(467)
2,102 (100)
4,844 (563)
62,059
13,317
5,917
13,380
(579)
(899)
3,151
1,696
226 4,828
(1,434)
39,114
8,832
1,521
12,212 355
(353)
1,917
1,136
(63) 3,448
(563)
Mutual Savings and Loan ...
Precision Steel ...........
Textiles ..................
Wesco Financial ...........
Amortization of Goodwill ..
Interest on Debt .......... (14,734) (15,104) (14,097) (13,844) (7,452) (7,346)
Shareholder-Designated
418 9,777
(1,434)
418 7,831
(1,434)
Contributions ..........
Other .....................
Operating Earnings ..........
Special GEICO Distribution ..
Special Gen. Foods Distribution 8,111
Sales of securities and
unusual sales of assets .. 104,699
-------- -------- -------- -------- -------- --------
Total Earnings - all entities $200,549 $147,878 $191,293 $136,074 $148,896 $112,166
======== ======== ======== ======== ======== ========
(1) 1983 figures are those for October through December.
(2) 1984 and 1983 are not comparable; major assets were
transferred in the mid-year 1983 merger of Blue Chip Stamps.
Sharp-eyed shareholders will notice that the amount of the
special GEICO distribution and its location in the table have
been changed from the presentation of last year. Though they
reclassify and reduce “accounting” earnings, the changes are
entirely of form, not of substance. The story behind the
changes, however, is interesting.
As reported last year: (1) in mid-1983 GEICO made a tender
offer to buy its own shares; (2) at the same time, we agreed by
written contract to sell GEICO an amount of its shares that would
be proportionately related to the aggregate number of shares
GEICO repurchased via the tender from all other shareholders; (3)
at completion of the tender, we delivered 350,000 shares to
GEICO, received $21 million cash, and were left owning exactly
the same percentage of GEICO that we owned before the tender; (4)
GEICO’s transaction with us amounted to a proportionate
redemption, an opinion rendered us, without qualification, by a
leading law firm; (5) the Tax Code logically regards such
proportionate redemptions as substantially equivalent to
dividends and, therefore, the $21 million we received was taxed
at only the 6.9% inter-corporate dividend rate; (6) importantly,
that $21 million was far less than the previously-undistributed
earnings that had inured to our ownership in GEICO and, thus,
from the standpoint of economic substance, was in our view
equivalent to a dividend.
Because it was material and unusual, we highlighted the
GEICO distribution last year to you, both in the applicable
quarterly report and in this section of the annual report.
Additionally, we emphasized the transaction to our auditors,
Peat, Marwick, Mitchell & Co. Both the Omaha office of Peat
Marwick and the reviewing Chicago partner, without objection,
concurred with our dividend presentation.
In 1984, we had a virtually identical transaction with
General Foods. The only difference was that General Foods
repurchased its stock over a period of time in the open market,
whereas GEICO had made a “one-shot” tender offer. In the General
Foods case we sold to the company, on each day that it
repurchased shares, a quantity of shares that left our ownership
87,739 --
61,043 82,021
19,575 --
-- 7,896
51,410
19,575
--
70,015 48,644
-- 18,224
7,294 --
67,260 101,376
65,089
71,587 45,298
(1,072)
(1,843)
1,166
3,278
percentage precisely unchanged. Again our transaction was
pursuant to a written contract executed before repurchases began.
And again the money we received was far less than the retained
earnings that had inured to our ownership interest since our
purchase. Overall we received $21,843,601 in cash from General
Foods, and our ownership remained at exactly 8.75%.
At this point the New York office of Peat Marwick came into
the picture. Late in 1984 it indicated that it disagreed with
the conclusions of the firm’s Omaha office and Chicago reviewing
partner. The New York view was that the GEICO and General Foods
transactions should be treated as sales of stock by Berkshire
rather than as the receipt of dividends. Under this accounting
approach, a portion of the cost of our investment in the stock of
each company would be charged against the redemption payment and
any gain would be shown as a capital gain, not as dividend
income. This is an accounting approach only, having no bearing
on taxes: Peat Marwick agrees that the transactions were
dividends for IRS purposes.
We disagree with the New York position from both the
viewpoint of economic substance and proper accounting. But, to
avoid a qualified auditor’s opinion, we have adopted herein Peat
Marwick’s 1984 view and restated 1983 accordingly. None of this,
however, has any effect on intrinsic business value: our
ownership interests in GEICO and General Foods, our cash, our
taxes, and the market value and tax basis of our holdings all
remain the same.
This year we have again entered into a contract with General
Foods whereby we will sell them shares concurrently with open
market purchases that they make. The arrangement provides that
our ownership interest will remain unchanged at all times. By
keeping it so, we will insure ourselves dividend treatment for
tax purposes. In our view also, the economic substance of this
transaction again is the creation of dividend income. However,
we will account for the redemptions as sales of stock rather than
dividend income unless accounting rules are adopted that speak
directly to this point. We will continue to prominently identify
any such special transactions in our reports to you.
While we enjoy a low tax charge on these proportionate
redemptions, and have participated in several of them, we view
such repurchases as at least equally favorable for shareholders
who do not sell. When companies with outstanding businesses and
comfortable financial positions find their shares selling far
below intrinsic value in the marketplace, no alternative action
can benefit shareholders as surely as repurchases.
(Our endorsement of repurchases is limited to those dictated
by price/value relationships and does not extend to the
“greenmail” repurchase - a practice we find odious and repugnant.
In these transactions, two parties achieve their personal ends by
exploitation of an innocent and unconsulted third party. The
players are: (1) the “shareholder” extortionist who, even before
the ink on his stock certificate dries, delivers his “your-
money-or-your-life” message to managers; (2) the corporate
insiders who quickly seek peace at any price - as long as the
price is paid by someone else; and (3) the shareholders whose
money is used by (2) to make (1) go away. As the dust settles,
the mugging, transient shareholder gives his speech on “free
enterprise”, the muggee management gives its speech on “the best
interests of the company”, and the innocent shareholder standing
by mutely funds the payoff.)
The companies in which we have our largest investments have
all engaged in significant stock repurhases at times when wide
discrepancies existed between price and value. As shareholders,
we find this encouraging and rewarding for two important reasons
- one that is obvious, and one that is subtle and not always
understood. The obvious point involves basic arithmetic: major
repurchases at prices well below per-share intrinsic business
value immediately increase, in a highly significant way, that
value. When companies purchase their own stock, they often find
it easy to get $2 of present value for $1. Corporate acquisition
programs almost never do as well and, in a discouragingly large
number of cases, fail to get anything close to $1 of value for
each $1 expended.
The other benefit of repurchases is less subject to precise
measurement but can be fully as important over time. By making
repurchases when a company’s market value is well below its
business value, management clearly demonstrates that it is given
to actions that enhance the wealth of shareholders, rather than
to actions that expand management’s domain but that do nothing
for (or even harm) shareholders. Seeing this, shareholders and
potential shareholders increase their estimates of future returns
from the business. This upward revision, in turn, produces
market prices more in line with intrinsic business value. These
prices are entirely rational. Investors should pay more for a
business that is lodged in the hands of a manager with
demonstrated pro-shareholder leanings than for one in the hands
of a self-interested manager marching to a different drummer. (To
make the point extreme, how much would you pay to be a minority
shareholder of a company controlled by Robert Wesco?)
The key word is “demonstrated”. A manager who consistently
turns his back on repurchases, when these clearly are in the
interests of owners, reveals more than he knows of his
motivations. No matter how often or how eloquently he mouths
some public relations-inspired phrase such as “maximizing
shareholder wealth” (this season’s favorite), the market
correctly discounts assets lodged with him. His heart is not
listening to his mouth - and, after a while, neither will the
market.
We have prospered in a very major way - as have other
shareholders - by the large share repurchases of GEICO,
Washington Post, and General Foods, our three largest holdings.
(Exxon, in which we have our fourth largest holding, has also
wisely and aggressively repurchased shares but, in this case, we
have only recently established our position.) In each of these
companies, shareholders have had their interests in outstanding
businesses materially enhanced by repurchases made at bargain
prices. We feel very comfortable owning interests in businesses
such as these that offer excellent economics combined with
shareholder-conscious managements.
The following table shows our 1984 yearend net holdings in
marketable equities. All numbers exclude the interests
attributable to minority shareholders of Wesco and Nebraska
Furniture Mart.
-------------
690,975
740,400
3,895,710
4,047,191
6,850,000
2,379,200
818,872
555,949
2,553,488
1,868,600
$ 32,908
46,738
175,307
226,137
397,300
38,662
28,149
27,242
109,162
149,955
---------- ----------
Market
---------- ----------
(000s omitted)
American Broadcasting Companies, Inc.
Exxon Corporation ...................
General Foods Corporation ...........
GEICO Corporation ...................
Handy & Harman ......................
Interpublic Group of Companies, Inc.
Northwest Industries
Time, Inc. ..........................
The Washington Post Company .........
No. of Shares Cost
Affiliated Publications, Inc. ....... $ 3,516
44,416
173,401
149,870
45,713
27,318
2,570
26,581
89,327
10,628
$573,340 $1,231,560
All Other Common Stockholdings 11,634 37,326
---------- ----------
Total Common Stocks $584,974 $1,268,886
========== ==========
It’s been over ten years since it has been as difficult as
now to find equity investments that meet both our qualitative
standards and our quantitative standards of value versus price.
We try to avoid compromise of these standards, although we find
doing nothing the most difficult task of all. (One English
statesman attributed his country’s greatness in the nineteenth
century to a policy of “masterly inactivity”. This is a strategy
that is far easier for historians to commend than for
participants to follow.)
In addition to the figures supplied at the beginning of this
section, information regarding the businesses we own appears in
Management’s Discussion on pages 42-47. An amplified discussion
of Wesco’s businesses appears in Charlie Munger’s report on pages
50-59. You will find particularly interesting his comments about
conditions in the thrift industry. Our other major controlled
businesses are Nebraska Furniture Mart, See’s, Buffalo Evening
News, and the Insurance Group, to which we will give some special
attention here.
Nebraska Furniture Mart
Last year I introduced you to Mrs. B (Rose Blumkin) and her
family. I told you they were terrific, and I understated the
case. After another year of observing their remarkable talents
and character, I can honestly say that I never have seen a
managerial group that either functions or behaves better than the
Blumkin family.
Mrs. B, Chairman of the Board, is now 91, and recently was
quoted in the local newspaper as saying, “I come home to eat and
sleep, and that’s about it. I can’t wait until it gets daylight
so I can get back to the business”. Mrs. B is at the store seven
days a week, from opening to close, and probably makes more
decisions in a day than most CEOs do in a year (better ones,
too).
In May Mrs. B was granted an Honorary Doctorate in
Commercial Science by New York University. (She’s a “fast track”
student: not one day in her life was spent in a school room prior
to her receipt of the doctorate.) Previous recipients of honorary
degrees in business from NYU include Clifton Garvin, Jr., CEO of
Exxon Corp.; Walter Wriston, then CEO of Citicorp; Frank Cary,
then CEO of IBM; Tom Murphy, then CEO of General Motors; and,
most recently, Paul Volcker. (They are in good company.)
The Blumkin blood did not run thin. Louie, Mrs. B’s son,
and his three boys, Ron, Irv, and Steve, all contribute in full
measure to NFM’s amazing success. The younger generation has
attended the best business school of them all - that conducted by
Mrs. B and Louie - and their training is evident in their
performance.
Last year NFM’s net sales increased by $14.3 million,
bringing the total to $115 million, all from the one store in
Omaha. That is by far the largest volume produced by a single
home furnishings store in the United States. In fact, the gain
in sales last year was itself greater than the annual volume of
many good-sized successful stores. The business achieves this
success because it deserves this success. A few figures will
tell you why.
In its fiscal 1984 10-K, the largest independent specialty
retailer of home furnishings in the country, Levitz Furniture,
described its prices as “generally lower than the prices charged
by conventional furniture stores in its trading area”. Levitz,
in that year, operated at a gross margin of 44.4% (that is, on
average, customers paid it $100 for merchandise that had cost it
$55.60 to buy). The gross margin at NFM is not much more than
half of that. NFM’s low mark-ups are possible because of its
exceptional efficiency: operating expenses (payroll, occupancy,
advertising, etc.) are about 16.5% of sales versus 35.6% at
Levitz.
None of this is in criticism of Levitz, which has a well-
managed operation. But the NFM operation is simply extraordinary
(and, remember, it all comes from a $500 investment by Mrs. B in
1937). By unparalleled efficiency and astute volume purchasing,
NFM is able to earn excellent returns on capital while saving its
customers at least $30 million annually from what, on average, it
would cost them to buy the same merchandise at stores maintaining
typical mark-ups. Such savings enable NFM to constantly widen
its geographical reach and thus to enjoy growth well beyond the
natural growth of the Omaha market.
I have been asked by a number of people just what secrets
the Blumkins bring to their business. These are not very
esoteric. All members of the family: (1) apply themselves with
an enthusiasm and energy that would make Ben Franklin and Horatio
Alger look like dropouts; (2) define with extraordinary realism
their area of special competence and act decisively on all
matters within it; (3) ignore even the most enticing propositions
failing outside of that area of special competence; and, (4)
unfailingly behave in a high-grade manner with everyone they deal
with. (Mrs. B boils it down to “sell cheap and tell the truth”.)
Our evaluation of the integrity of Mrs. B and her family was
demonstrated when we purchased 90% of the business: NFM had never
had an audit and we did not request one; we did not take an
inventory nor verify the receivables; we did not check property
titles. We gave Mrs. B a check for $55 million and she gave us
her word. That made for an even exchange.
You and I are fortunate to be in partnership with the
Blumkin family.
See’s Candy Shops, Inc.
Below is our usual recap of See’s performance since the time
of purchase by Blue Chip Stamps:
52-53 Week Year
Ended About
December 31
Sales
Revenues
Operating
Profits
After Taxes
Number of
Pounds of
Candy Sold
Number of
Stores Open
at Year End
------------------- ------------ ----------- ---------- -----------
1984 ..............
1983 (53 weeks) ...
1982 ..............
1981 ..............
1980 ..............
1979 ..............
1978 ..............
1977 ..............
1976 (53 weeks) ...
1975 ..............
1974 ..............
1973 ..............
1972 ..............
$135,946,000
133,531,000
123,662,000
112,578,000
97,715,000
87,314,000
73,653,000
62,886,000
56,333,000
50,492,000
41,248,000
35,050,000
31,337,000
$13,380,000
13,699,000
11,875,000
10,779,000
7,547,000
6,330,000
6,178,000
6,154,000
5,569,000
5,132,000
3,021,000
1,940,000
2,083,000
24,759,000 214
24,651,000 207
24,216,000 202
24,052,000 199
24,065,000 191
23,985,000 188
22,407,000 182
20,921,000 179
20,553,000 173
19,134,000 172
17,883,000 170
17,813,000 169
16,954,000 167
This performance has not been produced by a generally rising
tide. To the contrary, many well-known participants in the
boxed-chocolate industry either have lost money in this same
period or have been marginally profitable. To our knowledge,
only one good-sized competitor has achieved high profitability.
The success of See’s reflects the combination of an exceptional
product and an exceptional manager, Chuck Huggins.
During 1984 we increased prices considerably less than has
been our practice in recent years: per-pound realization was
$5.49, up only 1.4% from 1983. Fortunately, we made good
progress on cost control, an area that has caused us problems in
recent years. Per-pound costs - other than those for raw
materials, a segment of expense largely outside of our control -
increased by only 2.2% last year.
Our cost-control problem has been exacerbated by the problem
of modestly declining volume (measured by pounds, not dollars) on
a same-store basis. Total pounds sold through shops in recent
years has been maintained at a roughly constant level only by the
net addition of a few shops annually. This more-shops-to-get-
the-same-volume situation naturally puts heavy pressure on per-
pound selling costs.
In 1984, same-store volume declined 1.1%. Total shop volume,
however, grew 0.6% because of an increase in stores. (Both
percentages are adjusted to compensate for a 53-week fiscal year
in 1983.)
See’s business tends to get a bit more seasonal each year.
In the four weeks prior to Christmas, we do 40% of the year’s
volume and earn about 75% of the year’s profits. We also earn
significant sums in the Easter and Valentine’s Day periods, but
pretty much tread water the rest of the year. In recent years,
shop volume at Christmas has grown in relative importance, and so
have quantity orders and mail orders. The increased
concentration of business in the Christmas period produces a
multitude of managerial problems, all of which have been handled
by Chuck and his associates with exceptional skill and grace.
Their solutions have in no way involved compromises in
either quality of service or quality of product. Most of our
larger competitors could not say the same. Though faced with
somewhat less extreme peaks and valleys in demand than we, they
add preservatives or freeze the finished product in order to
smooth the production cycle and thereby lower unit costs. We
reject such techniques, opting, in effect, for production
headaches rather than product modification.
Our mall stores face a host of new food and snack vendors
that provide particularly strong competition at non-holiday
periods. We need new products to fight back and during 1984 we
introduced six candy bars that, overall, met with a good
reception. Further product introductions are planned.
In 1985 we will intensify our efforts to keep per-pound cost
increases below the rate of inflation. Continued success in
these efforts, however, will require gains in same-store
poundage. Prices in 1985 should average 6% - 7% above those of
1984. Assuming no change in same-store volume, profits should
show a moderate gain.
Buffalo Evening News
Profits at the News in 1984 were considerably greater than
we expected. As at See’s, excellent progress was made in
controlling costs. Excluding hours worked in the newsroom, total
hours worked decreased by about 2.8%. With this productivity
improvement, overall costs increased only 4.9%. This performance
by Stan Lipsey and his management team was one of the best in the
industry.
However, we now face an acceleration in costs. In mid-1984
we entered into new multi-year union contracts that provided for
a large “catch-up” wage increase. This catch-up is entirely
appropriate: the cooperative spirit of our unions during the
unprofitable 1977-1982 period was an important factor in our
success in remaining cost competitive with The Courier-Express.
Had we not kept costs down, the outcome of that struggle might
well have been different.
Because our new union contracts took effect at varying
dates, little of the catch-up increase was reflected in our 1984
costs. But the increase will be almost totally effective in 1985
and, therefore, our unit labor costs will rise this year at a
rate considerably greater than that of the industry. We expect
to mitigate this increase by continued small gains in
productivity, but we cannot avoid significantly higher wage costs
this year. Newsprint price trends also are less favorable now
than they were in 1984. Primarily because of these two factors,
we expect at least a minor contraction in margins at the News.
Working in our favor at the News are two factors of major
economic importance:
(1) Our circulation is concentrated to an unusual degree
in the area of maximum utility to our advertisers.
“Regional” newspapers with wide-ranging circulation, on
the other hand, have a significant portion of their
circulation in areas that are of negligible utility to
most advertisers. A subscriber several hundred miles
away is not much of a prospect for the puppy you are
offering to sell via a classified ad - nor for the
grocer with stores only in the metropolitan area.
“Wasted” circulation - as the advertisers call it -
hurts profitability: expenses of a newspaper are
determined largely by gross circulation while
advertising revenues (usually 70% - 80% of total
revenues) are responsive only to useful circulation;
(2) Our penetration of the Buffalo retail market is
exceptional; advertisers can reach almost all of their
potential customers using only the News.
Last year I told you about this unusual reader acceptance:
among the 100 largest newspapers in the country, we were then
number one, daily, and number three, Sunday, in penetration. The
most recent figures show us number one in penetration on weekdays
and number two on Sunday. (Even so, the number of households in
Buffalo has declined, so our current weekday circulation is down
slightly; on Sundays it is unchanged.)
I told you also that one of the major reasons for this
unusual acceptance by readers was the unusual quantity of news
that we delivered to them: a greater percentage of our paper is
devoted to news than is the case at any other dominant paper in
our size range. In 1984 our “news hole” ratio was 50.9%, (versus
50.4% in 1983), a level far above the typical 35% - 40%. We will
continue to maintain this ratio in the 50% area. Also, though we
last year reduced total hours worked in other departments, we
maintained the level of employment in the newsroom and, again,
will continue to do so. Newsroom costs advanced 9.1% in 1984, a
rise far exceeding our overall cost increase of 4.9%.
Our news hole policy costs us significant extra money for
newsprint. As a result, our news costs (newsprint for the news
hole plus payroll and expenses of the newsroom) as a percentage
of revenue run higher than those of most dominant papers of our
size. There is adequate room, however, for our paper or any
other dominant paper to sustain these costs: the difference
between “high” and “low” news costs at papers of comparable size
runs perhaps three percentage points while pre-tax profit margins
are often ten times that amount.
The economics of a dominant newspaper are excellent, among
the very best in the business world. Owners, naturally, would
like to believe that their wonderful profitability is achieved
only because they unfailingly turn out a wonderful product. That
comfortable theory wilts before an uncomfortable fact. While
first-class newspapers make excellent profits, the profits of
third-rate papers are as good or better - as long as either class
of paper is dominant within its community. Of course, product
quality may have been crucial to the paper in achieving
dominance. We believe this was the case at the News, in very
large part because of people such as Alfred Kirchhofer who
preceded us.
Once dominant, the newspaper itself, not the marketplace,
determines just how good or how bad the paper will be. Good or
bad, it will prosper. That is not true of most businesses:
inferior quality generally produces inferior economics. But even
a poor newspaper is a bargain to most citizens simply because of
its “bulletin board” value. Other things being equal, a poor
product will not achieve quite the level of readership achieved
by a first-class product. A poor product, however, will still
remain essential to most citizens, and what commands their
attention will command the attention of advertisers.
Since high standards are not imposed by the marketplace,
management must impose its own. Our commitment to an above-
average expenditure for news represents an important quantitative
standard. We have confidence that Stan Lipsey and Murray Light
will continue to apply the far-more important qualitative
standards. Charlie and I believe that newspapers are very
special institutions in society. We are proud of the News, and
intend an even greater pride to be justified in the years ahead.
Insurance Operations
Shown below is an updated version of our usual table listing
two key figures for the insurance industry:
1972 ..............................
1973 ..............................
1974 ..............................
1975 ..............................
1976 ..............................
1977 ..............................
1978 ..............................
1979 ..............................
1980 ..............................
1981 ..............................
1982 ..............................
1983 (Revised) ....................
1984 (Estimated) ..................
Source: Best’s Aggregates and Averages
10.2
8.0
6.2
11.0
21.9
19.8
12.8
10.3
6.0
3.9
4.4
4.5
8.1
Best’s data reflect the experience of practically the entire
industry, including stock, mutual, and reciprocal companies. The
combined ratio represents total insurance costs (losses incurred
plus expenses) compared to revenue from premiums; a ratio below
100 indicates an underwriting profit, and one above 100 indicates
a loss.
For a number of years, we have told you that an annual
increase by the industry of about 10% per year in premiums
Yearly Change in Premiums Written (%) -------------
Combined Ratio
after Policy-holder
Dividends
-------------------
96.2
99.2
105.4
107.9
102.4
97.2
97.5
100.6
103.1
106.0
109.7
111.9
117.7
written is necessary for the combined ratio to remain roughly
unchanged. We assumed in making that assertion that expenses as
a percentage of premium volume would stay relatively stable and
that losses would grow at about 10% annually because of the
combined influence of unit volume increases, inflation, and
judicial rulings that expand what is covered by the insurance
policy.
Our opinion is proving dismayingly accurate: a premium
increase of 10% per year since 1979 would have produced an
aggregate increase through 1984 of 61% and a combined ratio in
1984 almost identical to the 100.6 of 1979. Instead, the
industry had only a 30% increase in premiums and a 1984 combined
ratio of 117.7. Today, we continue to believe that the key index
to the trend of underwriting profitability is the year-to-year
percentage change in industry premium volume.
It now appears that premium volume in 1985 will grow well
over 10%. Therefore, assuming that catastrophes are at a
“normal” level, we would expect the combined ratio to begin
easing downward toward the end of the year. However, under our
industrywide loss assumptions (i.e., increases of 10% annually),
five years of 15%-per-year increases in premiums would be
required to get the combined ratio back to 100. This would mean
a doubling of industry volume by 1989, an outcome that seems
highly unlikely to us. Instead, we expect several years of
premium gains somewhat above the 10% level, followed by highly-
competitive pricing that generally will produce combined ratios
in the 108-113 range.
Our own combined ratio in 1984 was a humbling 134. (Here, as
throughout this report, we exclude structured settlements and the
assumption of loss reserves in reporting this ratio. Much
additional detail, including the effect of discontinued
operations on the ratio, appears on pages 42-43). This is the
third year in a row that our underwriting performance has been
far poorer than that of the industry. We expect an improvement
in the combined ratio in 1985, and also expect our improvement to
be substantially greater than that of the industry. Mike
Goldberg has corrected many of the mistakes I made before he took
over insurance operations. Moreover, our business is
concentrated in lines that have experienced poorer-than-average
results during the past several years, and that circumstance has
begun to subdue many of our competitors and even eliminate some.
With the competition shaken, we were able during the last half of
1984 to raise prices significantly in certain important lines
with little loss of business.
For some years I have told you that there could be a day
coming when our premier financial strength would make a real
difference in the competitive position of our insurance
operation. That day may have arrived. We are almost without
question the strongest property/casualty insurance operation in
the country, with a capital position far superior to that of
well-known companies of much greater size.
Equally important, our corporate policy is to retain that
superiority. The buyer of insurance receives only a promise in
exchange for his cash. The value of that promise should be
appraised against the possibility of adversity, not prosperity.
At a minimum, the promise should appear able to withstand a
prolonged combination of depressed financial markets and
exceptionally unfavorable underwriting results. Our insurance
subsidiaries are both willing and able to keep their promises in
any such environment - and not too many other companies clearly
are.
Our financial strength is a particular asset in the business
of structured settlements and loss reserve assumptions that we
reported on last year. The claimant in a structured settlement
and the insurance company that has reinsured loss reserves need
to be completely confident that payments will be forthcoming for
decades to come. Very few companies in the property/casualty
field can meet this test of unquestioned long-term strength. (In
fact, only a handful of companies exists with which we will
reinsure our own liabilities.)
We have grown in these new lines of business: funds that we
hold to offset assumed liabilities grew from $16.2 million to
$30.6 million during the year. We expect growth to continue and
perhaps to greatly accelerate. To support this projected growth
we have added substantially to the capital of Columbia Insurance
Company, our reinsurance unit specializing in structured
settlements and loss reserve assumptions. While these businesses
are very competitive, returns should be satisfactory.
At GEICO the news, as usual, is mostly good. That company
achieved excellent unit growth in its primary insurance business
during 1984, and the performance of its investment portfolio
continued to be extraordinary. Though underwriting results
deteriorated late in the year, they still remain far better than
those of the industry. Our ownership in GEICO at yearend
amounted to 36% and thus our interest in their direct
property/casualty volume of $885 million amounted to $320
million, or well over double our own premium volume.
I have reported to you in the past few years that the
performance of GEICO’s stock has considerably exceeded that
company’s business performance, brilliant as the latter has been.
In those years, the carrying value of our GEICO investment on our
balance sheet grew at a rate greater than the growth in GEICO’s
intrinsic business value. I warned you that over performance by
the stock relative to the performance of the business obviously
could not occur every year, and that in some years the stock must
under perform the business. In 1984 that occurred and the
carrying value of our interest in GEICO changed hardly at all,
while the intrinsic business value of that interest increased
substantially. Since 27% of Berkshire’s net worth at the
beginning of 1984 was represented by GEICO, its static market
value had a significant impact upon our rate of gain for the
year. We are not at all unhappy with such a result: we would far
rather have the business value of GEICO increase by X during the
year, while market value decreases, than have the intrinsic value
increase by only 1/2 X with market value soaring. In GEICO’s
case, as in all of our investments, we look to business
performance, not market performance. If we are correct in
expectations regarding the business, the market eventually will
follow along.
You, as shareholders of Berkshire, have benefited in
enormous measure from the talents of GEICO’s Jack Byrne, Bill
Snyder, and Lou Simpson. In its core business - low-cost auto
and homeowners insurance - GEICO has a major, sustainable
competitive advantage. That is a rare asset in business
generally, and it’s almost non-existent in the field of financial
services. (GEICO, itself, illustrates this point: despite the
company’s excellent management, superior profitability has eluded
GEICO in all endeavors other than its core business.) In a large
industry, a competitive advantage such as GEICO’s provides the
potential for unusual economic rewards, and Jack and Bill
continue to exhibit great skill in realizing that potential.
Most of the funds generated by GEICO’s core insurance
operation are made available to Lou for investment. Lou has the
rare combination of temperamental and intellectual
characteristics that produce outstanding long-term investment
performance. Operating with below-average risk, he has generated
returns that have been by far the best in the insurance industry.
I applaud and appreciate the efforts and talents of these three
outstanding managers.
Errors in Loss Reserving
Any shareholder in a company with important interests in the
property/casualty insurance business should have some
understanding of the weaknesses inherent in the reporting of
current earnings in that industry. Phil Graham, when publisher
of the Washington Post, described the daily newspaper as “a first
rough draft of history”. Unfortunately, the financial statements
of a property/casualty insurer provide, at best, only a first
rough draft of earnings and financial condition.
The determination of costs is the main problem. Most of an
insurer’s costs result from losses on claims, and many of the
losses that should be charged against the current year’s revenue
are exceptionally difficult to estimate. Sometimes the extent of
these losses, or even their existence, is not known for decades.
The loss expense charged in a property/casualty company’s
current income statement represents: (1) losses that occurred and
were paid during the year; (2) estimates for losses that occurred
and were reported to the insurer during the year, but which have
yet to be settled; (3) estimates of ultimate dollar costs for
losses that occurred during the year but of which the insurer is
unaware (termed “IBNR”: incurred but not reported); and (4) the
net effect of revisions this year of similar estimates for (2)
and (3) made in past years.
Such revisions may be long delayed, but eventually any
estimate of losses that causes the income for year X to be
misstated must be corrected, whether it is in year X + 1, or
X + 10. This, perforce, means that earnings in the year of
correction also are misstated. For example, assume a claimant
was injured by one of our insureds in 1979 and we thought a
settlement was likely to be made for $10,000. That year we would
have charged $10,000 to our earnings statement for the estimated
cost of the loss and, correspondingly, set up a liability reserve
on the balance sheet for that amount. If we settled the claim in
1984 for $100,000, we would charge earnings with a loss cost of
$90,000 in 1984, although that cost was truly an expense of 1979.
And if that piece of business was our only activity in 1979, we
would have badly misled ourselves as to costs, and you as to
earnings.
The necessarily-extensive use of estimates in assembling the
figures that appear in such deceptively precise form in the
income statement of property/casualty companies means that some
error must seep in, no matter how proper the intentions of
management. In an attempt to minimize error, most insurers use
various statistical techniques to adjust the thousands of
individual loss evaluations (called case reserves) that comprise
the raw data for estimation of aggregate liabilities. The extra
reserves created by these adjustments are variously labeled
“bulk”, “development”, or “supplemental” reserves. The goal of
the adjustments should be a loss-reserve total that has a 50-50
chance of being proved either slightly too high or slightly too
low when all losses that occurred prior to the date of the
financial statement are ultimately paid.
At Berkshire, we have added what we thought were appropriate
supplemental reserves but in recent years they have not been
adequate. It is important that you understand the magnitude of
the errors that have been involved in our reserving. You can
thus see for yourselves just how imprecise the process is, and
also judge whether we may have some systemic bias that should
make you wary of our current and future figures.
The following table shows the results from insurance
underwriting as we have reported them to you in recent years, and
also gives you calculations a year later on an “if-we-knew-then-
what-we think-we-know-now” basis. I say “what we think we know
now” because the adjusted figures still include a great many
estimates for losses that occurred in the earlier years.
However, many claims from the earlier years have been settled so
that our one-year-later estimate contains less guess work than
our earlier estimate:
Year ---- 1980 1981 1982 1983 1984
Underwriting Results
as Reported
to You -------------------- $ 6,738,000
Corrected Figures
After One Year’s
Experience
-----------------
$ 14,887,000
1,478,000 (1,118,000)
(21,462,000) (25,066,000)
(33,192,000) (50,974,000)
(45,413,000) ?
Our structured settlement and loss-reserve assumption
businesses are not included in this table. Important
additional information on loss reserve experience appears
on pages 43-45.
To help you understand this table, here is an explanation of
the most recent figures: 1984’s reported pre-tax underwriting
loss of $45.4 million consists of $27.6 million we estimate that
we lost on 1984’s business, plus the increased loss of $17.8
million reflected in the corrected figure for 1983.
As you can see from reviewing the table, my errors in
reporting to you have been substantial and recently have always
presented a better underwriting picture than was truly the case.
This is a source of particular chagrin to me because: (1) I like
for you to be able to count on what I say; (2) our insurance
managers and I undoubtedly acted with less urgency than we would
have had we understood the full extent of our losses; and (3) we
paid income taxes calculated on overstated earnings and thereby
gave the government money that we didn’t need to. (These
overpayments eventually correct themselves, but the delay is long
and we don’t receive interest on the amounts we overpaid.)
Because our business is weighted toward casualty and
reinsurance lines, we have more problems in estimating loss costs
than companies that specialize in property insurance. (When a
building that you have insured burns down, you get a much faster
fix on your costs than you do when an employer you have insured
finds out that one of his retirees has contracted a disease
attributable to work he did decades earlier.) But I still find
our errors embarrassing. In our direct business, we have far
underestimated the mushrooming tendency of juries and courts to
make the “deep pocket” pay, regardless of the factual situation
and the past precedents for establishment of liability. We also
have underestimated the contagious effect that publicity
regarding giant awards has on juries. In the reinsurance area,
where we have had our worst experience in under reserving, our
customer insurance companies have made the same mistakes. Since
we set reserves based on information they supply us, their
mistakes have become our mistakes.
I heard a story recently that is applicable to our insurance
accounting problems: a man was traveling abroad when he received
a call from his sister informing him that their father had died
unexpectedly. It was physically impossible for the brother to
get back home for the funeral, but he told his sister to take
care of the funeral arrangements and to send the bill to him.
After returning home he received a bill for several thousand
dollars, which he promptly paid. The following month another
bill came along for $15, and he paid that too. Another month
followed, with a similar bill. When, in the next month, a third
bill for $15 was presented, he called his sister to ask what was
going on. “Oh”, she said. “I forgot to tell you. We buried Dad
in a rented suit.”
If you’ve been in the insurance business in recent years -
particularly the reinsurance business - this story hurts. We
have tried to include all of our “rented suit” liabilities in our
current financial statement, but our record of past error should
make us humble, and you suspicious. I will continue to report to
you the errors, plus or minus, that surface each year.
Not all reserving errors in the industry have been of the
innocent-but-dumb variety. With underwriting results as bad as
they have been in recent years - and with managements having as
much discretion as they do in the presentation of financial
statements - some unattractive aspects of human nature have
manifested themselves. Companies that would be out of business
if they realistically appraised their loss costs have, in some
cases, simply preferred to take an extraordinarily optimistic
view about these yet-to-be-paid sums. Others have engaged in
various transactions to hide true current loss costs.
Both of these approaches can “work” for a considerable time:
external auditors cannot effectively police the financial
statements of property/casualty insurers. If liabilities of an
insurer, correctly stated, would exceed assets, it falls to the
insurer to volunteer this morbid information. In other words,
the corpse is supposed to file the death certificate. Under this
“honor system” of mortality, the corpse sometimes gives itself
the benefit of the doubt.
In most businesses, of course, insolvent companies run out
of cash. Insurance is different: you can be broke but flush.
Since cash comes in at the inception of an insurance policy and
losses are paid much later, insolvent insurers don’t run out of
cash until long after they have run out of net worth. In fact,
these “walking dead” often redouble their efforts to write
business, accepting almost any price or risk, simply to keep the
cash flowing in. With an attitude like that of an embezzler who
has gambled away his purloined funds, these companies hope that
somehow they can get lucky on the next batch of business and
thereby cover up earlier shortfalls. Even if they don’t get
lucky, the penalty to managers is usually no greater for a $100
million shortfall than one of $10 million; in the meantime, while
the losses mount, the managers keep their jobs and perquisites.
The loss-reserving errors of other property/casualty
companies are of more than academic interest to Berkshire. Not
only does Berkshire suffer from sell-at-any-price competition by
the “walking dead”, but we also suffer when their insolvency is
finally acknowledged. Through various state guarantee funds that
levy assessments, Berkshire ends up paying a portion of the
insolvent insurers’ asset deficiencies, swollen as they usually
are by the delayed detection that results from wrong reporting.
There is even some potential for cascading trouble. The
insolvency of a few large insurers and the assessments by state
guarantee funds that would follow could imperil weak-but-
previously-solvent insurers. Such dangers can be mitigated if
state regulators become better at prompt identification and
termination of insolvent insurers, but progress on that front has
been slow.
Washington Public Power Supply System
From October, 1983 through June, 1984 Berkshire’s insurance
subsidiaries continuously purchased large quantities of bonds of
Projects 1, 2, and 3 of Washington Public Power Supply System
(“WPPSS”). This is the same entity that, on July 1, 1983,
defaulted on $2.2 billion of bonds issued to finance partial
construction of the now-abandoned Projects 4 and 5. While there
are material differences in the obligors, promises, and
properties underlying the two categories of bonds, the problems
of Projects 4 and 5 have cast a major cloud ove