2011 Berkshire Hathaway Annual Meeting (Full Version)

Transcript

good morning i'm warren he's shirley i can see he can hear that's why we work together have trouble remembering each other's names from time to time we're going to uh i'm going to introduce the directors we're going to give you some uh information on the first quarter earnings we're going to talk briefly about the david sokol lubrizol situation and... Read More

Summary

This video features Warren Buffett and Shirley Munger introducing the directors of Berkshire Hathaway, discussing the first quarter earnings, and addressing the David Sokol Lubrizol situation. Buffett mentions that most of their businesses, except those related to residential housing, are improving quarter by quarter. However, the first quarter saw a rise in catastrophes that hit the reinsurance industry hard. Buffett also talks about the earnings, including the insurance underwriting loss and the impact of lost investments. Munger adds that it's a mistake to assume perfect rationality and that hubris can contribute to irrational behavior. They address the Sokol situation, highlighting that Sokol's actions were inexcusable but not illegal. The press release may not have conveyed enough anger, but it was important to include Sokol's good contributions to the company.

Questions & Answers

Q: What was the overall trend of Berkshire Hathaway's businesses in the first quarter?

Most of Berkshire Hathaway's businesses, except those related to residential housing, showed improvement quarter by quarter.

Q: How did the insurance industry perform in the first quarter?

The insurance industry had a tough quarter due to major catastrophes, particularly in the Pacific Asian region. The estimated cost of these catastrophes to the reinsurance industry was around $50 billion.

Q: What was the impact of the catastrophes on Berkshire Hathaway's insurance underwriting?

Berkshire Hathaway's insurance underwriting suffered an after-tax loss of $821 million in the first quarter. This made it unlikely for them to have an underwriting profit for the year.

Q: How did Berkshire Hathaway's insurance investment income perform in the first quarter?

Berkshire Hathaway's insurance investment income saw a slight dip due to certain investments being called in, such as Goldman Sachs and General Electric. However, the overall expectation is that the investment income will grow in the future.

Q: What was the performance of BNSF, Berkshire Hathaway's railroad business, in the first quarter?

BNSF had a significant gain in earnings, contributing to the overall growth in earnings for Berkshire Hathaway. The railroad business is expected to have a good year.

Q: What were the major catastrophes in the first quarter?

The major catastrophes in the first quarter were in the Pacific Asian region. These catastrophes cost the reinsurance industry an estimated $50 billion.

Q: How did GEICO, Berkshire Hathaway's insurance subsidiary, perform in the first quarter?

GEICO gained market share and saw growth in policies month by month compared to the previous year. The value of GEICO policyholders to Berkshire Hathaway is estimated to be significant.

Q: How did Berkshire Hathaway handle the David Sokol Lubrizol situation?

Berkshire Hathaway promptly addressed the situation by delivering a letter to the Securities and Exchange Commission, conducting interviews with Sokol, and releasing a press statement. The press release may not have expressed enough anger, but it aimed to present both Sokol's good contributions and his questionable actions.

Q: Why wasn't there a sense of outrage in the press release regarding Sokol's actions?

Buffett explains that Sokol had made significant contributions to Berkshire Hathaway over the years, and it was important to acknowledge that. The press release aimed to provide the facts and actions involved without adding unnecessary anger to the situation.

Q: How did Buffett and Munger handle disagreements in their long-standing partnership?

Buffett and Munger have worked together for 52 years and have never had an argument. They approach decisions with rationality and focus on the facts rather than getting angry.

Q: What are the potential effects of the government ending the POMO program?

The impact of the government ending the Permanent Open Market Operation program (POMO) is uncertain. However, since the program's end has been widely anticipated and advertised, its effects on the stock market and the economy may already be priced in.