Berkshire Hathaway

Berkshire Hathaway, Inc. (Berkshire) is a holding company incorporated in Delaware that owns a diverse set of subsidiary businesses. Its corporate headquarters is located in Omaha, Nebraska. As of the end of 2007, Berkshire and its subsidiaries employed about 233,000 persons. Berkshire is a unique company in two ways: (1) by its success with its investments in stocks, bonds, and cash equivalents, which are overseen by its chairman, Warren E. Buffett, and its vice chairman, Charles T. Munger; and (2) by its extraordinarily decentralized management style as evidenced by minimal involvement by its corporate headquarters in the day-to-day operations of its subsidiaries.

Berkshire has a portfolio of investment in common stocks with a market value estimated at about $74.9 billion. This group of stocks is closely followed by the financial community. Berkshire has significant holdings (valuations in excess of $4 billion) in the following companies (in descending order of investment): Coca-Cola Company, Wells Fargo & Company, American Express Company, Procter & Gamble Company, Burlington Northern Santa Fe, Johnson & Johnson, and Kraft Foods, Inc.

Berkshire looks to invest in companies that show improvements in earnings and companies that possess superiorities that “make life difficult for their competitors.” Berkshire acquires and operates companies based on the following criteria: first, large purchases generating at least $75 million in pre-tax earnings; second, companies with demonstrated consistent earnings power; third, businesses earning good returns on equity while employing little or no debt; fourth, management already in place; fifth, businesses that are simple to understand; and finally, businesses with a known offering price (and a friendly takeover). The following sections describe the business sectors and operating businesses of Berkshire.

Insurance and Reinsurance

Berkshire's 60-some insurance businesses are its most important subsidiaries and operate in both the U.S. domestic market and foreign markets. These subsidiaries compete in both the primary insurance market and in the reinsurance market. Each of its insurance subsidiaries is rated highly for its capital strength, its financial condition, and its operating performance. The insurance operations and their subsidiaries are grouped into one of four units: GEICO, General Re, Berkshire Hathaway Reinsurance Group (BHRG), and Berkshire Hathaway Primary Group.

GEICO, headquartered in Chevy Chase, Maryland, primarily offers private passenger automobile insurance (but also insures other types of vehicles). General Re is a major international reinsurer operating in 56 cities providing insurance and reinsurance services worldwide. General Re's property and casualty operations are headquartered in Stamford, Connecticut, with 16 branch offices serving the United States and Canada. Its large international subsidiary Cologne Re provides property/casualty reinsurance primarily through Faraday, which controls the managing agent of Syndicate 435 at Lloyds of London. The BHRG group, also headquartered in Stamford, Connecticut, primarily provides catastrophe excess of loss reinsurance policies covering property losses that result from terrorism, natural disasters, and aviation risks. The Berkshire Hathaway Primary Group, headquartered in Omaha, Nebraska, and its affiliates primarily underwrite motor vehicle and general liability insurance to commercial enterprises principally in the United States.

Energy, Utilities, and Manufacturing

Berkshire holds a majority interest in MidAmerican Energy Holdings Company, an international energy company. MidAmerican operates two regulated utility companies and two pipelines in the United States, an electricity distribution subsidiary in the United Kingdom, and a hydroelectric facility in the Philippines.

...