Berkshire Hathaway Relationship with 5 Insurance Companies, Geico?

By Journal On Dec 17, 2024

Daftar Isi

Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a holding company headquartered in Omaha, Nebraska, United States, with many subsidiaries. Berkshire Hathaway’s core business is insurance, including property and life insurance, reinsurance, and non-standard specialty insurance.

The company has been delivering phenomenal average annual returns of 25%+ to shareholders over the last 25 years, with large amounts of capital and little debt. One thousand US dollars invested in Berkshire in 1957 turned into $51,356,000 at the end of 2003.

According to Forbes magazine, Warren Buffett manages the company, one of the most talked about investors and the second richest person in America. Initially, at Berkshire, Buffett focused on long-term investments in companies listed on the Stock Exchange but has now shifted to buying companies as a whole.

Today, Berkshire has various businesses such as candy retailers, newspaper publishers, homeware retailers, encyclopedia sales, vacuum cleaner sales, uniform manufacturing and distribution, jewelry retailing, etc.

Berkshire Hathaway

The forerunner of this company began with the Hathaway Manufacturing Company, which was founded in 1888 by Horatio Hathaway, a business in the field of cotton processing.

The company was successful in its first decade but suffered a setback during the decline of the textile industry after World War I. At the time, the company was run by Seabury Stanton, whose investments and efforts paid off with increased profitability after the Great Depression of 1999. 1929.

In the 1950s, Hathaway joined Berkshire Fine Spinning Associates, another textile company that had been in operation since the early 19th century.

At the time, Berkshire Hathaway had 15 factories with 12,000 employees, $120 million in revenue, and was headquartered in New Bedford, Massachusetts. However, approximately one decade later, seven factory locations were closed, accompanied by massive layoffs.

Owner of Berkshire Hathaway

In 1962, CEO and President Warren Buffett believed Berkshire Hathaway stock was trading below its actual value and began buying it. After several clashes of necessity with the Stantons, Buffett purchased enough stock to change management and then take over the company.

Buffett maintained Berkshire Hathaway’s core business in the textile industry but, in 1967, began expanding into the insurance and other investment industries. The first insurance company that Berkshire bought was the National Indemnity Company.

In the late 1970s, Berkshire acquired the Government Employees Insurance Company (GEICO). In 1985, Berkshire’s official textile factory closed. One of Buffett’s ideas is that the textile industry’s incentive margins are already fragile, and it is no longer possible to continue working in that field.

Business process reengineering is also considered unprofitable because, according to Buffett’s argument, all other textile companies (in America) will do the same.

To that end, Buffett closed the textile business that became Berkshire’s roots but kept the Berkshire Hathaway name and turned it into an investment company. Warren Buffet started his career as an entrepreneur in the United States region of Omaha, Nebraska.

Facts about Berkshire Hathaway

On October 23, 2006, for the first time, Berkshire Hathaway’s Series A shares sold for more than $100,000 (one hundred thousand US dollars) per share, making it the most expensive share on the New York Stock Exchange.

Intrinsivaluator Site performs calculations and obtains 4 (four) rating metrics for Berkshire; liquidation value of $83,162 for series A shares ($2,772 series B shares), the optimistic intrinsic value of $160,800 series A shares (5,360 series B shares). All of that was more or less done, according to March 5, 2006.

Berkshire CEO Warren Buffett, respected for his expertise in investing and deep understanding of the spectrum of his business, is widely read and quoted in his annual letter. To be able to read the quote can be found on Wikiquote – Warren Buffett.

In 2005, Buffett owned 38% of Berkshire Hathaway. Berkshire Vice Chairman Charlie Munger owns enough stock to make him a billionaire, and early Berkshire investors such as David Gottesman and Franklin Otis Booth also became billionaires.

However, Berkshire creates Series B shares, with 1/30 Series A holdings with 1/200 voting rights over Series A. Class A shareholders can convert their shares to Series B, but not vice versa.

Buffett tends to oppose the creation of series B shares but is forced to prevent the formation of unit trusts, which can be traded and would look like ‘Berkshire stock’. As Buffett explained in his 1995 annual letter (as in English):

“‘The trust units that have recently come to the fore are flying in the face of this goal. They will be sold by working brokers for large commissions, impose other burdensome fees on their shareholders, and be mass marketed to unsophisticated buyers, likely to be seduced by our past record and deceived by the publicity Berkshire and I have received in recent years. A definite outcome: many investors are doomed to be.

Berkshire Hathaway is known as a company that never did a stock split, which caused its share price to be very high. This also causes stocks to become illiquid in the market, so they are not included in the S&P500 stock index. However, Berkshire creates Series B shares, with 1/30 Series A holdings with 1/200 voting rights over Series A. Class A shareholders can convert their shares to Series B, but not vice versa.

Berkshire’s annual meeting is held at the Qwest Center in Omaha, Nebraska, and is usually attended by 20,000 people. [1] These meetings, which are always filled with humor and banter, typically begin with a film prepared by Berkshire Hathaway shareholders.

The 2004 film features Arnold Schwarzenegger as a ‘Warrenator’ who is sent into the past to stop Buffett and Munger from trying to save the world from the vast company created by Microsoft-Starbucks-Wal-Mart.

Schwarzenegger is next shown arguing in the gym with Buffett about California’s 13th Proposal (1978). [2] The 2006 film featured actresses Jamie Lee Curtis and Nicollette Sheridan alongside Charlie Munger as Berkshire insiders

Companies incorporated in Berkshire Hathaway.

Finance and Insurance sector subsidies

GEICO
General Re
Kansas Bankers Surety Company
National Indemnity Company
Wesco Financial Company
Applied Underwriter Inc.
Medical Protector

Other subsidiaries

Rent Xtra Borsheim Jewelry Milk Queen Loom fruit Nebraska Furniture Mart Jordan Furniture Pampered Chef Candy See World Book International Safety Flight NetJets Forest River Business Wire Russell Corporation ISCAR Metalworking

Berkshire Hathaway Business

The insurance and reinsurance business activities are carried out by more than 50 insurance companies (domestic and foreign), but the main activities are in the United States. In addition, due to the acquisition of General Re in 1998, Berkshire’s insurance business includes life, accident, and health reinsurance, as well as property and casualty reinsurance.

Berkshire insurance company has very high capital power. These strengths set it apart from other competitors. Berkshire’s overall insurance value in America was $48 billion as of December 31, 2006. All Berkshire’s subsidiaries are rated AAA by Standard and Poor’s, the highest rating ever given by Standard and Poor’s.

In addition, it is also rated A++ (Superior) by A.M. Best in terms of financial condition and operating performance. This AAA rating results from Buffett’s excellence in capital, human resources, and business management.