10-KPeriod: FY2007

BERKSHIRE HATHAWAY INC Annual Report, Year Ended Dec 31, 2007

Filed February 29, 2008For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc.'s 2007 10-K report highlights a robust and diversified business empire, primarily driven by its substantial insurance operations. The company continued its strategy of disciplined underwriting, focusing on long-term profitability and maintaining exceptional capital strength across its insurance subsidiaries. Key acquisitions in 2006 and 2007, such as ISCAR Metalworking Companies and Russell Corporation, alongside the significant consolidation of MidAmerican Energy Holdings Company, broadened the company's reach and revenue streams. Financially, Berkshire demonstrated strong growth in total revenues and net earnings compared to the previous year, benefiting from favorable underwriting results in insurance, improved performance in utilities and energy, and growth across manufacturing, service, and retailing segments. The company's investment portfolio also saw substantial growth. Despite exposure to market risks and ongoing governmental investigations within certain insurance subsidiaries, Berkshire maintained a strong liquidity position and a solid capital base, underscoring its resilient financial health and strategic growth trajectory.

Financial Highlights

16 data points
Beta

Revenue

$118.25B

Net Income

$13.21B

11.2% Net Margin

Cash & Equivalents

$44.33B

Free Cash Flow

$7.18B

Financial Statements
Beta
Revenue$118.25B
Operating Expenses$98.08B
Net Income$13.21B
Shares Outstanding (Basic)1.55M

Key Highlights

  • 1Berkshire Hathaway's insurance businesses, including GEICO, General Re, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group, collectively generated significant underwriting gains and substantial investment income.
  • 2The company continued its diversification strategy with key acquisitions in 2006 and 2007, including ISCAR Metalworking Companies, Russell Corporation, and TTI, Inc., while also consolidating its interest in MidAmerican Energy Holdings Company.
  • 3Total revenues reached $118.245 billion in 2007, an increase from $98.539 billion in 2006, with net earnings growing to $13.213 billion from $11.015 billion in the prior year.
  • 4The insurance segment's invested assets grew significantly, driven by both shareholder capital and "float," with total invested assets across all businesses reaching $130.860 billion at year-end 2007.
  • 5The company reported strong pre-tax earnings from its manufacturing, service, and retailing businesses, although the building products segment faced headwinds due to a slowdown in housing construction.
  • 6Berkshire Hathaway maintained a strong financial position, with total assets of $273.160 billion and shareholders' equity of $120.733 billion at December 31, 2007.
  • 7Despite ongoing governmental investigations related to non-traditional insurance products, particularly concerning General Re, Berkshire stated it was cooperating fully and could not predict the outcome or estimate potential losses.

Frequently Asked Questions

Berkshire Hathaway's strong financial performance in 2007 was primarily driven by its insurance businesses, which delivered significant underwriting gains and investment income. The utilities and energy segment, bolstered by the consolidation of MidAmerican Energy Holdings Company and favorable market conditions, also contributed positively. The manufacturing, service, and retailing segments generally showed robust performance, with notable contributions from newly acquired businesses and steady operations, although certain areas like building products experienced a slowdown due to broader economic conditions.

Berkshire Hathaway continued its active acquisition strategy, with significant transactions including the acquisition of TTI, Inc. and the intimate apparel business of VF Corporation, as well as substantial growth in its utilities and energy segment through the consolidation of MidAmerican Energy Holdings Company. These acquisitions diversified Berkshire's revenue streams and expanded its market presence across various industries, contributing to overall revenue and earnings growth, though also introducing new operational complexities and integration challenges.

Key risks highlighted by Berkshire Hathaway include the potential volatility in earnings due to its significant tolerance for risk in its insurance businesses, the inherent estimation errors in property and casualty loss reserves, and the concentration of its insurance subsidiaries' investments in common stocks. The report also emphasizes the company's dependence on a few key individuals, particularly Warren E. Buffett, for investment and capital allocation decisions, and notes that past growth rates are not indicative of future results due to the company's large capital base.

The 2007 10-K details ongoing investigations by U.S. federal and state governmental authorities into non-traditional insurance products, primarily involving General Re and certain other insurance subsidiaries. While Berkshire and its subsidiaries are cooperating fully, the report states that the company cannot predict the outcome of these investigations or estimate any potential losses, and the impact on future results remains uncertain.