10-QPeriod: Q3 FY2004

BERKSHIRE HATHAWAY INC Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 8, 2004For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc.'s third-quarter 2004 report shows a notable decrease in net earnings to $1.137 billion from $1.806 billion in the same period last year. This decline was primarily driven by significant catastrophe losses incurred by its insurance subsidiaries due to four hurricanes in the Southeast U.S. and Caribbean, amounting to approximately $1.25 billion pre-tax. Despite the impact of these events, the company's diverse operations, including its non-insurance businesses, demonstrated resilience, with overall revenues showing an increase. The balance sheet remains robust, with substantial shareholders' equity and ample liquidity, positioning Berkshire Hathaway to pursue future acquisition opportunities. The company continues to manage its investment portfolio, with equity securities valued at $35.1 billion and fixed maturity securities at $23.4 billion. The report also highlights a shift in accounting for life settlement contracts, leading to an immediate accounting loss but with management maintaining confidence in their long-term value. Overall, while the quarter was affected by significant weather-related insurance claims, Berkshire Hathaway's diversified business model and strong financial position suggest continued stability.

Key Highlights

  • 1Net earnings for Q3 2004 decreased to $1.137 billion from $1.806 billion in Q3 2003, largely due to $1.25 billion in pre-tax catastrophe losses from hurricanes.
  • 2Insurance underwriting results were significantly impacted by hurricane losses, resulting in a net underwriting loss of $215 million for the third quarter of 2004.
  • 3GEICO's premiums earned increased by 13.3% in Q3 2004, with policies-in-force growing due to competitive rates, increased advertising, and customer service.
  • 4Non-insurance businesses showed revenue growth, with building products, finance and financial products, flight services, and McLane Company all contributing positively.
  • 5Total shareholders' equity stood at $80.7 billion as of September 30, 2004, reflecting a strong capital base.
  • 6Consolidated cash and invested assets (excluding finance businesses) were approximately $99.1 billion, indicating significant liquidity.
  • 7The company's investment in equity securities was valued at $35.1 billion, with major holdings including American Express, Coca-Cola, Gillette, and Wells Fargo.

Frequently Asked Questions

The primary reason for the decrease in net earnings was the impact of significant catastrophe losses, totaling approximately $1.25 billion pre-tax, incurred by Berkshire Hathaway's insurance subsidiaries due to four hurricanes in the Southeast United States and the Caribbean during the third quarter of 2004.

The insurance segment's underwriting operations experienced a net loss of $215 million in the third quarter of 2004, primarily due to the substantial hurricane-related claims. However, the insurance businesses continued to generate investment income.

The company maintains a strong financial position, with consolidated shareholders' equity at $80.7 billion as of September 30, 2004. It also reported substantial liquidity, with consolidated cash and invested assets (excluding finance businesses) of approximately $99.1 billion.

The value of equity securities was $35.1 billion, with a slight decrease from the previous year. Fixed maturity securities were valued at $23.4 billion. The report also notes a shift in accounting for life settlement contracts, which resulted in an immediate accounting loss but is viewed by management as a sound investment strategy.