likes to excel. Managers of this stripe cannot be "hired" in the
normal sense of the word. What we must do is provide a concert hall
in which business artists of this class will wish to perform.
我之所以会对这项交易这么感兴趣的原因在于Frank愿意继续留下来担任
CEO，就像我们其它所有经理人一样，他不需要因为经济因素而继续工作，但他
确实热爱这项任务且做的很好，这类型的经理人可不是三言两语就可以"请"得到
的，我们能做的就是尽量提供一个够水准的演奏厅，让这些商业界的天才艺术家
可以在这里好好发挥。
Brown (which, by the way, has no connection to Brown Shoe of
St. Louis) is the leading North American manufacturer of work shoes
and boots, and it has a history of earning unusually fine margins
on sales and assets. Shoes are a tough business - of the billion
pairs purchased in the United States each year, about 85% are
imported - and most manufacturers in the industry do poorly. The
wide range of styles and sizes that producers offer causes
inventories to be heavy; substantial capital is also tied up in
receivables. In this kind of environment, only outstanding managers
like Frank and the group developed by Mr. Heffernan can prosper.
布朗(跟圣路易的布朗鞋子完全没有关系)是北美地区工作鞋与工作靴的领导品
牌，同时拥有非凡的销售毛利与资产报酬，事实上鞋子产业竞争相当地激烈，在
全美一年10亿双的采购量中，大约有85%是从国外进口，而产业中大部分的制
造工厂表现都乏善可陈，由于款式与型号繁多导致库存压力相当重，同时资金也
绑在大笔的应收帐款，在这样的环境底下，只有像Frank这样优秀的经理人再
加上Heffernan先生所建立这样的事业才有可能生存。
A distinguishing characteristic of H. H. Brown is one of the
most unusual compensation systems I've encountered - but one that
warms my heart: A number of key managers are paid an annual salary
of $7,800, to which is added a designated percentage of the profits
of the company after these are reduced by a charge for capital
employed. These managers therefore truly stand in the shoes of
owners. In contrast, most managers talk the talk but don't walk the
walk, choosing instead to employ compensation systems that are long
on carrots but short on sticks (and that almost invariably treat
equity capital as if it were cost-free). The arrangement at Brown,
in any case, has served both the company and its managers
exceptionally well, which should be no surprise: Managers eager to
bet heavily on their abilities usually have plenty of ability to
bet on.
布朗鞋业有一个相当与众不同的特点，那就是它的薪资奖赏制度与我之前看到的
完全不同，不过却深得我心，公司主要的经理人每年的底薪只有7,800美元，
之后再依据公司每年的获利，乘以一个事先订定的百分比，并扣除运用资金的成
本，因此我们可以说这些经理人完全是与股东站在同一条船上，相对于一般说归
说、做归做的经理人，选择运用红萝卜长，杆子短的薪资报酬制度(总是把股东
所提供的资金当作是不用成本的)，事实证明布朗鞋业这样的安排，不论在任何
情况下，对于公司与经理人都绝对有利，胆敢依恃个人能力来做赌注的经理人，
绝对有相当的能力来下赌。
* * * * * * * * * * * *
It's discouraging to note that though we have on four
occasions made major purchases of companies whose sellers were
represented by prominent investment banks, we were in only one of
these instances contacted by the investment bank. In the other
three cases, I myself or a friend initiated the transaction at some
point after the investment bank had solicited its own list of
prospects. We would love to see an intermediary earn its fee by
thinking of us - and therefore repeat here what we're looking for:
很令人失望的是虽然我们有四个主要的投资个案的卖方是透过著名的投资银行
所介绍，但却只有一家是真正由投资银行主动联系我们的，其它三个案子都是在
投资银行寻求其名单上的买主不成后，由我本人或是朋友促成最后的交易，我们
很希望中间人在赚取其佣金收入的同时，还能够想到我们的存在，以下就是我们
想要找的企业条件
(1) Large purchases (at least $10 million of after-tax
earnings),
(2) Demonstrated consistent earning power (future projections
are of little interest to us, nor are "turnaround"
situations),
(3) Businesses earning good returns on equity while employing
little or no debt,
(4) Management in place (we can't supply it),
(5) Simple businesses (if there's lots of technology, we
won't understand it),
(6) An offering price (we don't want to waste our time or
that of the seller by talking, even preliminarily,
about a transaction when price is unknown).
(1)钜额交易(每年税后盈余至少有一千万美元)
(2)持续稳定获利(我们对有远景或具转机的公司没兴趣)
(3)高股东报酬率(并且甚少举债)
(4)具备管理阶层(我们无法提供)
(5)简单的企业(若牵涉到太多高科技，我们弄不懂)
(6)合理的价格(在价格不确定前，我们不希望浪费自己与对方太多时间)
We will not engage in unfriendly takeovers. We can promise
complete confidentiality and a very fast answer - customarily
within five minutes - as to whether we're interested. (With Brown,
we didn't even need to take five.) We prefer to buy for cash, but
will consider issuing stock when we receive as much in intrinsic
business value as we give.
我们不会进行敌意的购并，并承诺完全保密并尽快答复是否感兴趣(通常不超过
五分钟)，像是布朗鞋业这样的案子根本就不要五分钟，我们倾向采现金交易，
除非我们所换得的内含价值跟我们付出的一样多，否则不考虑发行股份。
Our favorite form of purchase is one fitting the pattern
through which we acquired Nebraska Furniture Mart, Fechheimer's and
Borsheim's. In cases like these, the company's owner-managers wish
to generate significant amounts of cash, sometimes for themselves,
but often for their families or inactive shareholders. At the same
time, these managers wish to remain significant owners who continue
to run their companies just as they have in the past. We think we
offer a particularly good fit for owners with such objectives and
we invite potential sellers to check us out by contacting people
with whom we have done business in the past.
我们最喜欢的交易对象之一是像B太太- Heldman家族那样，公司经营者希望
能马上有一大笔现金，不管是给自己、家人或是其它股东，最好这些经营者如往
常一样能够继续留在公司，我想我们可以提供具有以上想法的经营者，一个满意
的方式，我们也欢迎可能的卖方与那些过去与我们合作过的对象打听。
Charlie and I frequently get approached about acquisitions
that don't come close to meeting our tests: We've found that if
you advertise an interest in buying collies, a lot of people will
call hoping to sell you their cocker spaniels. A line from a
country song expresses our feeling about new ventures, turnarounds,
or auction-like sales: "When the phone don't ring, you'll know it's
me."
另一方面查理跟我也常常接到一些不符合我们条件的询问，包括新事业、转机
股、拍卖案以及最常见的中介案。我们发现如果你登广告要买牧羊犬，结果却有
一大堆人打电话来要卖你长耳猎犬，对于这类的事业，有首乡村歌曲其中的一句
歌词最能描述我们的感觉，「若电话不响，你就知道那是我」。
Besides being interested in the purchase of businesses as
described above, we are also interested in the negotiated purchase
of large, but not controlling, blocks of stock comparable to those
we hold in Capital Cities, Salomon, Gillette, USAir, Champion, and
American Express. We are not interested, however, in receiving
suggestions about purchases we might make in the general stock
market.
除了以上买下整家公司的购并案外，我们也会考虑买进一大部份不具控制权的股
份，就像我们在资本城、所罗门、吉列、美国航空、冠军企业与美国运通这几个
Case一样的公司，不过对于一般直接从股票市场上买进股份的建议我们，则一
点兴趣都没有。
Insurance Operations
保险业营运
Shown below is an updated version of our usual table
presenting key figures for the property-casualty insurance
industry:
下表是产物意外险业的最新的几项重要指数
Yearly Change Combined Ratio Yearly Change Inflation Rate
in Premiums After Policyholder in Incurred Measured by
Written (%) Dividends Losses (%) GDP Deflator (%)
------------- --------------- ------------- ----------------
1981 ..... 3.8 106.0 6.5 10.0
1982 ..... 3.7 109.6 8.4 6.2
1983 ..... 5.0 112.0 6.8 4.0
1984 ..... 8.5 118.0 16.9 4.5
1985 ..... 22.1 116.3 16.1 3.7
1986 ..... 22.2 108.0 13.5 2.7
1987 ..... 9.4 104.6 7.8 3.1
1988 ..... 4.4 105.4 5.5 3.9
1989 ..... 3.2 109.2 7.7 4.4
1990 (Revised) 4.4 109.6 4.8 4.1
1991 (Est.) 3.1 109.1 2.9 3.7
The combined ratio represents total insurance costs (losses
incurred plus expenses) compared to revenue from premiums: A
ratio below 100 indicates an underwriting profit, and one above
100 indicates a loss. The higher the ratio, the worse the year.
When the investment income that an insurer earns from holding
policyholders' funds ("the float") is taken into account, a
combined ratio in the 107 - 111 range typically produces an
overall break-even result, exclusive of earnings on the funds
provided by shareholders.
综合比率代表保险的总成本(理赔损失加上费用)占保费收入的比例，比率在100
以下代表有承保的损失，在100以上则代表有承保的获利综合比率代表的是保
险的总成本(损失加上费用)占保费收入的比率，100以下代表会有承销利益，100
以上代表会有承销损失，若把持有保费收入浮存金(扣除股东权益部份所产生的
盈余)所产生的投资收益列入考量，损益两平的范围大概是在107-111之间。
For the reasons laid out in previous reports, we expect the
industry's incurred losses to grow at close to 10% annually, even
in periods when general inflation runs considerably lower. (Over
the last 25 years, incurred losses have in reality grown at a
still faster rate, 11%.) If premium growth meanwhile materially
lags that 10% rate, underwriting losses will mount.
基于前几次年报所说明的理由，即使是通货膨胀在这几年来相对温和，我们预期
保险业每年损失增加的比率约在10%左右，若是保费收入成长没有到达10%以
上，损失一定会增加，(事实上过去25年以来，理赔损失系以11%的速度在成
长)，若是保费收入还是大幅落后于10%的门槛，承保损失一定会继续增加。
However, the industry's tendency to under-reserve when
business turns bad may obscure the picture for a time - and that
could well describe the situation last year. Though premiums did
not come close to growing 10%, the combined ratio failed to
deteriorate as I had expected but instead slightly improved.
Loss-reserve data for the industry indicate that there is reason
to be skeptical of that outcome, and it may turn out that 1991's
ratio should have been worse than was reported. In the long run,
of course, trouble awaits managements that paper over operating
problems with accounting maneuvers. Eventually, managements of
this kind achieve the same result as the seriously-ill patient
who tells his doctor: "I can't afford the operation, but would
you accept a small payment to touch up the x-rays?"
然而产业普遍存在损失准备提列不足的现象，使得企业前景不佳的情况可以获得
暂时的掩饰，这正是去年度所发生的事，虽然保费收入成长不到10%，但综合
比率非但没有像我所预测地那样恶化反而还有点改善，损失准备的统计资料显示
这样的现象实在是相当令人怀疑，这种结果也可能导致1991年的比率将更进一
步恶化，当然就长期而言，这些利用会计手法掩盖营运问题的经理人还是要面对
真正的麻烦，到最后这类的经理人会变得跟许多病入膏肓的病人对医生说的一
样：「我实在是承受不起另一次手术，不过你是否可以考虑把我的X光片给补
一补」。
Berkshire's insurance business has changed in ways that make
combined ratios, our own or the industry's, largely irrelevant
to our performance. What counts with us is the "cost of funds
developed from insurance," or in the vernacular, "the cost of
float."
于是Berkshire旗下的保险事业将与公司本身或产业经营绩效越来越不相关的
综合比率做了一番修正，对我们来说真正重要的是我们从保险业所得到的资金的
成本，套句行话就是浮存金的成本。
Float - which we generate in exceptional amounts - is the
total of loss reserves, loss adjustment expense reserves and
unearned premium reserves minus agents balances, prepaid
acquisition costs and deferred charges applicable to assumed
reinsurance. And the cost of float is measured by our
underwriting loss.
浮存金-我们靠保险业所取得大量的资金，系指将所有的损失准备、损失费用调
整准备与未赚取保费加总后，再扣除应付佣金、预付购并成本及相关再保递延费
用，至于浮存金的成本则是以我们所发生的承保损失来衡量。
The table below shows our cost of float since we entered the
business in 1967.
下表是我们在1967年进入保险业后，浮存金的成本统计：
(1) (2) Yearend Yield
Underwriting Approximate on Long-Term
Loss Average Float Cost of Funds Govt. Bonds
(承保损失) (平均浮存金) (平均资金成本) (长期公债殖利率)
------------ ---------- --------------- -----------
(In $ Millions) (Ratio of 1 to 2)
1967 ........ profit $17.3 less than zero 5.50%
1968 ........ profit 19.9 less than zero 5.90%
1969 ........ profit 23.4 less than zero 6.79%
1970 ........ $0.37 32.4 1.14% 6.25%
1971 ........ profit 52.5 less than zero 5.81%
1972 ........ profit 69.5 less than zero 5.82%
1973 ........ profit 73.3 less than zero 7.27%
1974 ........ 7.36 79.1 9.30% 8.13%
1975 ........ 11.35 87.6 12.96% 8.03%
1976 ........ profit 102.6 less than zero 7.30%
1977 ........ profit 139.0 less than zero 7.97%
1978 ........ profit 190.4 less than zero 8.93%
1979 ........ profit 227.3 less than zero 10.08%
1980 ........ profit 237.0 less than zero 11.94%
1981 ........ profit 228.4 less than zero 13.61%
1982 ........ 21.56 220.6 9.77% 10.64%
1983 ........ 33.87 231.3 14.64% 11.84%
1984 ........ 48.06 253.2 18.98% 11.58%
1985 ........ 44.23 390.2 11.34% 9.34%
1986 ........ 55.84 797.5 7.00% 7.60%
1987 ........ 55.43 1,266.7 4.38% 8.95%
1988 ........ 11.08 1,497.7 0.74% 9.00%
1989 ........ 24.40 1,541.3 1.58% 7.97%
1990 ........ 26.65 1,637.3 1.63% 8.24%
1991 ........ 119.6 1,895.0 6.31% 7.40%
As you can see, our cost of funds in 1991 was well below the
U. S. Government's cost on newly-issued long-term bonds. We have in
fact beat the government's rate in 20 of the 25 years we have been
in the insurance business, often by a wide margin. We have over
that time also substantially increased the amount of funds we hold,
which counts as a favorable development but only because the cost
of funds has been satisfactory. Our float should continue to grow;
the challenge will be to garner these funds at a reasonable cost.
各位可以看到我们1991年的资金成本甚至比美国政府新发行的长期公债利率
还低，事实上在过去25年的保险事业经营中，我们有20年是远胜于政府公债
发行利率，而且差距的幅度通常都相当可观，同时所持有的浮存金数量也以惊人
的幅度成长，当然这只有在资金成本低的情况下，才称得上是好现象，展望未来，
浮存金的数量还会继续成长，对我们而言，最大的挑战是这些资金是否能有合理
的成本取得。
Berkshire continues to be a very large writer - perhaps the
largest in the world - of "super-cat" insurance, which is coverage
that other insurance companies buy to protect themselves against
major catastrophic losses. Profits in this business are enormously
volatile. As I mentioned last year, $100 million in super-cat
premiums, which is roughly our annual expectation, could deliver us
anything from a $100 million profit (in a year with no big
catastrophe) to a $200 million loss (in a year in which a couple of
major hurricanes and/or earthquakes come along).
Berkshire一直都是霹雳猫保单相当大的发行公司，或许规模已是全世界最大
的，这类保单通常是由其它保险公司买来分散他们本身在重大意外事故所需承担
的风险，这类保险的获利情况变化相当的大，就像是去年我曾经提过的，一亿美
元的保费收入，这大约是我们预期一年所能接到的业务量，可能可以让我们有一
亿美元的获利(只要当年度没有重大灾害发生)，也可能让我们产生二亿美元的损
失(只要当年度发生连续几个飓风或地震)。
We price this business expecting to pay out, over the long
term, about 90% of the premiums we receive. In any given year,
however, we are likely to appear either enormously profitable or
enormously unprofitable. That is true in part because GAAP
accounting does not allow us to set up reserves in the catastrophefree
years for losses that are certain to be experienced in other
years. In effect, a one-year accounting cycle is ill-suited to the
nature of this business - and that is a reality you should be aware
of when you assess our annual results.
