这场经典的赛事，甚至还用慢动作播放精彩的第四节，我们以今年封面的颜色表 .25
用这个优势建立起强大的巨灾保险业务。
What General Re gives us, however, is the distribution force
technical facilities and management that will allow us to employ our
structural strength in every facet of the industry. In particular, General
Re and Cologne Re can now accelerate their push into international
markets, where the preponderance of industry growth will almost
certainly occur. As the merger proxy statement spelled out, Berkshire
also brings tax and investment benefits to General Re. But the most
compelling reason for the merger is simply that General Re's
outstanding management can now do what it does best, unfettered by
the constraints that have limited its growth.
而通用再保可以给我们的是行销通路、技术背景与管理技能，让我们得以将原本
拥有的财务优势更充分运用到保险业的每一个层面，尤其是通用再保与科隆再保
现在可以加速投入国际市场，这块大家看好将呈现高成长的处女地，而就像合并
案的公开说明书中所强调的，Berkshire将为通用再保带来租税与投资上的优
势，但是更重要的原因还在于通用再保的优秀经营阶层将可以在既有的基础上，
摆脱原有的种种束缚，尽情地发挥其潜能。
Berkshire is assuming responsibility for General Re's investmen
portfolio, though not for Cologne Re's. We will not, however, be involved
in General Re's underwriting. We will simply ask the company to
exercise the discipline of the past while increasing the proportion of its
business that is retained, expanding its product line, and widening its
geographical coverage -- making these moves in recognition of
Berkshire's financial strength and tolerance for wide swings in earnings.
As we've long said, we prefer a lumpy 15% return to a smooth 12%.
Berkshire将会承担管理通用再保投资组合的工作(但科隆再保部份不包含在
内)，除此之外我们并不会干涉通用再保的承保业务，我们只算很简单地要求他
们继续维持原有的原则，同时利用Berkshire强大的财务实力以及盈余变动的超
强忍受力，增加自留业务的比例、扩大现有产品线、增加业务区域，就像是我们
一再强调的，我们宁可接受变动剧烈的15%，也不要稳健平顺的12%。
Over time, Ron and his team will maximize General Re's ne
potential. He and I have known each other for many years, and each of
our companies has initiated significant business that it has reinsured
with the other. Indeed, General Re played a key role in the resuscitation
of GEICO from its near-death status in 1976.
相信只要给他们一点时间，Ron跟他的团队一定能够将通用再保的潜力发挥到
极致，我跟他已经结识好几年了，彼此之间也一直维持有再保业务上的往来，事
实上，通用再保在1976年GEICO当初东山再起的过程中，扮演极为重要的角
色。
Both Ron and Rich Santulli plan to be at the annual meeting, an
I hope you get a chance to say hello to them.
Ron跟Rich两人都将出席今年的股东会，希望届时大家可以过来跟他们两位打
声招呼。
The Economics of Property-Casualty Insurance
产物意外险的经营
With the acquisition of General Re -- and with GEICO's busines
mushrooming -- it becomes more important than ever that you
understand how to evaluate an insurance company. The key
determinants are: (1) the amount of float that the business generates;
(2) its cost; and (3) most important of all, the long-term outlook for
both of these factors.
随着通用再保的加入以及GEICO业务的突飞猛进，大家越来越有必要对如何评
估保险业有更多的了解，其中主要的关键因素有(1)这个行业所能产生的浮存金
数量(2)以及它的成本(3)最重要的是这些因素长期的展望。
To begin with, float is money we hold but don't own. In a
insurance operation, float arises because premiums are received before
losses are paid, an interval that sometimes extends over many years.
During that time, the insurer invests the money. Typically, this pleasant
activity carries with it a downside: The premiums that an insurer takes in
usually do not cover the losses and expenses it eventually must pay.
That leaves it running an "underwriting loss," which is the cost of float.
An insurance business has value if its cost of float over time is less than
the cost the company would otherwise incur to obtain funds. But the
business is a lemon if its cost of float is higher than market rates for
money.
首先浮存金是一项我们持有但却不属于我们的资金，在保险公司的营运中，浮存
金产生的原因在于保险公司在真正支付损失理赔之前，一般会先向保户收取保
费，在这期间保险公司会将资金运用在其它投资之上，当然这样的好处也必须要
付出代价，通常保险业者收取的保费并不足以因应最后支付出去的相关损失与费
用，于是保险公司便会发生承保损失，这就是浮存金的成本，而当一家公司取得
浮存金成本，就长期而言低于从其它管道取得资金的成本时，它就有存在的价
值，否则一旦保险事业取得浮存金的成本若远高于货币市场利率时，它就像是一
颗极酸的柠檬。
A cautions appropriate here: Because loss costs must be
estimated, insurers have enormous latitude in figuring their
underwriting results, and that makes it very difficult for investors to
calculate a company's true cost of float. Errors of estimation, usually
innocent but sometimes not, can be huge. The consequences of these
miscalculations flow directly into earnings. An experienced observer
can usually detect large-scale errors in reserving, but the general public
can typically do no more than accept what's presented, and at times I
have been amazed by the numbers that big-name auditors have
implicitly blessed. As for Berkshire, Charlie and I attempt to be
conservative in presenting its underwriting results to you, because we
have found that virtually all surprises in insurance are unpleasant ones.
有一点必须特别注意的是，因为损失成本必须仰赖估算，所以保险业者对于承保
结算的成绩有相当大伸缩的空间，连带使得投资人很难正确地衡量一家保险公司
真正的浮存金成本，估计错误，通常是无心，但有时却是故意，与真实的结果往
往会有很大的差距，而这种结果直接反映在公司的损益表上，有经验的行家通常
可以经由公司的准备提列情形发现重大的错误，但对于一般投资大众来说，除了
被迫接受财务报表的数字之外，别无他法，而我个人常常被这些经过各大会计师
事务所背书的财务报告所吓到，至于就Berkshire本身而言，查理跟我在编列财
务报表时，都尽量采取最保守的做法，因为就我们个人的经验而言，保险业所发
生的意外，通常都不会是什么好消息。
The table that follows shows the float generated by Berkshire'
insurance operations since we entered the business 32 years ago. The
data are for every fifth year and also the last, which includes General
Re's huge float. For the table we have calculated our float -- which we
generate in large amounts relative to our premium volume -- by adding
net loss reserves, loss adjustment reserves, funds held under
reinsurance assumed and unearned premium reserves, and then
subtracting agents balances, prepaid acquisition costs, prepaid taxes
and deferred charges applicable to assumed reinsurance. (Got that?)
下表中所显示的数字是，Berkshire进入保险事业32年以来所贡献的浮存金，
资料以每五年计，而最近的五年还包含通用再保大量的浮存金在内，可说是大获
全胜，在这张计算浮存金的表中，我们将所有的损失准备、损失费用调整准备、
再保预先收取的资金与未赚取保费加总后，再扣除应付佣金、预付购并成本、预
付税负以及取得再保业务的相关递延费用，得出浮存金的数额，弄清楚了吗 相
对于我们的保费收入总额，我们的浮存金部位算是相当大的。
Year Average Float
(in $ millions)
1967 17
1972 70
1977 139
1982 221
1987 1,267
1992 2,290
1997 7,093
1998 22,762 (yearend)
Impressive as the growth in our float has been -- 25.4
compounded annually -- what really counts is the cost of this item. If
that becomes too high, growth in float becomes a curse rather than a
blessing.
每年25.4%的成长确实令人印象深刻，不过真正重要的是取得浮存金的成本，
如果成本过高，那么浮存金的成长就可能变成一项诅咒而非幸福。
At Berkshire, the news is all good: Our average cost over the 3
years has been well under zero. In aggregate, we have posted a
substantial underwriting profit, which means that we have been paid for
holding a large and growing amount of money. This is the best of all
worlds. Indeed, though our net float is recorded on our balance sheet as
a liability, it has had more economic value to us than an equal amount of
net worth would have had. As long as we can continue to achieve an
underwriting profit, float will continue to outrank net worth in value.
在Berkshire 我们的记录算是不错的了，32年来我们的平均成本远低于零，总
的来说，我们享有相当多的承保利益，也就是说我们在持有一笔大额且不断成长
的资金的同时，还能获得额外的利益，这是全世界之最，虽然就会计原则而言，
浮存金在会计报表系属于负债，但实际上，这些负债对于Berkshire而言，其价
值远甚至高于列在帐上的其它股东权益，而只要我们在承保上能够持续维持利益
的话，这些浮存金的价值就远胜于帐上的净值。
During the next few years, Berkshe's growth in float may well be
modest. The reinsurance market is soft, and in this business,
relationships change slowly. Therefore, General Re's float -- 2/3rds of
our total -- is unlikely to increase significantly in the near term. We do
expect, however, that our cost of float will remain very attractive
compared to that of other insurers.
在往后的几年内，Berkshire浮存金的成长速度可能会略微减缓，再保险的市场
相当低迷，在这行商业关系的变动相当缓慢，也因此占我们总浮存金将近三分之
二的通用再保浮存金在可见的未来很难有重大的进展，不过我们仍然预期
Berkshire浮存金的成本相较于其它同业能够维持相当低的水准。
Sources of Reported Earnings
帐列盈余的来源
The table that follows shows the main sources of Berkshire'
reported earnings. In this presentation, purchase-accounting
adjustments are not assigned to the specific businesses to which they
apply, but are instead aggregated and shown separately. This procedure
lets you view the earnings of our businesses as they would have been
reported had we not purchased them. For the reasons discussed on
pages 62 and 63, this form of presentation seems to us to be more
useful to investors and managers than one utilizing generally-accepted
accounting principles (GAAP), which require purchase-premiums to be
charged off business-by-business. The total earnings we show in the
table are, of course, identical to the GAAP total in our audited financial
statements.
下表显示Berkshire帐列盈余的主要来源，在这张表中商誉的摊销数与购买法会
计调整数会从个别被投资公司分离出来，单独加总列示，之所以这样做是为了让
旗下各事业的盈余状况，不因我们的投资而有所影响，过去我一再地强调我们认
为这样的表达方式，较之一般公认会计原则要求以个别企业基础做调整，不管是
对投资者或是管理者来说，更有帮助，当然最后损益加总的数字仍然会与经会计
师查核的数字一致。
(in millions)
Berkshire's Share
of Net Earnings
(after taxes and
Pre-Tax Earnings minority interests)
1998 1997 1998 1997
Operating Earnings:
Insurance Group:
Underwriting -- Super-
Cat . . . . . . . . . . . . . . . .
$154 $283 $100 $183
Underwriting -- Other
Reinsurance . . . . . . . . . .
(175) (155) (114) (100)
Underwriting -- GEICO . . . . . . . . . . . . . . . . . . 269 281 175 181
Underwriting -- Other
Primary . . . . . . . . . . . . .
17 53 10 34
Net Investment Income . . . . . . . . . . . . . . . . . . . 974 882 731 704
Buffalo News . . . . . . . . . . . . . . . . . . . . . . . . . . 53 56 32 33
Finance and Financial Products Businesses . . . . 205 28 133 18
Flight
Services . . . . . . . . . . . . . . . . . . . . . . . . . .
181 (1) 140 110 (1) 84
Home
Furnishings . . . . . . . . . . . . . . . . . . . . . . .
72 57 (2) 41 32 (2)
International Dairy
Queen . . . . . . . . . . . . . . . . .
58 -- 35 --
Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 32 23 18
Scott Fetzer (excluding finance
operation) . . . . .
137 119 85 77
See's
Candies . . . . . . . . . . . . . . . . . . . . . . . . . .
62 59 40 35
Shoe
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33 49 23 32
General
Re . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26 (3) -- 16 (3) --
Purchase-Accounting
Adjustments . . . . . . . . . . .
(123) (101) (118) (94)
Interest Expense
(4) . . . . . . . . . . . . . . . . . . . . . .
(100) (107) (63) (67)
Shareholder-Designated
Contributions . . . . . . . .
(17) (15) (11) (10)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 60 29 37
Operating
Earnings . . . . . . . . . . . . . . . . . . . . . .
1,899 1,721 1,277 1,197
Capital Gains from
Investments . . . . . . . . . . . . .
2,415 1,106 1,553 704
Total Earnings - All
Entities . . . . . . . . . . . . . . . . $4,314 $2,827 $ 2,830 $1,901
===== ===== ===== =====
(1) Includes Executive Jet from August 7, 1998.
(2)
Includes Star Furniture from July 1, 1997.
(3) From date of acquisition, December 21, 1998.
(4) Excludes interest expense of Finance Businesses.
Yocan be proud of our operating managers. They almost
invariably deliver earnings that are at the very top of what conditions in
their industries allow, meanwhile fortifying their businesses' long-term
competitive strengths. In aggregate, they have created many billions of
dollars of value for you.
大家绝对可以我们旗下优秀的经理人为荣，他们几乎都能够在各自产业所能允许
的情况下创造出最好的获利，同时还能继续强化企业长期的竞争优势，总的来
说，他们已为所有的股东创造出数十亿美元的价值。
An example: In my 1994 letter, I reported on Ralph Schey'
extraordinary performance at Scott Fetzer. Little did I realize that he was
just warming up. Last year Scott Fetzer, operating with no leverage
(except for a conservative level of debt in its finance subsidiary), earned
a record $96.5 million after-tax on its $112 million net worth.
举例来说，在1994年的年报中，我曾经向各位提到Ralph在史考特飞兹的杰
出表现，只是我万万没想到的是那时还只能算是他的热身阶段，去年在没有任何
借款的情况下(除了其财务子公司的一点借款之外)，靠着1.12亿美元的净值，
竟缔造出9,650万美元的惊人税后净利。
Today, Berkshire has an unusually large number of individuals
such as Ralph, who are truly legends in their industries. Many of these
joined us when we purchased their companies, but in recent years we
have also identified a number of strong managers internally. We further
expanded our corps of all-stars in an important way when we acquired
General Re and EJA.
时至今日，Berkshire 有一大群杰出的明星份子，就像Ralph等在各自的产业
都是一方之霸，其中很多人是在我们买下公司时，就已经加入了我们的行列，不
过近来年我们也从内部发掘了不少的人才，而最近在购并通用再保与EJA之后，
更让我们的梦幻队伍声势大振。
Charlie and I have the easy jobs at Berkshire: We do very littl
except allocate capital. And, even then, we are not all that energetic. We
have one excuse, though: In allocating capital, activity does not
correlate with achievement. Indeed, in the fields of investments and
acquisitions, frenetic behavior is often counterproductive. Therefore,
Charlie and I mainly just wait for the phone to ring.
查理跟我在Berkshire的工作其实很简单，主要的任务就是资金分配，即便是如
此我们的态度也不是那么的积极，其中有一个原因在于做的多，不代表就拿得
多，事实上，在投资与购并的世界中，疯狂的行为往往会造成反效果，也因此查
理跟我通常都只是静静地等待电话铃响。
Our managers, however, work very hard -- and it shows
Naturally, they want to be paid fairly for their efforts, but pay alone can't
explain their extraordinary accomplishments. Instead, each is primarily
motivated by a vision of just how far his or her business can go -- and
by a desire to be the one who gets it there. Charlie and I thank them on
your behalf and ours.
当然我们的经理人也非常的努力，且成效显著，而很自然的，他们也希望自己的
努力可以得到公平的对待，只是金钱的报酬并不足以解释他们为何能有这样杰出
的成就，主要的动力还在于每个经理人都想要了解自己所带领的企业到底能够发
挥到怎样的境界，为此，查理跟我谨代表大家向他们致上十二万分的谢意。
* * * * * * * * * * * *
