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Berkshire Hathaway Inc. () is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from which it invests the float (the retained premiums) in a broad portfolio of subsidiaries, equity positions and other securities. The company has been overseen since 1965 by its chairman and CEO Warren Buffett and (since 1978) vice chairman Charlie Munger, who are known for their advocacy of value investing principles. Under their direction, the company's book value has grown at an average rate of 20%, compared to about 10% from the S&P 500 index with dividends included over the same period, while employing large amounts of capital and minimal debt.

The company's insurance brands include auto insurer GEICO and reinsurance firm General Re. Its non-insurance subsidiaries operate in diverse sectors such as confectionery, retail, railroads, home furnishings, machinery, jewelry, apparel, electrical power and natural gas distribution. Among its partially owned businesses are Pilot Flying J (38.6%), Kraft Heinz Company (26.7%), American Express (18.8%), Bank of America (11.9%), The Coca-Cola Company (9.32%) and Apple (5.57%).

Berkshire is the seventh largest component of the S&P 500 index and the top-ranked company in the Forbes Global 2000, which takes into account both market value and fundamental data. Its class A shares have the highest per-share price of any public company in the world, reaching $500,000 in March 2022, because Buffett chooses not to split the stock.

History

Berkshire Hathaway traces its roots to a textile manufacturing company established by Oliver Chace in 1839 as the Valley Falls Company in Valley Falls, Rhode Island. Chace had previously worked for Samuel Slater, the founder of the first successful textile mill in America. Chace founded his first textile mill in 1806. In 1929, the Valley Falls Company merged with the Berkshire Cotton Manufacturing Company established in 1889, in Adams, Massachusetts. The combined company was known as Berkshire Fine Spinning Associates.

In 1955, Berkshire Fine Spinning Associates merged with the Hathaway Manufacturing Company which had been founded in 1888 in New Bedford, Massachusetts, by Horatio Hathaway with profits from whaling and the China Trade. Hathaway had been successful in its first decades, but it suffered during a general decline in the textile industry after World War I. At this time, Hathaway was run by Seabury Stanton, whose investment efforts were rewarded with renewed profitability after the Great Depression. After the merger, Berkshire Hathaway had 15 plants employing over 12,000 workers with over $120 million in revenue, and was headquartered in New Bedford. However, seven of those locations were closed by the end of the decade, accompanied by large layoffs.

In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern in the price direction of its stock whenever the company closed a mill. Eventually, Buffett acknowledged that the textile business was waning and the company's financial situation was not going to improve. In 1964, Stanton made an oral tender offer to buy back Buffett's stake in the company for $11 per share. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender offer in writing, but the tender offer was for only $11. Buffett later admitted that this lower, undercutting offer made him angry. Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton (which he did). However, this made Buffett the majority owner of a failing textile business.

Buffett initially maintained Berkshire's core business of textiles, but by 1967, he was expanding into the insurance industry and other investments. Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for Berkshire Hathaway's other investments). In 1985, the last textile operations (Hathaway's historic core) were shut down.

In 2010, Buffett claimed that purchasing Berkshire Hathaway was the biggest investment mistake he had ever made, and claimed that it had denied him compounded investment returns of about $200 billion over the subsequent 45 years. Buffett claimed that had he invested that money directly in insurance businesses instead of buying out Berkshire Hathaway (due to what he perceived as a slight by an individual), those investments would have paid off several hundredfold.

Senior leadership (since 1970)

* Chairman and CEO: Warren Buffett (1970– )
* Vice Chairman: Charlie Munger (1978– )

Corporate affairs

Berkshire's class A shares sold for $465,725 as of January 5, 2022, making them the highest-priced shares on the New York Stock Exchange, in part because they have never had a stock split and have only paid a dividend once since Warren Buffett took over, retaining corporate earnings on its balance sheet in a manner that is impermissible for mutual funds. Shares closed over $100,000 for the first time on October 23, 2006. Despite its size, Berkshire had for many years not been included in broad stock market indices such as the S&P 500 due to the lack of liquidity in its shares; however, following a 50-to-1 split of Berkshire's Class B Shares in January 2010, and Berkshire's announcement that it would acquire the Burlington Northern Santa Fe Corporation, parent of BNSF Railway, Berkshire replaced BNSF in the S&P 500 on February 16, 2010.

Buffett's letters to shareholders are published annually. ''Barron's'' said Berkshire was the most respected company in the world in 2007, based on a survey of American money managers.

In 2008, Berkshire invested in preferred stock of Goldman Sachs as part of a recapitalization of the investment bank. Buffett defended Lloyd Blankfein's decisions as CEO of Goldman Sachs.

, Buffett owned 31.7% aggregate voting power of Berkshire's shares outstanding and 18.0% of the economic value of those shares. Berkshire's vice-chairman, Charlie Munger, also holds a stake big enough to make him a billionaire, and early investments in Berkshire by David Gottesman and Franklin Otis Booth, Jr. resulted in their becoming billionaires as well. The Bill and Melinda Gates Foundation is a large shareholder of Berkshire, owning 4.0% of Class B Shares.

Berkshire Hathaway has never split its Class A shares because of management's desire to attract long-term investors as opposed to short-term speculators. However, Berkshire Hathaway created a Class B stock, with a per-share value originally kept (by specific management rules) close to of that of the original shares (now Class A) and of the per-share voting rights, and after the January 2010 split, at the price and the voting rights of the Class-A shares. Holders of class A stock are allowed to convert their stock to Class B, though not vice versa. Buffett was reluctant to create the class B shares but did so to thwart the creation of unit trusts that would have marketed themselves as Berkshire look-alikes. As Buffett said in his 1995 shareholder letter: "The unit trusts that have recently surfaced fly in the face of these goals. They would be sold by brokers working for big commissions, would impose other burdensome costs on their shareholders, and would be marketed ''en masse'' to unsophisticated buyers, apt to be seduced by our past record and beguiled by the publicity Berkshire and I have received in recent years. The sure outcome: a multitude of investors destined to be disappointed."

The salary for Buffett is $100,000 per year with no stock options, which is among the lowest salaries for CEOs of large companies in the United States.

Annual shareholders' meetings

Berkshire's annual shareholders' meetings take place at the CHI Health Center in Omaha, Nebraska. Attendance has grown over the years with 2018 numbers totaling over 40,000 people. The 2007 meeting had an attendance of approximately 27,000. The meetings, nicknamed "Woodstock for Capitalists", are considered Omaha's largest annual event along with the baseball College World Series. Known for their humor and light-heartedness, the meetings typically start with a movie made for Berkshire shareholders. The 2004 movie featured Arnold Schwarzenegger in the role of "The Warrenator" who travels through time to stop Buffett and Munger's attempt to save the world from a "mega" corporation formed by Microsoft- Starbucks-Wal-Mart. Schwarzenegger is later shown arguing in a gym with Buffett regarding Proposition 13. The 2006 movie depicted actresses Jamie Lee Curtis and Nicollette Sheridan lusting after Munger. The meeting, scheduled to last 6–8 hours, is an opportunity for investors to ask Buffett and Munger questions.

Governance

The current members of the board of directors of Berkshire Hathaway are Warren Buffett (Chairman), Charlie Munger (Vice Chairman), Thomas S. Murphy, Howard Graham Buffett (Warren's son), Ronald Olson, Charlotte Guyman, Chris Davis, Donald Keough, David Gottesman, Kenneth Irvine Chenault, Steve Burke, Susan Decker, Meryl Witmer, Ajit Jain, and Greg Abel.

On March 13, 2020, Bill Gates announced that he was leaving the board of directors of both Microsoft and Berkshire Hathaway in order to focus more on his philanthropic efforts.

Succession plans

In May 2010, three months away from his 80th birthday, Buffett said he would be succeeded at Berkshire Hathaway by a team consisting of a CEO and three or four investment managers, each of the latter would be responsible for a "significant portion of Berkshire's investment portfolio". Five months later, Berkshire announced that Todd Combs, manager of the hedge fund Castle Point Capital, would join them as an investment manager. On September 12, 2011, Berkshire Hathaway announced that 50-year-old Ted Weschler, founder of Peninsula Capital Advisors, will join Berkshire in early 2012 as a second investment manager.

In Berkshire Hathaway's annual shareholder letter dated February 25, 2012, Buffett said that his successor as CEO had been chosen internally but not named publicly. While the intent of this message was to bolster confidence in the leadership of a "Buffett-less Berkshire", critics have noted that this strategy of choosing a successor without a concrete exit strategy for the sitting CEO often leaves an organization with fewer long term options, while doing little to calm shareholder fear.

In June 2014, the firm's cash and cash equivalents rose past $50 billion, the first time it finished a quarter above that level since Buffett became chairman and chief executive officer. At the end of 2017, the firm's cash and cash equivalent holdings rose to $116 billion.

On January 10, 2018, Berkshire Hathaway appointed Ajit Jain and Greg Abel to vice-chairman roles. Abel was appointed vice chairman for non-insurance business operations, and Jain became vice chairman of insurance-operations. While Buffett has not further elaborated on his succession plans, he praised his two top executives in an annual shareholder letter, fuelling speculation that Jain and Abel are the logical successors.

On May 3, 2021, Warren Buffett chose Greg Abel to be his successor as CEO of Berkshire Hathaway.

Finance

For the fiscal year 2019, Berkshire Hathaway reported earnings of 81.4 billion, with an annual revenue of 254.6 billion, an increase of 2.7% over the previous fiscal cycle. Berkshire Hathaway's market capitalization was valued at over 496 billion in September 2018. , Berkshire Hathaway is ranked third on the Fortune 500 rankings of the largest United States corporations by total revenue.

Businesses and investments

Insurance group

Insurance and reinsurance business activities are conducted through approximately 70 domestic and foreign-based insurance companies. Berkshire's insurance businesses provide insurance and reinsurance of property and casualty risks primarily in the United States. In addition, as a result of the General Re acquisition in December 1998, Berkshire's insurance businesses also includes life, accident, and health reinsurers, as well as internationally based property and casualty reinsurers. Berkshire's insurance companies maintain capital strength at exceptionally high levels. This strength differentiates Berkshire's insurance companies from their competitors. Collectively, the aggregate statutory surplus of Berkshire's U.S.-based insurers was approximately $48 billion . All of Berkshire's major insurance subsidiaries are rated AAA by Standard & Poor's Corporation, the highest Financial Strength Rating assigned by Standard & Poor's, and are rated A++ (superior) by A. M. Best with respect to their financial condition and operating performance.
* GEICO – Berkshire acquired GEICO in January 1996. GEICO is headquartered in Chevy Chase, Maryland, and its principal insurance subsidiaries include; Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, and GEICO Casualty Company. Over the past five years, these companies have offered primarily private passenger automobile insurance to individuals in all 50 states and the District of Columbia. GEICO markets its policies primarily through direct response methods in which applications for insurance are submitted directly to the companies via the Internet or by telephone.
* Gen Re – Berkshire acquired General Re in December 1998. General Re held a 91% ownership interest in Cologne Re . General Re subsidiaries currently conduct global reinsurance business in approximately 72 cities and provide global reinsurance coverage. General Re operates the following reinsurance businesses: North American property/casualty, international property/casualty, which principally consists of Cologne Re and the Faraday operations, and life/health reinsurance. General Re's reinsurance operations are primarily based in Stamford, Connecticut, and Cologne, Germany. General Re is one of the largest reinsurers in the world based on net premiums written and capital.
* NRG (Nederlandse Reassurantie Groep) – Berkshire acquired NRG, a Dutch life reinsurance company, from ING Group in December 2007.
* Berkshire Hathaway Assurance – Berkshire created a government bond insurance company to insure municipal and state bonds. These types of bonds are issued by local governments to finance public works projects such as schools, hospitals, roads, and sewer systems. Few companies are capable of competing in this area.

On June 8, 2017, it was announced that Berkshire Hathaway had settled with California's insurance regulator, allowing its Applied Underwriters unit to sell a revised version of its "controversial" compensation insurance policies for workers in the state. Berkshire Hathaway sold Applied Underwriters in 2019.

On March 21, 2022, Berkshire Hathaway announced it was buying insurance company Alleghany for $11.6 billion. This would have expanded its presence in the insurance space and allowed it to own a holding company much like Berkshire itself. There was speculation a bidding war could erupt for the company, with ''Barron's'' citing Markel, W.R. Berkley, Chubb, and Loews along with Pershing Square as potential suitors. Barron's also reported on an analysis that suggested the company could be worth $1,000 a share, compared to the offer of $848.02. This move was touted as an example of Warren Buffett's "disdain" for investment bankers.

Utilities and energy group

In 2008, Berkshire owned 85 million shares of ConocoPhillips. Later, in one of Buffett's interviews, he described this as "a major mistake" as the price of oil collapsed. Berkshire offloaded most of its shares but held 472 thousand shares until 2012. In that year, ConocoPhillips spun off a subsidiary, Phillips 66, of which Berkshire owned 27 million shares. Berkshire later sold back $1.4 billion worth of shares to Phillips 66 in exchange for Phillips Specialty Products. Buffett frequently referred to Phillips 66 as one of the best businesses Berkshire invested in because of its consistent dividends and share buyback programs. Despite this, Berkshire sold its entire holdings in 2020.

Berkshire currently holds 92% of Berkshire Hathaway Energy. At the time of purchase, Berkshire's voting interest was limited to 10% of the company's shares, but this restriction ended when the Public Utility Holding Company Act of 1935 was repealed in 2005. A major subsidiary of Berkshire Hathaway Energy is Northern Powergrid, which operates in the UK.

Until a name change on April 30, 2014, Berkshire Hathaway Energy was known as MidAmerican Energy Holdings Co.

Manufacturing, service and retailing

Recreational vehicles

On June 21, 2005, Berkshire Hathaway agreed to purchase Forest River Inc., the world's largest seller of recreational vehicles, from Pete Liegl.

Clothing

Berkshire's clothing businesses include manufacturers and distributors of a variety of clothing and footwear. Businesses engaged in the manufacture and distribution of clothing include Union Underwear Corp. – Fruit of the Loom, Garan, Russell Corporation and Fechheimer Brothers. Fechheimer Brothers is made up of two brands Flying Cross and Vertx. Flying Cross manufacturers public safety uniforms and Vertx is a civilian tactical clothing company. Berkshire's footwear businesses include H.H. Brown Shoe Group, Acme Boots, Brooks Sports and Justin Brands. Justin Brands is made up of Chippewa Boots, Justin Boots, Justin Original Workboots, Nocona Boots, and Tony Lama Boots. Berkshire acquired Fruit of the Loom on April 29, 2002, for $835 million in cash. Fruit of the Loom, headquartered in Bowling Green, Kentucky, is a vertically integrated manufacturer of basic clothing. Berkshire acquired Russell Corporation on August 2, 2006, for $600 million.

Building products

In August 2000, Berkshire Hathaway entered the building products business with the acquisition of Acme Building Brands. Headquartered in Fort Worth, Texas, Acme manufactures and distributes clay bricks (Acme Brick), concrete block (Featherlite), and cut limestone (Texas Quarries). It expanded its building products business in December 2000, when it acquired Benjamin Moore & Co. of Montvale, New Jersey

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