1. 1 Berkshire Hathaway Asset Study Winter 2011 Fin / Invest / Business Law Cluster Kevin C. Kaufhold 1

2. 2 Description of Berkshire Hathaway Holding company owning insurance and other firms 70 domestic and foreign insurance subsidiaries Largest are GEICO, General Re, Swiss RE, WESCO Also owns $ Billion + positions in Coca-Cola, Wells-Fargo, Zales Jewelers, BN RR, utilities, many others $ 112.024 Billion market cap $35 Billion in cash reserves (plus equity positions) 2009 revenues were $112.493 Billion 2009 earnings were $5.192 Billion TTM EPS is $7,234 EPS 2

3. 3 Description of Berkshire Hathaway, continued Ownership and management structure Publicly traded CEO Warren Buffett; Charlie Munger active in WESCO 16% institutional ownership. Class A shares never split: $127,000 per share value Class B shares developed in 1996 at 1 / 30 of Class A Class B split 2-2011 when BN was acquired 50:1 Class B is therefore now at 1 / 1500 of Class A ($80 / share) 3

4. 4 Impact from National Economy VL macro growth 2% 2011 Consensus has been revised upward --- 2% to 3.5% 2011 P&C insurance industry is pro-cyclical Slowness of economic recovery is a large factor in current industry and company pricing performance

5. 5 Industry Considerations Slow macro recovery putting pressure on P&C insurance industry Firms reluctant to pay higher insurance premiums New insurance clients harder to develop Investment returns from portfolios also under pressure Laddered bond positions expiring New bonds having lower returns 5

6. 6 Industry Considerations, continued S&P and VL have neutral outlook on industry Excess underwriting capacity or supply S&P estimates excess at $335 Billion Net premiums may increase modestly 2 to 4% in 2011 But P&C storm and catastrophic damages 2009 decreased Going forward 3+ years, industry may expand with economy Many firms planning for eventual share repurchases 6

7. 7 Company Considerations BRK holding up well in industry Good investment returns Better than expected profit from insurance operations Poised to use cash to increase equity positions and acquisitions Safety ranking (VL) = 1 (highest) Only other safety ranking of 1 in industry is Chubb 7

8. 8 Company Considerations, Continued Premium growth last 9 years 5.39% (ind 5.00%) LT debt to capital 9 years 13.30% (ind up to 40%) ROE 9 years 8.00% Beta = 0.14 (ind is 0.38 to 1.49; Chubb at 0.47). PE range 13 to 21 in 2009 YTD share pricing 6.0% (ind 5.6%; 6.9% S&P) 5 year share pricing 7.8% (ind 3.5%; 1.3% S&P)

9. 9 Company Portfolio Focused portfolio of cash reserves or insurance “float” Concentrated in insurance and consumer staples Top 10 positions comprise 93.5% of BRK portfolio Top 4 positions 67%; KO, Wells Fargo, American Express, P&G BRK is now Wells Fargo biggest shareholder at $9.7 Billion

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12. 12 Company Valuations VL projects NT pricing consistent with capital markets But, 3 to 5 year pricing at 5% to 11% annualized returns Thomson Reuters LT growth forecast at 5.0% Technical indicators neutral to negative (VL to Thomson) But forecast revenue growth 18.4% 2010 to 22.0% 2011 Relative value is negative (Thomson)

13. 13 Company Valuation, continued Biggest factor may be Succession Successors named, but likely Buffett will remain in charge indefinitely Question as to growth post-Buffett My recommendation ---- NT hold --- primarily based on relative value LT accumulation --- based on superior industry position Current and future Management is inherently oriented toward shareholder interests History heavily favors BRK’s superiority of pricing performance ---

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15. 15 References MSN Money, financial information and worksheets S&P company and industry report, 2-19-2011; Significant events 2-7- 2011 (Wesco) San Francisco Business Times, 2-21-2011 article on Wells Fargo Seeking Alpha commentary on company, 2-2011 Thomson Reuters company report, 2-18-2011. Value-Line, 12-7-2010 company and industry reports Yahoo Finance, financial information and worksheets, pricing graph