Letter to Shareholders

# 2003 Letter to Shareholders ## To the Shareholders of Berkshire Hathaway Inc. We gained $13.6 billion in net worth during 2003, which increased the per-share book value of both our Class A and Class B stock by 21.0%. Over the last 39 years, per-share book value has grown from $19 to $50,498, a rate of 22.2% compounded annually. ## MidAmerican Energy In 2003, we increased our ownership of MidAmerican Energy Holdings Company to 80.2%. This business owns regulated utilities in Iowa, Illinois, and other states, as well as natural gas pipelines. Regulated utilities have attractive economics. They provide essential services, earn regulated returns on capital, and have predictable cash flows. While the returns are not spectacular, they are steady and reliable. > "Utilities are not glamorous, but they are dependable. We like dependable." MidAmerican also owns a large natural gas pipeline system. Pipelines are toll roads for energy—they earn fees for transporting gas regardless of the price of the commodity. This is a wonderful business model. We expect MidAmerican to contribute steadily to Berkshire's earnings for decades. The business fits our criteria: understandable, well-managed, and economically sound. ## Insurance Operations Our insurance operations had another excellent year. The hardening market that followed September 11 continued into 2003. We maintained underwriting discipline and wrote profitable business. [[Ajit Jain]]'s reinsurance operation continues to be a standout. Ajit has built a unique business that takes on risks others cannot—but only when the price is right. His discipline has generated enormous value. [[GEICO]] gained market share again. Our low-cost model continues to attract price-sensitive consumers. We are investing heavily in technology and advertising to accelerate growth. Our **insurance float** exceeded $40 billion. This float is available for investment at no cost, provided we maintain underwriting discipline. The combination of float and investment returns is powerful. ## Investment Portfolio Our investment portfolio performed well. [[Coca-Cola]], American Express, and other long-term holdings contributed to our results. We continue to focus on businesses with durable competitive advantages. We seek to buy such businesses at reasonable prices and hold them indefinitely. This approach has served us well for decades. [[Charlie Munger]] and I are patient. We would rather hold a wonderful business forever than trade in and out. The tax advantages of long-term holding are significant, and the compounding power of a great business is best captured over many years. ## Looking Forward We now have a diversified collection of businesses: - Insurance operations generating float and underwriting profit - Regulated utilities providing steady returns - Retail and manufacturing businesses with strong market positions - An investment portfolio of wonderful companies This diversification reduces risk while maintaining our ability to compound capital. We will continue to acquire businesses that meet our criteria and to hold our investments for the long term. Warren E. Buffett February 2004