2011 Berkshire Hathaway Annual Meeting (Full Version)

Good morning. I'm Warren. He's Shirley. I can see he can hear; that's why we work together. We have trouble remembering each other's names from time to time.

We're going to—uh—I'm going to introduce the directors. We're going to give you some information on the first quarter earnings. We're going to talk briefly about the David Sokol Lubrizol situation, and then we're going to open it up for your questions. Anything that relates to the Lubrizol matter is going to be transcribed and will be put up on the website—the Berkshire Hathaway website—just as promptly as we can. Maybe this evening, this afternoon, maybe tomorrow morning, but very promptly because we want to be sure that all shareholders here get to read every word of what has been said here about the matter.

First thing I'd like to do is introduce the directors, and if they stand and remain standing, you can withhold your applause as they stand, but you can go crazy at the end, or you can continue to withhold your applause; that will be your call. Charlie and I are up here, and we don't like to stand up too often, so we'll skip our standing.

The directors are Howard Buffett, Stephen Burke, Susan Decker, Bill Gates, Sandy Gottisman, Charlotte Guyman, Don Keo, Tom Murphy, Ron Olson, and Walter Scott. [Applause]

Now, we have a few slides that deal with the first quarter earnings. I think Mark Hamburg would like me to emphasize that these are preliminary. This is about as early as we ever have a meeting in relation to the quarter; normally, it's always the first Saturday in May. So they had to work a little harder than usual to get these numbers together.

I would tell you as background that basically, pretty much all of our businesses, with the exception of those that are related to residential housing, are getting better. You can almost see it with most of them, quarter by quarter. We have a wide diversity of businesses; we have more than 70 companies we list. But then Marmon itself has over 100 businesses, so we are a cross-section of not only the American economy but, to some extent, we see a fair amount about what's going on internationally too.

In the first quarter, as has been the case really since the fall of 2009, both our non-residential construction businesses—except for those non-residential construction businesses—our other businesses have generally gotten better quarter by quarter, and there was no exception to that in the first quarter. What was very different in the first quarter was that we had probably the second-worst quarter for the insurance industry in terms of catastrophes around the globe.

Normally, the third quarter of the year is the worst period because that's when hurricanes tend to hit the U.S., with most of them—well, about 50% of them—occurring in September and then sort of forming a normal curve on either side of September. So the third quarter usually is the record quarter, and the third quarter was the record quarter back at the time of Katrina.

But in the first quarter of this year, we had some major catastrophes in the Pacific Asian areas, and that hit the reinsurance industry particularly hard. I no one knows at this point—it's a wild guess—but probably those catastrophes cost the reinsurance industry on the order of 50 billion dollars. We usually participate to the extent of three to five percent.

First of all, I'll give you our overall earnings the way we normally present them, and if we'll put the first slide up, you can see that our insurance underwriting suffered an after-tax loss of 821 million dollars.

Now, when I wrote the annual report, I postulated that normal earning power of Berkshire had about 17 billion pre-tax and about 12 billion after tax, assuming break-even on insurance underwriting. Our insurance underwriting has done better than break-even; in fact, it's made quite a bit of money for eight consecutive years.

But I would say, with the start of these catastrophes in the first quarter, or the catastrophe experience we had in the first quarter, I would say that it's unlikely that we would have an underwriting profit for 2011. It...