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1970 Shareholder Letter

Buffett's 1970 letter discusses the transition from Buffett Partnership to Berkshire, noting textile operations break-even performance despite industry difficulties while insurance and banking delivered strong returns.

buffettberkshire1970insurancetextileannual-letter

1970 Shareholder Letter

Date: March 15, 1971 Author: Warren Buffett Company: Berkshire Hathaway

Overview

1970 was a year of dramatically diverse earnings among Berkshire's operating units. The Illinois National Bank & Trust achieved record earnings, insurance operations grew substantially despite poor underwriting, and textile operations broke even in an increasingly difficult industry environment. The return on average shareholder's investment was approximately 10% — below American industry average but far better than if resources had continued to be devoted exclusively to textiles.

Key Points

Banking Excellence

The Illinois National Bank & Trust continued to rank at the top nationally in earnings as a percentage of average resources, demonstrating exceptional management by Gene Abegg and Bob Kline.

Insurance: Growth with Underwriting Challenges

"We enjoyed an outstanding year for growth in our insurance business, accompanied by a somewhat poorer underwriting picture."

The traditional operation experienced a surge in volume as conventional auto insurance markets became more restricted — a pattern consistent with Berkshire's history as a non-conventional carrier that gains when standard markets have capacity problems.

Textile Industry Reality

"Prices continue at poor levels and demand has not strengthened. Inventory levels, while reduced from a year ago through great effort, continue high in relation to current sales levels."

Buffett praised management and labor for their effort despite difficult conditions:

"Led by Ken Chace, the effort, attitude and enterprise manifested by management and labor in this operation have been every bit the equal of their counterparts in our much more profitable businesses. But in the past year they have been swimming against a strong tide."

Home-State Insurance Expansion

Cornhusker Casualty Company (100% owned by National Indemnity, writing standard business through Nebraska agents only) got off to a strong start, combining "big-company capability and small-company accessibility."

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