1996 Shareholder Letter
Buffett's 1996 letter introduces the dual-column intrinsic value table (investments per share vs. operating earnings per share), discusses GEICO's transformation, and announces the FlightSafety acquisition and Class B shares.
1996 Shareholder Letter
Date: February 28, 1997 Author: Warren Buffett Company: Berkshire Hathaway
Overview
1996 net worth increased $6.2 billion or 36.1%, with per-share book value reaching $19,011 — a 23.8% compound annual return over 32 years.
Key Points
GEICO Becomes Wholly-Owned
On January 2, 1996, Berkshire acquired the remaining 49% of GEICO, making it a 100%-owned subsidiary. The "step acquisition" accounting required a $478.4 million book value writedown.
GEICO's transformation under Tony Nicely was remarkable: from a struggling company to exceptional performer.
FlightSafety International
December 1996 acquisition — training center for corporate pilots. Paid with both A and B shares, partly in cash.
Class B Shares Issued
New Class B shares offered in May 1996, each with economic interest equal to 1/30th of Class A.
Dual-Column Value Table
The updated table tracking Berkshire's intrinsic value:
| Year | Investments Per Share | Pre-tax Earnings Per Share |
|---|---|---|
| 1965 | $4 | $4.08 |
| 1975 | $159 | ($6.48) |
| 1985 | $2,443 | $18.86 |
| 1995 | $22,088 | $258.20 |
| 1996 | $28,500 | $421.39 |
Low Corporate Overhead
Headquarters expense: less than 2 basis points (1/50th of 1%) of net worth. Berkshire's jet named "The Indefensible."
Famous Quotes
"We are here to make money with you, not off you."
Related
- letter-1995 — Previous year
- letter-1997 — Following year
- warren-buffett
- intrinsic-value