- The Washington Times - Saturday, March 8, 2003

OMAHA, Neb., March 8 (UPI) — Berkshire Hathaway Inc. reported its highest ever annual profit on Saturday, citing increased profits from higher insurance and reinsurance rates charged by company units, partly as a reaction to the destruction of the World Trade Center on Sept. 11, 2001.

The Omaha, Neb., -based company run by billionaire investor Warren Buffet reported a profit of $4.2 billion, or $2,795 a share, for 2002, compared with $795 million, or $521 a share, for 2001.

Revenue rose 10 percent to a record $42.3 billion.

"In all respects, 2002 was a banner year," Buffet said in his annual report to shareholders.

Berkshire's profit from insurance was higher than it might have been in a "normal" year, Buffet said. The company also saw better returns from its old-economy operations, which range from See's Candies to Helzberg Diamond Shops and Ben Bridge Jeweler.

Berkshire's stock gained $1,210, or 1.90 percent, to close Friday at $64,800 a share on the New York Stock Exchange.

In his annual letter to shareholder released Saturday on Berkshire's Web site, Buffet touted his insurance and investment company's performance. "The confluence of these favorable factors in 2002 caused our book-value gain to outstrip the performance of the S&P; 500 by 32.1 percentage points," he wrote.

The company made very few changes to its reported equity portfolio in 2002. Berkshire added 6.7 million shares of M&T; Bank, valued at $532 million to its disclosure.

Berkshire's largest equity position remains 200 million shares of Coca-Cola Co. worth nearly $8.8 billion as of Dec. 31, 2002, down from $9.4 billion at the end of 2001.

In his letter, Buffet also called on corporate boards to get tough with their chief executive officers saying that new regulations won't be tough enough to restore shareholder confidence. Buffet also told investors to watch out for companies with weak corporate governance and questionable accounting.

The chairman of Berkshire Hathaway also confessed to the very behavior he criticized after sitting on 19 corporate boards in the past 40 years.

"To often I was silent when management made proposals that I judged to be counter to the interests of shareholders," he wrote. In those cases "collegiality trumped independence."

Buffet wrote that a certain social atmosphere presides in boardrooms where it becomes impolitic to challenge the CEO.

"It's almost impossible … in a boardroom populated by well-mannered people, to raise the question of whether the CEO should be replaced," he said. "It's equally awkward to question a proposed acquisition … endorsed by the CEO, particularly when his inside staff and outside advisors are present and unanimously support his decision."

Also, Buffet said, be careful of companies that trumpet earnings and revenue growth projections.

"Managers that always promise to 'make the numbers' will at some point be tempted to make up the numbers," he said.

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