In a letter to shareholders posted on his website Sept. 26, billionaire Warren Buffet warned of a recession, “probably a relatively deep and extended one, but they are part of business life and we are prepared.”
Buffett estimated holding company Berkshire Hathaway’s losses from the terrorist attacks at $2.2 billion. “We’ve labeled this a ‘guess’ because that’s all it is. It will be many years before we can tell the world within a narrow range what the true figure was,” Buffett wrote.
A high percentage of the loss occurred in Berkshire’s U.S. insurance companies, with the balance in German and U.K. entities, according to Buffett. Because the company has regularly paid very large amounts of U.S. income taxes, it will bear 65 percent of the cost applicable to the U.S. operations, while the government will bear 35 percent.
“Many insurers will not have their loss mitigated in this manner and some may not survive,” Buffett wrote. “Though much of our loss will be paid very soon, significant payments in the liability area will take a considerable time to settle.
“Even with tax recoveries, our loss is huge. Nevertheless, it’s one Berkshire can easily bear. We have long been in the super-cat business and we have been prepared, both financially and psychologically, to handle them when they occur. This won’t be our last hit, though we fervently hope disasters in the future arise from natural causes, rather than be man-made.”
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