Annual Letters
Of course, with a minor interest we do not have the right to
direct or even influence management policies of SAFECO. But why
should we wish to do this? The record would indicate that they
do a better job of managing their operations than we could do
ourselves. While there may be less excitement and prestige in
sitting back and letting others do the... See more
direct or even influence management policies of SAFECO. But why
should we wish to do this? The record would indicate that they
do a better job of managing their operations than we could do
ourselves. While there may be less excitement and prestige in
sitting back and letting others do the... See more
Chairman's Letter - 1978
if management is 10/10 and operated efficiently, then why ever change what they are doing or try to take full control — if it ain’t broke, don’t fix it
CPI figures indicate rates overall were only 3% higher
in January 1979 than a year ago. But the items that make up loss
costs - auto repair and medical care costs - were up over 9%.
How different than yearend 1976 when rates had advanced over 22%
in the preceding twelve months, but costs were up 8%.
in January 1979 than a year ago. But the items that make up loss
costs - auto repair and medical care costs - were up over 9%.
How different than yearend 1976 when rates had advanced over 22%
in the preceding twelve months, but costs were up 8%.
Chairman's Letter - 1978
industry dynamics out of ones control will impact profits
Our experience has been that the manager of an already high-
cost operation frequently is uncommonly resourceful in finding
new ways to add to overhead, while the manager of a tightly-run
operation usually continues to find additional methods to curtail
costs, even when his costs are already well below those of his
competitors
cost operation frequently is uncommonly resourceful in finding
new ways to add to overhead, while the manager of a tightly-run
operation usually continues to find additional methods to curtail
costs, even when his costs are already well below those of his
competitors
Chairman's Letter - 1978
when spending is already high, the spender will find ways to keep spending
when spending is tight and constrained, spender will find ways to show restraint and curtail costs
Of course, it takes at least several years to evaluate
underwriting results, but the early signs are encouraging and
Floyd’s operation achieved the best loss ratio among the
homestate companies in 1978.
underwriting results, but the early signs are encouraging and
Floyd’s operation achieved the best loss ratio among the
homestate companies in 1978.
Chairman's Letter - 1978
don’t get ahead of yourself at the first signs of success. it takes several years to see success
Associated’s business has not grown, and it consistently has
faced adverse demographic and retailing trends. But Ben’s
combination of merchandising, real estate and cost-containment
skills has produced an outstanding record of profitability, with
returns on capital necessarily employed in the business often in
the 20% after-tax area.
faced adverse demographic and retailing trends. But Ben’s
combination of merchandising, real estate and cost-containment
skills has produced an outstanding record of profitability, with
returns on capital necessarily employed in the business often in
the 20% after-tax area.
Chairman's Letter - 1978
cash flow business with no growth — run by family type for ever
Earnings of $1.3 million in 1978, while much improved from
1977, still represent a low return on the $17 million of capital
employed in this business. Textile plant and equipment are on
the books for a very small fraction of what it would cost to
replace such equipment today. And, despite the age of the
equipment, much of it is functionally similar... See more
1977, still represent a low return on the $17 million of capital
employed in this business. Textile plant and equipment are on
the books for a very small fraction of what it would cost to
replace such equipment today. And, despite the age of the
equipment, much of it is functionally similar... See more
Chairman's Letter - 1978
in capital intensive commodity markets, margins will be near zero as the steady state supply > demand you have no product moats and any edge you might find to improve product (or margins) will be copied by the market hard to return capital
With hard work and some imagination
Chairman's Letter - 1977
conviction even when feedback could lower it
It is comforting to be in a
business where some mistakes can be made and yet a quite
satisfactory overall performance can be achieved. In a sense,
this is the opposite case from our textile business where even
very good management probably can average only modest results.
One of the lessons your management has learned - and,
unfortunately,... See more
business where some mistakes can be made and yet a quite
satisfactory overall performance can be achieved. In a sense,
this is the opposite case from our textile business where even
very good management probably can average only modest results.
One of the lessons your management has learned - and,
unfortunately,... See more
Chairman's Letter - 1977
being a subpar operator in a good market beats being an elite operate in a subpar market
We are not at all unhappy when our wholly-owned businesses
retain all of their earnings if they can utilize internally those
funds at attractive rates. Why should we feel differently about
retention of earnings by companies in which we hold small equity
interests, but where the record indicates even better prospects
for profitable employment of... See more
retain all of their earnings if they can utilize internally those
funds at attractive rates. Why should we feel differently about
retention of earnings by companies in which we hold small equity
interests, but where the record indicates even better prospects
for profitable employment of... See more
Chairman's Letter - 1978
if there are opportunities for high ROI investment at attractive costs, then earnings should be used to plow into the business — but if capital requirements are low for a business or track record of poor allocation of capital (low profitability) then earnings should be distributed as dividends or share repurchases