Berkshire Hathaway 2018 Annual Meeting Audience Question # 53

Berkshire’s share buyback decisions will not be affected by the rules of the states

Warren Buffett:

OK. Gregg?

Gregg Warren:

Warren, in this year’s annual report it was noted, much as it is every year, that payments of dividends by the company’s insurance subsidiaries are restricted by insurance statutes and other regulations, with Berkshire’s insurance operations currently allowed to declare up to 16 billion as ordinary dividends during 2018.

My question here is, should we view this annual regulatory threshold for dividends as a benchmark for allowable share repurchases as well? And in the event that Berkshire wanted to buy back more stock than that, or pay out even more as dividends, would there be an issue with you using capital from operations that aren’t held by the insurance operations to return additional capital?

With the side question here being, would the annual cash distribution from BNSF, which is held on National Indemnity’s books, be excluded?

Warren Buffett:

Yeah. The… we will obviously follow the rules of the states in which we’re domiciled, and all the rules, of course. But basically it’s the state of domestication in the insurance companies, and they do restrict the amount of dividends in any given year. Although you could, if you wanted to, request some additional amount. But we don’t ever consider that.

But repurchases… if repurchases were really attractive, we would do it in a very big way. And, you know, I wouldn’t rule… there’s all kinds of ways that we could arrange things to do either a very large acquisition, which is what I would prefer, or a very large repurchase, would I don’t think is probably in the cards just because the way our stock trades, not because we wouldn’t like it at a large discount.

So Charlie and I, we’ve got the appetite. And we would have… we’ve got a lot of cash… but we could have a lot more cash. We can make any deal of… even one of a very large size. We can make anything that came along… we could work out how to get it done.

We would… we would have… we’re not going to be doing this, but we would have partners who would come in and give us a preferential part of a partnership. That’s not going to happen, in all probability. But there’s a lot of things that we could do. So don’t rule out anything based on statutory limitations of distributions from insurance companies…

Charlie Munger:

And that… we could get special permissions to…

Warren Buffett:

Oh, we can get…

Charlie Munger:

… declare bigger dividends. We are not… you should not assume that we’re constrained by the laws of nature to the amount that we can take out under the statutes now.

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