Long-time readers of Berkshire Hathaway's (BRK.A,BRK.B) annual reports may have noticed a change in the opening pages of the latest report. From 2010-2015 there was a discussion on intrinsic business value. Two of this figure's three key elements were presented to readers. First, there was per-share investments - stocks, bonds, and cash equivalents. Second, per-share pre-tax earnings from sources other than investments (including investments would produce a double counting) and underwriting. Starting in 2015 insurance underwriting was included, as Warren Buffett felt that insurance results had significantly stabilized, as catastrophe coverage had been deemphasized within Berkshire. In fact annual underwriting income averaged $1,434 per-share over the past decade, and Berkshire then had 13 consecutive years of underwriting profit, totaling a significant $26.2 billion.
The third element in calculating intrinsic business value is how effectively retained earnings will be used in the future. Because this obviously can not be precisely calculated, Buffett never offers an exact number, stating two equally informed individuals can arrive at two different figures with neither being wrong. But it was still very helpful for readers to have the two quantitative figures.
