2014 Letter to Shareholders

To the Shareholders of Berkshire Hathaway Inc.

In 2014, Berkshire's market value crossed $300 billion for the first time. More importantly, our intrinsic value grew even more than our market value, as our businesses continued to compound at attractive rates.

"The key to Berkshire's success is that we think like owners. We measure success by the increase in intrinsic value, not by the size of our reported earnings."

Why We Don't Pay Dividends

Every year, shareholders ask why Berkshire doesn't pay dividends. The answer is simple: your money works better in our hands than in yours.

In 2014, every dollar we retained earned far more than you could earn on your own. Our reinvested earnings generated returns of 15-20% annually, far exceeding what dividend income would provide after taxes.

When Berkshire earns $15 billion in a year and reinvests it at 15%, we create $2.25 billion of value. If we paid that $15 billion as dividends, you would pay taxes and be left with perhaps $11 billion to reinvest. The compounding advantage is enormous.

We will pay dividends only when we cannot redeploy capital at above-average rates. That day has not arrived.

Burlington Northern

In 2014, our $34 billion acquisition of Burlington Northern Santa Fe Railway passed its two-year anniversary. The integration has been even more successful than we expected.

BNSF has reduced its capital expenditure requirements while increasing volumes. The railroad is more efficient, more reliable, and more profitable than when we acquired it. This is the Berkshire way: we buy excellent businesses and let their managers keep doing what made them excellent.

Insurance Operations

GEICO gained 1.2 million policies in 2014 while improving profitability. This combination of growth and margin improvement is exactly what we hoped for when we began the turnaround.

Our reinsurance operations, led by Ajit Jain, generated float that now exceeds $80 billion. This float—permanent, low-cost capital—is the foundation of our investment returns.

Our Investment Approach

In 2014, we made several new investments that fit our criteria: excellent businesses, honest management, and reasonable prices. We also continued to repurchase shares when they traded below intrinsic value.

Our share repurchases in 2014 totaled $1.3 billion at prices averaging below $200 per Class A share. At those prices, every repurchase increased the value of every remaining share.

The American System

Once again, the American economy rewarded those who participated patiently. Our entire success is built on the premise that American business will continue to create wealth for shareholders who hold for the long term.

Looking Forward

We don't know what 2015 will bring. We do know that:

1. Our businesses will compound — Essential services earn solid returns in any environment
2. Our float will grow — Insurance operations expand our permanent capital
3. Our culture will persist — Charlie and I have built something that will outlast us
4. America will create opportunities — We will be there to seize them

Thank you for your trust.

Warren E. Buffett February 2015