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PAINE WEBBER 1999 2ND Q REPORT

Alice Schroeder just released Paine Webber's view on Berkshire's 2nd quarter report. Once again Ms. Schroeder is the only analyst to cover Berkshire and delivers an impactful look into the financial numbers behind this company.

Becoming a client of PW or getting to know a PW broker is extremely important for those shareholders and Berkshire followers who want to have access to 'the unofficial and objective information spokesperson' of Berkshire. Once again Alice and her staff give readers an interpretation behind the numbers and at the same time several financial, insurance and accounting lessons.

Paine Webber's 12 page report is of course proprietary and available from PW (but with permission) here are some interesting 2nd quarter highlights:

(1) Operating earnings declined mainly due to GenRe and GEICO.
(2) Berkshire deployed excess capital into fixed income. Assets are underleveraged.
(3) GenRe increased its ownership of CologneRe from 83% to 87%.
(4) GenRe's problems are temporary.
(5) “Berkshire is a company that stands at bat until a home run opportunity crosses the plate. The fact that the company isn't swinging its bat right now doesn't particularly trouble [PW].”
(6) Alice's 1999 earnings estimate is $1010 per share versus $1021 last year.
(7) PW is still comfortable with their float method of valuation and will update its valuation in the next few months. Berkshire is still undervalued.
(8) Next quarter float should increase by more than $1 billion to $24 billion.
(9) Berkshire more than ever is an insurance company with insurance representing nearly 72% of revenues.
(10) Note Executive Jet's impact on earnings.
(11) GEICO will exchange short term earnings for the long term, grow 20 - 25% per year, and spend $100 million on advertising.
(12) GenRe management did not know about and did not hide the surprise Unicover scam before closing Berkshire's acquisition. And in typical Berkshire fashion is the only company to acknowledge its exposure of $275 million in losses. No other insurance company has stepped forward to declare its participation in $1.2 billion in additional net losses.

Ms Schroeder once again penetrates the true picture behind Berkshire's latest numbers. Often we look too closely and see only Mr. Buffett's brush strokes and colors. Alice, with her knowledge of the insurance industry, helps us stand back to see and understand the whole picture. Congratulations on an insightful look and taking a complicated financial story and making it simple to interpret.

More than ever Berkshire shareholders need an honest straightforward insurance analyst who is willing to take her time to help us understand the nuances of insurance. We are lucky to have Alice.
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