Our Management Principles


The Annual reports provide a detailed and continuing update on the progress of the company. 

The purpose of this description is to openly communicate our corporate management principles to our shareholders, employees, and stakeholders. Our goal is to establish a long-term, trustworthy relationship by clearly stating our beliefs and intentions for managing the company. This will allow for a shared understanding and expectation of how we plan to operate under a shared set of values.


Our corporate management principles are based on owner-related business principles aimed at providing a strong foundation for the company’s management and decision-making, and emphasize the importance of shareholder value, technology, and long-term success. 

These principles are intended to effectively convey the message that the company values and respects the contributions and investments of its shareholders.

These principles should guide the company’s leadership’s actions and strategies and help ensure that the company is well-positioned for future growth and success.  

Our key principles are owner-related business principles, and the following:

1)     The company is a corporation that should be viewed as a partnership between shareholders and management, with shareholders. Shareholders should be seen as co-venturers who have invested indefinitely and should be treated as owner-partners. The CEO and Chairman should be considered as managing partners. Despite the size of their shareholdings, the shareholders are also considered by management as controlling partners. The company should not be viewed as the ultimate owner of the business assets, but rather as a conduit through which the shareholders own the assets. Shareholders should be able to envision themselves as part owners of the business and expect to stay with it indefinitely. That they have entrusted their funds to the company and should be treated as co-venturers.

2)     In line with this Owner-orientation, Directors should invest a significant portion of their net worth in the company to align their interests with shareholders. This will ensure that the company’s success or financial suffering is shared proportionally with the shareholders, as the directors’ net worth will also be impacted. This aligns with the owner-oriented approach and ensures that the directors are invested in the company’s success.

3)     The company’s long-term goal is to increase the intrinsic value of the business on a per-share basis, focusing on earning-per-share as the primary measure of economic performance. The economic significance or performance should be measured by per-share progress, and the aim should be to maximize the average annual rate of gain in intrinsic business value on a per-share basis.

4)     Use technology to optimize value and maintain a competitive advantage. Adopt and effectively implement the latest technologies to increase efficiency, reduce costs, and improve our products and services, with the goal of consistently outperforming competitors and driving long-term success.

5)     The company’s preference is to reach its goal of increasing intrinsic value on a per-share basis through direct ownership of a diversified group of businesses that generate cash and consistently earn above-average returns on capital.

6)     If this is not possible, the company may choose to own parts of similar businesses, primarily through purchases of marketable common stocks by insurance subsidiaries. The allocation of capital in any given year will depend on the price and availability of businesses and the need for insurance capital.

7)     It is important to report the earnings of each major business controlled, as these numbers are significant and generally aid in making judgments. However, consolidated reported earnings may not accurately reflect the true economic performance due to the company’s two-pronged approach to business ownership and the limitations of conventional accounting.

8)     Therefore, the company regularly reports “look-through” earnings, which include reported operating earnings, excluding capital gains and purchase-accounting adjustments, plus a share of the undistributed earnings of major investees.

9)     Operating or capital-allocation decisions should not be influenced by accounting consequences.

10)  The company aims to use debt sparingly and structure borrowed loans on a long-term fixed-rate basis in order to be conservative and avoid over-leveraging the balance sheet.

11)  Deferred tax liabilities do not accrue interest, and as long as the company can break even in insurance underwriting, the cost of the float developed from that operation will be zero.

12)  The company should not fill a managerial “wish list” at the expense of shareholders. It should not diversify by purchasing entire businesses at controlled prices that ignore long-term economic consequences to the shareholders. Acquisitions should be able to raise the per-share intrinsic value of the company’s stock.

13)  The company should periodically assess whether retention, over time, delivers at least $1 of market value for each $1 retained to shareholders. If the company determines that it can’t create extra value by retaining earnings, it can pay them out and allow shareholders to deploy the funds.

14)  The company should issue common stock only when it receives as much in business value as it gives. This rule applies to all forms of issuance, including mergers, public stock offerings, stock-for-debt swaps, stock options, and convertible securities. The company should not sell small portions of the company, as issuing shares is equivalent to selling assets on a basis that is inconsistent with the value of the entire enterprise. Managements that suggest or imply during a public offering that their stock is undervalued are usually dishonest or unfair to existing shareholders. Owners would be treated unfairly if their managers deliberately sold assets worth $1 for 80 cents.

15)  The company should not engage in the practice of simply discarding businesses that are not performing up to expectations, like discarding cards in a game of gin rummy. Instead, it should focus on finding ways to improve the performance of these businesses and bring them up to par.  Great caution should be taken with suggestions that poor businesses can be restored to satisfactory profitability through major capital expenditures or closing, if they are doomed to run never-ending operating losses.

16)  The company should be candid in its reporting to shareholders and emphasize the key points vital for appraising business value. The CEO who misleads others in public may eventually mislead himself in private. The company should apply specific standards of accuracy, balance, and incisiveness when reporting to shareholders. The annual report should provide as much value-defining information as possible within a reasonable length. The goal is to update all shareholders at the same time and not give any single shareholder an advantage.

17)  Despite the policy of candor, the company should only discuss activities in marketable securities to the extent legally required. Like the good product or business acquisition ideas, good investment ideas are rare, valuable, and subject to competitive appropriation. The company can freely discuss business and investment philosophy and pass along intellectual generosity, even if it may create new and capable investment competitors for the company. “AN ADDED PRINCIPLE – STOCK PRICE AT A FAIR LEVEL THAN A HIGH LEVEL.”

18)  The Company would prefer for shareholders to experience a gain or loss in market value during their period of ownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during that period. The Company would like for shareholders to see their investment in the company increase or decrease in value at a rate that is consistent with the Company’s own performance. If the company is doing well and its intrinsic value is increasing, the company would like for shareholders to see their investment in the company also increase in value. If the company’s intrinsic value is decreasing, the company would like for shareholders to see their investment in the company to be decreasing in value. This aligns with the interests of the company and its shareholders, as both are working towards the same goal of increasing the intrinsic value of the company.


Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life. It offers a logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value is an estimate of the discounted cash that can be extracted from a business over its remaining lifespan. It is used to evaluate the relative attractiveness of investments and businesses.  Intrinsic value is not a precise figure and may change due to revised interest rates or future cash flow forecasts. On the other hand, the per-share book value may not accurately reflect a company’s intrinsic value, particularly for businesses controlled by the company but not necessarily reflected in their book value. However, on a year-to-year basis, the percentage change in book value from one year to the next may provide a rough approximation of the change in intrinsic value.

The differences between book value and intrinsic value can be understood by looking at one form of investment, a college education. The education cost can be assumed as “Book value”. If this cost is to be accurate, it should include the earnings that were foregone by the student because he chose college rather than a job.

To understand the difference between book value and intrinsic value, consider the investment of purchasing a rental property. The cost of the property can be thought of as the “book value,” but in order to accurately reflect the value of the investment, this value should also include the potential rental income and any appreciation of the property over time.

Some property owners may find that the price paid for the book value of their investment is higher than its intrinsic value, meaning that they did not receive a good return on their investment. In other cases, the intrinsic value of the property may far exceed its book value, indicating that the investment was wise. In either case, book value is not a reliable indicator of intrinsic value.


Managing partners can delegate work to the managers in the subsidiaries. The Company’s principle is to delegate work to subsidiary managers and allow them to run their businesses as independently as possible. This helps to keep them motivated and focused on their work. The managing partners are responsible for making all operating decisions and for distributing excess cash generated by the subsidiaries to headquarters. This helps to protect the managers from outside influences that may distract them from their work. The company is committed to treating and compensating its managers fairly and creating a positive work environment for them.

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