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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition period from            to
 Commission file number 1-4720
 WESCO FINANCIAL CORPORATION
  Delaware
(State or Other Jurisdiction of 
Incorporation or organization)
    
    95-2109453
(I.R.S. Employer Identification No.)301 East Colorado Boulevard, Suite 300, 
Pasadena, California
    
    91101-1901
(Zip Code)(Address of Principal Executive Offices)
 (626) 585-6700
  Securities registered pursuant to section 12(b) of the Act:
 Title of Each ClassCapital Stock, $1 par value
    
    Name of Each Exchange on Which RegisteredNYSE Amex
  None
  
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
    Title of Document
    
    Parts of
Form 10-KNone
    
    None




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEX-21EX-31.AEX-31.BEX-32.AEX-32.B    Table of Contents  
 PART I
 
 Item 1.  Business
   
    
    the insurance business, through Wesco-Financial Insurance Company (Wes-FIC), which was
incorporated in 1985 and engages in the property and casualty insurance business, and The
Kansas Bankers Surety Company (KBS), which was incorporated in 1909, purchased by Wes-FIC
in 1996 and provides specialized insurance coverages for banks;
 
    
    the furniture rental business, through CORT Business Services Corporation (CORT), which
traces its national presence to the combination of five regional furniture rental companies
in 1972 and was purchased by Wesco in 2000, and
 
    
    the steel service center business, through Precision Steel Warehouse, Inc. (Precision
Steel), which was begun in 1940 and acquired by Wesco in 1979.
    2




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
    
    Participation, since 2001, in several risk pools managed by a subsidiary of General
Reinsurance Corporation, covering principally hull, liability and workers compensation
exposures, relating to the aviation industry. For the past four years, Wes-FIC has
participated to the extent of 16.67% in several hull and liability pools and 5% of a
workers compensation pool. In July 2009, it began to participate to the extent of 25% in an
international pool. Another General Reinsurance Corporation subsidiary provides a portion of
the upper-level reinsurance protection to these aviation risk pools, and therefore to
Wes-FIC, on terms that could cause some conflict of interest under certain conditions, such
as in settling a large loss. Wes-FICs exposure to detrimental effects, however, is
mitigated because a senior manager of NICO who represents the membership interests of
Wes-FIC and unrelated pool members with an additional 75% of the hull and liability pools
and 90% of the workers compensation pool who have the same exposures to this potential
conflict of interest, has access to information regarding significant losses and thus is
able to address conflict issues that might arise.
 
    
    Participation, since the beginning of 2008, in a retrocession agreement with NICO, to
assume 10% of NICOs quota share reinsurance of Swiss Reinsurance Company and its major
property-casualty affiliates (Swiss Re). Under this agreement, Wes-FIC has assumed 2% part
of NICOs 20% quota share reinsurance of all Swiss Re property-casualty risks incepting over
the five-year period ending December 31, 2012 on the same terms as NICOs agreement with
Swiss Re. Wes-FICs share of written premiums under the contract was $241.1 million in 2010,
giving rise to earned premiums of $240.5 million, the latter representing 84.5% of Wes-FICs
2010 earned premiums and 31.4% of Wescos consolidated revenues. Annual premiums in each of
the two remaining years under the contract could vary significantly depending on market
conditions and opportunities. The contract expires at the end of 2012. See Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, beginning on page 15, for more
information about the impact of Wes-FICs participation in the Swiss Re contract.
    4




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billion million
 ,
     5




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
    
    expanding its corporate and individual customer base;
 
    
    enhancing its ability to capture an increasing number of Internet customers through its
on-line catalog and other web services;
 6




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
    
    making selective acquisitions; and
 
    
    continuing to develop various products and services.
       7




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8




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Item 1A.
    
    Risk Factors
  An investment in Wesco is not an investment in Berkshire Hathaway.
  Wescos investments are unusually concentrated and fair values are subject to loss in
value.
  Wesco is dependent for its investment and all other capital allocation decisions on a few key
people.
  9




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Wescos Wes-FIC subsidiary is dependent upon the Berkshire Insurance Group for its management
and personnel, and for opportunities to participate with the Berkshire Insurance Group in
reinsurance contracts representing essentially the entirety of its reinsurance business, as well as
a significant portion of its insurance business to date.
  Wescos tolerance for risk in its insurance businesses may result in a high degree of
volatility in periodic reported earnings.
    The degree of estimation error inherent in the process of estimating property and casualty
insurance loss reserves may result in a high degree of volatility in periodic reported
earnings.
  10




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Each of Wescos operating businesses faces intense competitive pressures.
  Unfavorable economic conditions could hurt Wescos operating businesses.
  Berkshire and Wesco have entered into a merger agreement. In the event the merger does not
close, there could be an adverse effect on the trading price of Wescos capital stock.
  In addition to the foregoing risk factors inherent in Wescos operations, Wescos shareholders
face a market liquidity risk because the daily trading volume of Wescos shares on NYSE Amex is
relatively low.
  
 Item 1B.
    
    Unresolved Staff Comments
  11




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##### Table of Contents



Item 2.
    
    Properties
       
 Item 3.
    
    Legal Proceedings
  Joel Krieger v. Wesco Financial Corporation, et al. James Kinsey v. Wesco Financial Corporation, et al.
 12




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Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
   2010
    
    2009Sales Price
    
    
    
    
    
    Sales PriceDividends
    
    
    
    
    
    
    
    
    
    DividendsQuarter Ended
    
    High
    
    Low
    
    Paid
    
    High
    
    Low
    
    PaidMarch 31
    
    $
    416
    
    
    $
    342
    
    
    $
    0.41
    
    
    $
    309
    
    
    $
    208
    
    
    $
    0.395June 30
    
    
    408
    
    
    
    319
    
    
    
    0.41
    
    
    
    323
    
    
    
    269
    
    
    
    0.395September 30
    
    
    387
    
    
    
    318
    
    
    
    0.41
    
    
    
    328
    
    
    
    285
    
    
    
    0.395December 31
    
    
    373
    
    
    
    352
    
    
    
    0.41
    
    
    
    354
    
    
    
    313
    
    
    
    0.395$
    1.64
    
    
    
    
    
    
    
    
    
    
    $
    1.580
    13




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Item 6.  Selected Financial Data
  December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Assets:Cash and cash equivalents
    
    $
    472,569
    
    
    $
    273,671
    
    
    $
    297,643
    
    
    $
    526,722
    
    
    $
    1,257,351Investments Securities with fixed maturities
    
    
    235,193
    
    
    
    229,872
    
    
    
    28,656
    
    
    
    38,600
    
    
    
    81,861Equity securities
    
    
    2,272,253
    
    
    
    2,065,627
    
    
    
    1,868,293
    
    
    
    1,919,425
    
    
    
    1,040,550Accounts receivable
    
    
    37,191
    
    
    
    37,983
    
    
    
    57,489
    
    
    
    42,841
    
    
    
    37,204Receivable from affiliates
    
    
    170,852
    
    
    
    173,476
    
    
    
    133,396
    
    
    
    36,671
    
    
    
    23,182Rental furniture
    
    
    177,680
    
    
    
    177,793
    
    
    
    217,597
    
    
    
    178,297
    
    
    
    182,846Goodwill of acquired businesses
    
    
    277,514
    
    
    
    277,590
    
    
    
    277,742
    
    
    
    266,607
    
    
    
    266,607Other assets
    
    
    148,692
    
    
    
    165,414
    
    
    
    169,879
    
    
    
    103,846
    
    
    
    80,704Total assets
    
    $
    3,791,944

    
    
    $
    3,401,426
    
    
    $
    3,050,695
    
    
    $
    3,113,009
    
    
    $
    2,970,305Liabilities:Insurance losses and loss
adjustment expenses Affiliated business
    
    $
    371,805
    
    
    $
    290,375
    
    
    $
    164,424
    
    
    $
    39,687
    
    
    $
    29,761Unaffiliated business
    
    
    36,579
    
    
    
    53,091
    
    
    
    50,844
    
    
    
    54,158
    
    
    
    48,549Unearned insurance premiums Affiliated business
    
    
    112,019
    
    
    
    110,477
    
    
    
    94,544
    
    
    
    15,041
    
    
    
    14,062Unaffiliated business
    
    
    9,545
    
    
    
    11,516
    
    
    
    13,251
    
    
    
    15,225
    
    
    
    15,298Deferred furniture rental income
and security deposits
    
    
    8,269
    
    
    
    11,846
    
    
    
    17,674
    
    
    
    19,947
    
    
    
    20,440Accounts payable and accrued
expenses
    
    
    73,500
    
    
    
    54,537
    
    
    
    61,145
    
    
    
    49,476
    
    
    
    48,258Notes payable
    
    
    51,200
    
    
    
    28,200
    
    
    
    40,400
    
    
    
    37,200
    
    
    
    38,200Income taxes payable, principally
deferred
    
    
    363,310
    
    
    
    290,667
    
    
    
    230,657
    
    
    
    347,416
    
    
    
    355,399Total liabilities
    

    $
    1,026,227
    
    
    $
    850,709
    
    
    $
    672,939
    
    
    $
    578,150
    
    
    $
    569,967Shareholders equity:Capital stock and additional paid-
in capital
    
    $
    33,324
    
    
    $
    33,324
    
    
    $
    33,324
    
    
    $
    33,324
    
    
    $
    33,324Accumulated other comprehensive
income Unrealized appreciation of
investments, net of taxes
    
    
    438,918
    
    
    
    284,051
    
    
    
    154,660
    
    
    
    381,017
    
    
    
    344,978Foreign currency translation
adjustments, net of taxes
    
    
    (1,553
    )
    
    
    (1,151
    )
    
    
    (1,897
    )
    
    
    
    
    
    
    Retained earnings
    
    
    2,295,028
    
    
    
    2,234,493
    
    
    
    2,191,669
    
    
    
    2,120,518
    
    
    
    2,022,036Total shareholders equity
    
    $
    2,765,717
    
    
    $
    2,550,717
    
    
    $
    2,377,756
    
    
    $
    2,534,859
    
    
    $
    2,400,338Per capital share
    
    $
    388.45
    
    
    $
    358.26
    
    
    $
    333.96
    
    
    $
    356.03
    
    
    $
    337.14
 14




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Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Revenues:Furniture rentals
    
    $
    309,439
    
    
    $
    312,234
    
    
    $
    340,162
    
    
    $
    327,671
    
    
    $
    324,300Sales and service revenues
    
    
    106,278
    
    
    
    106,342
    
    
    
    130,753
    
    
    
    129,861
    
    
    
    139,058Insurance premiums earned Affiliated business
    
    
    272,223
    
    
    
    307,560
    
    
    
    218,094
    
    
    
    35,530
    
    
    
    32,643Unaffiliated business
    
    
    12,294
    
    
    
    15,661
    
    
    
    19,870
    
    
    
    18,881
    
    
    
    21,506Dividend and interest income
    
    
    75,807
    
    
    
    67,458
    
    
    
    79,079
    
    
    
    90,872
    
    
    
    84,504Realized net investment gains
    
    
    6,541
    
    
    
    
    
    
    
    7,006
    
    
    
    24,240
    
    
    
    Other-than-temporary impairment
losses on investments
    
    
    (21,021
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    4,142
    
    
    
    4,076
    
    
    
    3,990
    
    
    
    3,869
    
    
    
    3,716765,703
    
    
    
    813,331
    
    
    
    798,954
    
    
    
    630,924
    
    
    
    605,727Costs and expenses:Cost of products and services sold
    
    
    124,245
    
    
    
    130,992
    
    
    
    149,319
    
    
    
    143,282
    
    
    
    154,218Insurance losses and loss adjustment
expenses Affiliated business
    
    
    182,925
    
    
    
    198,853
    
    
    
    151,308
    
    
    
    24,008
    
    
    
    21,401Unaffiliated business
    
    
    (2,669
    )
    
    
    14,454
    
    
    
    20,892
    
    
    
    4,269
    
    
    
    9,944Insurance underwriting expenses Affiliated business
    
    
    82,059
    
    
    
    92,857
    
    
    
    63,156
    
    
    
    8,019
    
    
    
    7,566Unaffiliated business
    
    
    5,525
    
    
    
    5,946
    
    
    
    7,135
    
    
    
    7,284
    
    
    
    7,294Selling, general and administrative
    
    
    281,929
    
    
    
    305,934
    
    
    
    300,231
    
    
    
    280,728
    
    
    
    265,327Interest expense
    
    
    504
    
    
    
    641
    
    
    
    1,798
    
    
    
    2,408
    
    
    
    2,711674,518
    
    
    
    749,677
    
    
    
    693,839
    
    
    
    469,998
    
    
    
    468,461Income before income taxes
    
    
    91,185
    
    
    
    63,654
    
    
    
    105,115
    
    
    
    160,926
    
    
    
    137,266Income taxes
    
    
    18,973
    
    
    
    9,581
    
    
    
    22,999
    
    
    
    51,765
    
    
    
    45,233Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116
    
    
    $
    109,161
    
    
    $
    92,033Amounts per share:Net income
    
    $
    10.14
    
    
    $
    7.59
    
    
    $
    11.53
    
    
    $
    15.33
    
    
    $
    12.93Cash dividends
    
    
    1.64
    
    
    
    1.58
    
    
    
    1.54
    
    
    
    1.50
    
    
    
    1.46
  
 Item 7.  Managements Discussion and Analysis of Financial Condition and Results of Operations
    15




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all after income tax
effect
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Insurance segment:Underwriting
    
    
    $10,840
    
    
    $
    7,222
    
    
    $
    (2,942
    )Investment income
    
    
    62,211
    
    
    
    55,781
    
    
    
    64,274Furniture rental segment
    
    
    11,480
    
    
    
    (1,359
    )
    
    
    15,744Industrial segment
    
    
    1,079
    
    
    
    (648
    )
    
    
    842Nonsegment items other than investment gains
    
    
    (3,986
    )
    
    
    (6,923
    )
    
    
    (356
    )Realized net investment gains
    
    
    4,252
    
    
    
    
    
    
    
    4,554Other-than-temporary impairment losses on investments
    
    
    (13,664
    )
    
    
    
    
    
    
    Consolidated net income
    
    
    $72,212
    
    
    $
    54,073
    
    
    $
    82,116
  18




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Insurance Segment
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Insurance premiums written Reinsurance
    
    $
    275,126
    
    
    $
    329,227
    
    
    $
    298,622Primary
    
    
    9,658
    
    
    
    9,964
    
    
    
    17,850Total
    
    $
    284,784
    
    
    $
    339,191
    
    
    $
    316,472Insurance premiums earned Reinsurance
    
    $
    274,567
    
    
    $
    311,144
    
    
    $
    217,584Primary
    
    
    9,950
    
    
    
    12,077
    
    
    
    20,380Total
    
    
    284,517
    
    
    
    323,221
    
    
    
    237,964Insurance losses, loss adjustment expenses and underwriting
expenses
    
    
    267,840
    
    
    
    312,110
    
    
    
    242,491Underwriting gain (loss), before income taxes Reinsurance
    
    
    13,820
    
    
    
    15,968
    
    
    
    (2,162
    )Primary
    
    
    2,857
    
    
    
    (4,857
    )
    
    
    (2,365
    )Total
    
    
    16,677
    
    
    
    11,111
    
    
    
    (4,527
    )Income taxes
    
    
    5,837
    
    
    
    3,889
    
    
    
    (1,585
    )Underwriting gain (loss)
    
    $
    10,840
    
    
    $
    7,222
    
    
    $
    (2,942
    )
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Year Ended December 31,2010
    
    
    2009
    
    
    2008Investment income, before taxes
    
    $
    75,643
    
    
    $
    67,253
    
    
    $
    77,914Income taxes
    
    
    13,432
    
    
    
    11,472
    
    
    
    13,640Investment income, after taxes
    
    $
    62,211
    
    
    $
    55,781
    
    
    $
    64,274
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Furniture Rental Segment
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:Furniture rentals
    
    $
    309,439
    
    
    $
    312,234
    
    
    $
    340,162Furniture sales
    
    
    51,075
    
    
    
    61,191
    
    
    
    61,800Service fees
    
    
    6,937
    
    
    
    6,771
    
    
    
    8,081367,451
    
    
    
    380,196
    
    
    
    410,043Cost of rentals, sales and fees
    
    
    85,837
    
    
    
    99,042
    
    
    
    97,997Selling, general and administrative expenses
    
    
    262,627
    
    
    
    283,590
    
    
    
    287,498Interest expense
    
    
    504
    
    
    
    640
    
    
    
    1,798348,968
    
    
    
    383,272
    
    
    
    387,293Income (loss) before income taxes
    
    
    18,483
    
    
    
    (3,076
    )
    
    
    22,750Income taxes
    
    
    7,003
    
    
    
    (1,717
    )
    
    
    7,006Segment net income (loss)
    
    $
    11,480
    
    
    $
    (1,359
    )
    
    $
    15,744
      23




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Industrial Segment
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues, principally sales and services
    
    $
    48,266
    
    
    $
    38,380
    
    
    $
    60,872Cost of sales and services
    
    
    38,408
    
    
    
    31,950
    
    
    
    51,323Selling, general and administrative expenses
    
    
    8,225
    
    
    
    7,435
    
    
    
    7,94846,633
    
    
    
    39,385
    
    
    
    59,271Income (loss) before income taxes
    
    
    1,633
    
    
    
    (1,005
    )
    
    
    1,601Income taxes
    
    
    554
    
    
    
    (357
    )
    
    
    759Segment net income (loss)
    
    $
    1,079
    
    
    $
    (648
    )
    
    $
    842
    24




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Unrelated to Business Segment Operations
    25




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Payments DueTotal
    
    
    2011
    
    
    2012-2013
    
    
    2014-2015
    
    
    ThereafterNotes payable, including interest
    
    $
    51,305
    
    
    $
    51,105
    
    
    $
    200
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    107,934
    
    
    
    26,659
    
    
    
    39,291
    
    
    
    23,308
    
    
    
    18,676Payment of insurance losses and loss
adjustment expenses*
    
    
    408,384
    
    
    
    104,905
    
    
    
    148,095
    
    
    
    98,774
    
    
    
    56,610Purchase obligations, other than for
capital expenditures
    
    
    9,064
    
    
    
    8,483
    
    
    
    406
    
    
    
    145
    
    
    
    30Purchase obligations for capital
expenditures
    
    
    4,379
    
    
    
    1,324
    
    
    
    1,638
    
    
    
    1,417
    
    
    
    Other, principally deferred
compensation
    
    
    6,782
    
    
    
    169
    
    
    
    339
    
    
    
    314
    
    
    
    5,960Totals
    
    $
    587,848
    
    
    $
    192,645
    
    
    $
    189,969
    
    
    $
    123,958
    
    
    $
    81,276
 
 *
    
    Amounts and timing of payments are significantly dependent on estimates. See Critical
Accounting Policies and Practices below. 26




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Use of Estimates in Preparation of Financial Statements
  Fair Value Measurements
    27




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##### Table of Contents



Investments
   Rental furniture
  28




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##### Table of Contents



Revenue recognition
     Losses and loss adjustment expenses
    29




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##### Table of Contents



December 31,
    
    
    December 31,2010
    
    
    2009Case reserves
    
    $
    165,125
    
    
    $
    121,389IBNR reserves
    
    
    243,259
    
    
    
    222,077Gross liability before ceded reinsurance
    
    
    408,384
    
    
    
    343,466Ceded reserves
    
    
    (24,271
    )*
    
    
    (19,288
    )*Net reserves
    
    $
    384,113
    
    
    $
    324,178
 
 *
    
    Represents principally, Wes-FICs proportionate share of reinsurance purchased by the
aviation pools. 30




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##### Table of Contents



Gross Unpaid Losses
    
    
    Net Unpaid Losses*Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Swiss Re contract
    
    $
    307,117
    
    
    $
    246,596
    
    
    $
    307,117
    
    
    $
    246,596Other reinsurance, principally aviation-related
    
    
    84,833
    
    
    
    80,170
    
    
    
    60,562
    
    
    
    61,152KBS primary
    
    
    16,434
    
    
    
    16,700
    
    
    
    16,434
    
    
    
    16,430Total
    
    $
    408,384
    
    
    $
    343,466
    
    
    $
    384,113
    
    
    $
    324,178
 
 *
    
    Net of reinsurance recoverable, and before foreign currency translation effects.   Reinsurance
   31




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##### Table of Contents



Primary insurance
  Goodwill of acquired businesses
   32




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##### Table of Contents



Realized Investment Gains and Losses and Other-Than-Temporary Impairments
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      33




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##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Increase
    
    
    Decrease
    
    
    Increase
    
    
    DecreaseMarket value of equity
securities As recorded
    
    $
    2,272,253
    
    
    $
    2,272,253
    
    
    $
    2,065,627
    
    
    $
    2,065,627Hypothetical
    
    
    3,408,380
    
    
    
    1,136,127
    
    
    
    3,098,440
    
    
    
    1,032,813Shareholders equity As recorded
    
    
    2,765,717
    
    
    
    2,765,717
    
    
    
    2,550,717
    
    
    
    2,550,717Hypothetical
    
    
    3,504,199
    
    
    
    2,027,235
    
    
    
    3,222,045
    
    
    
    1,879,388
        34




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##### Table of Contents



expects, anticipates, intends, plans, believes,
estimates, may, could,
  
 Item 8. Financial Statements and Supplementary Data
  Financial Statements
    
    Page Number(s)Report of independent registered public accounting firm
    
    48-49Consolidated balance sheet  December 31, 2010 and 2009
    
    50Consolidated statement of income  years ended December 31, 2010, 2009 and 2008
    
    51Consolidated statement of cash flows  years ended December 31, 2010, 2009
and 2008
    
    52Consolidated statement of changes in shareholders equity and comprehensive income
 years ended December 31, 2010, 2009 and 2008
    
    53Notes to consolidated financial statements
    
    54-69
  Financial Statement Schedule
    
    Schedule Number
    
    Page Number(s)Condensed financial information of Wesco 
December 31, 2010 and 2009, and years ended December 31, 2010,
2009 and 2008
    
    I
    
    70-71
 35




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##### Table of Contents



Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
    Internal Control  Integrated Framework
   
 
 Item 9B. Other Information
  36




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
        37




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38




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##### Table of Contents



39




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##### Table of Contents



Item 11. Executive Compensation
    Name
    
    Cash FeesCarolyn H. Carlburg
    
    $
    69,500
    (1,2)Robert E. Denham
    
    
    10,500Robert T. Flaherty
    
    
    38,500
    (2,3)Peter D. Kaufman
    
    
    13,500
    (3)Elizabeth Caspers Peters
    
    
    38,500
    (2)
 
 (1)
    
    Includes $9,000 paid to Ms. Carlburg as chair of the Audit Committee.(2)
    
    Includes retainers paid to Special Committee members early in 2011.(3)
    
    Includes fees of $3,000 each, paid to Messrs. Flaherty and Kaufman
as members of the Audit Committee, representing $750 for each of
four meetings they attended.     40




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41




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##### Table of Contents



(1)
 Annual CompensationAllName and Capacity in Which Served
    
    Year
    
    
    Salary(2)
    
    
    Bonus(3)
    
    
    Other(4)
    
    
    TotalCharles T. Munger  Chairman of the Board,
    
    
    2010
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    President and Chief Executive Officer of Wesco
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jeffrey L. Jacobson  Vice President and Chief Financial
    
    
    2010
    
    
    
    294,000
    
    
    
    
    
    
    
    
    
    
    
    294,000
    _Officer of Wesco and MS Property Company
    
    
    2009
    
    
    
    276,600
    
    
    
    
    
    
    
    
    
    
    
    276,6002008
    
    
    
    286,000
    
    
    
    
    
    
    
    
    
    
    
    286,000Robert E. Sahm  Vice President of Wesco and
    
    
    2010
    
    
    
    244,800
    
    
    
    20,400
    
    
    
    12,441
    
    
    
    277,641President of MS Property Company
    
    
    2009
    
    
    
    242,400
    
    
    
    20,400
    
    
    
    14,865
    
    
    
    277,6652008
    
    
    
    235,200
    
    
    
    20,000
    
    
    
    20,822
    
    
    
    276,022Christopher M. Greco  Treasurer of Wesco and
    
    
    2010
    
    
    
    266,000
    
    
    
    
    
    
    
    
    
    
    
    266,000Executive Vice President of MS Property Company
    
    
    2009
    
    
    
    256,400
    
    
    
    
    
    
    
    
    
    
    
    256,4002008
    
    
    
    177,600
    
    
    
    
    
    
    
    
    
    
    
    177,600
 
 (1)
    
    Wesco has no equity plans, deferred compensation arrangements, non-equity
incentive or pension plans for its executive officers.(2)
    
    Messrs. Munger, Jacobson and Greco have been employees of, and compensated by,
Blue Chip but have spent a portion of their time on the activities of Wesco and
its subsidiaries. The figures shown in this column for Messrs. Jacobson and Greco
represent amounts paid to Blue Chip by Wesco or its subsidiaries for their
services. Blue Chip has not been compensated by Wesco or its subsidiaries for Mr.
Mungers services. Mr. Munger was paid a total of $100,000 annually by Blue Chip
for 2010, 2009 and 2008. Mr. Sahm is compensated by MS Property Company.(3)
    
    Mr. Sahms bonus is based on a length-of-service formula applicable to all
employees of MS Property Company and is equal to one months salary.(4)
    
    Represents the value of company-owned automobile and club dues paid by MS Property.   42




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
   Wesco Capital Stock
    
    Berkshire Class A Stock
    
    Berkshire Class B StockAmount and Nature
    
    
    
    
    
    Amount and Nature
    
    
    
    
    
    Amount and Natureof Beneficial
    
    Percent
    
    of Beneficial
    
    Percent
    
    of Beneficial
    
    PercentName
    
    Ownership(1)
    
    of Class
    
    Ownership(1)
    
    of Class
    
    Ownership(1)
    
    of ClassBlue Chip Stamps
    
    
    5,703,087
    (2)
    
    
    80.1
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Carolyn H. Carlburg
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    550
    
    
    
    *Robert E. Denham
    
    
    1,270
    (3)
    
    
    *
    
    
    
    60
    (4)
    
    
    *
    
    
    
    9,250
    (4)
    
    
    *Robert T. Flaherty
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    *
    
    
    
    
    
    
    
    *Peter D. Kaufman
    
    
    1,000
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    2,300
    (5)
    
    
    *Charles T. Munger
    
    
    
    
    
    
    
    
    
    
    6,403
    
    
    
    *
    
    
    
    750
    
    
    
    *Elizabeth Caspers Peters
    
    
    66,843
    (6)
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Christopher M. Greco
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    (7)
    
    
    *Jeffrey L. Jacobson
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    *
    
    
    
    7,320
    (8)
    
    
    *Robert E. Sahm
    
    
    3,150
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    *All directors and
executive officers as a
group
    
    
    72,263
    (2,3,6,9)
    
    
    1.0
    
    
    
    6,612
    (4)
    
    
    *
    
    
    
    22,420
    (4,5,7,8)
    
    
    *
 
 *
    
    Less than 1%.(1)
    
    Beneficial owner has sole voting and investment power, except as indicated. With respect to
Berkshire shares, each share of Class A stock is convertible into one thousand five hundred
shares of Class B stock at the option of the shareholder. As a result, pursuant to Rule
13d-3(d)(1) of the Securities Exchange Act of 1934, a shareholder is deemed to have beneficial
ownership of the shares of Class B stock which such shareholder may acquire upon conversion of
the Class A stock. In order to avoid overstatement in this table, the amount of Class B stock
beneficially owned does not take into account such shares of Class B stock which may be
acquired upon conversion of shares of Class A stock held by a shareholder. The percentage of
outstanding Class B stock is based on the total number of shares of Class B stock outstanding
as of February 15, 2011 and does not take into account shares of Class B stock which may be
issued upon conversion of Class A stock. 43




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##### Table of Contents



(2)
    
    Voting and investment power may be deemed to be controlled by Berkshire and Warren E. Buffett
by virtue of the relationships described above. Blue Chips principal executive offices are
located at 301 East Colorado Boulevard, Suite 300, Pasadena, California 91101-1901.
Berkshires principal executive offices are located at 3555 Farnam Street, Omaha, Nebraska
68131, which is also Mr. Buffetts principal address.(3)
    
    Includes 270 shares held by Mr. Denhams spouse, as to which Mr. Denham disclaims beneficial
ownership.(4)
    
    Includes 20 Class A shares and 1,750 Class B shares as to which Mr. Denham has shared
beneficial ownership by virtue of a power of attorney, allowing Mr. Denham investment power
but with respect to which he has no voting power. Also includes 5,250 Class B shares as to
which Mr. Denham has voting and investment power but with respect to which he has no economic
interest.(5)
    
    Represents shares held by Mr. Kaufmans spouse, as to which Mr. Kaufman disclaims beneficial
ownership.(6)
    
    Includes 16,843 shares held by a trust of which Mrs. Peters is co-trustee with her children
and income beneficiary.(7)
    
    Includes 50 shares held by Mr. Grecos spouse, as to which Mr. Greco disclaims beneficial
ownership.(8)
    
    Includes 1,050 shares held jointly by Mr. Jacobson and his spouse as to which Mr. Jacobson
has shared voting and investment power and 300 shares as to which he has shared voting and
investment power but with respect to which he has no economic interest.(9)
    
    Does not include the 5,703,087 shares (80.1%) held by Blue Chip, of which Charles T. Munger,
Jeffrey L. Jacobson and Christopher M. Greco are directors and executive officers. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  .
   44




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
   Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 All Other Fees.
 Audit Fees Pre-approval Policy.
 45




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##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules
           46




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##### Table of Contents



SIGNATURES
  WESCO FINANCIAL CORPORATIONBy:
    
    /s/ Charles T. MungerCharles T. Munger
    
    February 25, 2011Chairman of the Board and President (principal executive officer)By:
    
    /s/ Jeffrey L. JacobsonJeffrey L. Jacobson
    
    February 25, 2011Vice President and Chief Financial Officer(principal financial and accounting officer)
  /s/ Carolyn H. CarlburgCarolyn H. Carlburg
    
    February 25, 2011Director/s/ Robert E. DenhamRobert E. Denham
    
    February 25, 2011Director/s/ Robert T. FlahertyRobert T. Flaherty
    
    February 25, 2011Director/s/ Peter D. KaufmanPeter D. Kaufman
    
    February 25, 2011Director/s/ Charles T. MungerCharles T. Munger
    
    February 25, 2011Director/s/ Elizabeth Caspers PetersElizabeth Caspers Peters
    
    February 25, 2011Director
 47




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control  Integrated Framework
    48




---



##### Table of Contents



Internal Control
 Integrated Framework
  
 49




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##### Table of Contents



WESCO FINANCIAL CORPORATION
 
 CONSOLIDATED BALANCE SHEET
 (Dollar amounts in thousands except for amounts per share)
 December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    472,569
    
    
    $
    273,671Investments Securities with fixed maturities
    
    
    235,193
    
    
    
    229,872Equity securities
    
    
    2,272,253
    
    
    
    2,065,627Accounts receivable
    
    
    37,191
    
    
    
    37,983Receivable from affiliates
    
    
    170,852
    
    
    
    173,476Rental furniture
    
    
    177,680
    
    
    
    177,793Goodwill of acquired businesses
    
    
    277,514
    
    
    
    277,590Other assets
    
    
    148,692
    
    
    
    165,414$
    3,791,944
    
    
    $
    3,401,426LIABILITIES AND SHAREHOLDERS EQUITYInsurance losses and loss adjustment expenses Affiliated business
    
    $
    371,805
    
    
    $
    290,375Unaffiliated business
    
    
    36,579
    
    
    
    53,091Unearned insurance premiums Affiliated business
    
    
    112,019
    
    
    
    110,477Unaffiliated business
    
    
    9,545
    
    
    
    11,516Deferred furniture rental income and security deposits
    
    
    8,269
    
    
    
    11,846Accounts payable and accrued expenses
    
    
    73,500
    
    
    
    54,537Notes payable
    
    
    51,200
    
    
    
    28,200Income taxes payable, principally deferred
    
    
    363,310
    
    
    
    290,667Total liabilities
    
    
    1,026,227
    
    
    
    850,709Shareholders equity 
Capital stock, $1 par value  authorized, 7,500,000 shares; issued and
outstanding, 7,119,807 shares
    
    
    7,120
    
    
    
    7,120Additional paid-in capital
    
    
    26,204
    
    
    
    26,204Accumulated other comprehensive income
    
    
    437,365
    
    
    
    282,900Retained earnings
    
    
    2,295,028
    
    
    
    2,234,493Total shareholders equity
    
    
    2,765,717
    
    
    
    2,550,717$
    3,791,944
    
    
    
    3,401,426
 See notes to consolidated financial statements.
 50




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WESCO FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENT OF INCOME
 (Dollar amounts in thousands except for amounts per share)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:Furniture rentals
    
    $
    309,439
    
    
    $
    312,234
    
    
    $
    340,162Sales and service revenues
    
    
    106,278
    
    
    
    106,342
    
    
    
    130,753Insurance premiums earned Affiliated business
    
    
    272,223
    
    
    
    307,560
    
    
    
    218,094Unaffiliated business
    
    
    12,294
    
    
    
    15,661
    
    
    
    19,870Dividend and interest income
    
    
    75,807
    
    
    
    67,458
    
    
    
    79,079Realized, net investment gains
    
    
    6,541
    
    
    
    
    
    
    
    7,006Other-than-temporary impairment losses on investments
    
    
    (21,021
    )
    
    
    
    
    
    
    Other
    
    
    4,142
    
    
    
    4,076
    
    
    
    3,990765,703
    
    
    
    813,331
    
    
    
    798,954Costs and expenses:Cost of products and services sold
    
    
    124,245
    
    
    
    130,992
    
    
    
    149,319Insurance losses and loss adjustment expenses Affiliated business
    
    
    182,925
    
    
    
    198,853
    
    
    
    151,308Unaffiliated business
    
    
    (2,669
    )
    
    
    14,454
    
    
    
    20,892Insurance underwriting expenses Affiliated business
    
    
    82,059
    
    
    
    92,857
    
    
    
    63,156Unaffiliated business
    
    
    5,525
    
    
    
    5,946
    
    
    
    7,135Selling, general and administrative expenses
    
    
    281,929
    
    
    
    305,934
    
    
    
    300,231Interest expense
    
    
    504
    
    
    
    641
    
    
    
    1,798674,518
    
    
    
    749,677
    
    
    
    693,839Income before income taxes
    
    
    91,185
    
    
    
    63,654
    
    
    
    105,115Income taxes
    
    
    18,973
    
    
    
    9,581
    
    
    
    22,999Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116Amounts per capital share based on 7,119,807 shares outstanding
throughout each year:Net income
    
    $
    10.14
    
    
    $
    7.59
    
    
    $
    11.53Cash dividends
    
    
    1.64
    
    
    
    1.58
    
    
    
    1.54
 See notes to consolidated financial statements.
 51




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WESCO FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (Dollar amounts in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116Adjustments to reconcile net income with net cash flows
from operating activities Gross profit on sale of rental furniture
    
    
    (17,964
    )
    
    
    (20,755
    )
    
    
    (22,447
    )Realized investment gains, net
    
    
    (6,541
    )
    
    
    
    
    
    
    (7,006
    )Other-than-temporary impairment losses
    
    
    21,021
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    46,595
    
    
    
    55,500
    
    
    
    49,574Change in liabilities for insurance losses and loss
adjustment 
expenses Affiliated business
    
    
    81,430
    
    
    
    125,951
    
    
    
    124,737Unaffiliated business
    
    
    (16,512
    )
    
    
    2,247
    
    
    
    (3,314
    )Change in unearned insurance premiums Affiliated business
    
    
    1,542
    
    
    
    15,933
    
    
    
    79,503Unaffiliated business
    
    
    (1,971
    )
    
    
    (1,735
    )
    
    
    (1,974
    )Change in receivable from affiliates
    
    
    7,177
    
    
    
    (40,080
    )
    
    
    (96,725
    )Change in income taxes payable
    
    
    (11,080
    )
    
    
    (9,410
    )
    
    
    4,953Other, net
    
    
    9,392
    
    
    
    12,134
    
    
    
    (16,767
    )Net cash flows from operating activities
    
    
    185,301
    
    
    
    193,858
    
    
    
    192,650Cash flows from investing activities:Purchases of securities with fixed maturities
    
    
    (13,123
    )
    
    
    (208,269
    )
    
    
    Purchases of equity securities
    
    
    
    
    
    
    
    
    
    
    (349,071
    )Purchases of rental furniture
    
    
    (69,525
    )
    
    
    (45,385
    )
    
    
    (74,572
    )Proceeds from redemptions and maturities of securities with
fixed maturities
    
    
    14,782
    
    
    
    8,639
    
    
    
    7,402Proceeds from sales of rental furniture
    
    
    51,075
    
    
    
    61,192
    
    
    
    61,800Proceeds from sales of equity securities
    
    
    11,394
    
    
    
    
    
    
    
    60,203Change in condominium construction in process
    
    
    18,734
    
    
    
    (5,420
    )
    
    
    (28,510
    )Acquisitions of businesses, net of cash acquired
    
    
    (4,631
    )
    
    
    (878
    )
    
    
    (81,428
    )Other, net
    
    
    (6,384
    )
    
    
    (4,333
    )
    
    
    (8,863
    )Net cash flows from investing activities
    
    
    2,322
    
    
    
    (194,454
    )
    
    
    (413,039
    )Cash flows from financing activities:Borrowings under revolving credit facility
    
    
    124,100
    
    
    
    45,100
    
    
    
    87,200Repayments under revolving credit facility
    
    
    (101,100
    )
    
    
    (57,300
    )
    
    
    (84,000
    )Payment of cash dividends
    
    
    (11,677
    )
    
    
    (11,249
    )
    
    
    (10,965
    )Net cash flows from financing activities
    
    
    11,323
    
    
    
    (23,449
    )
    
    
    (7,765
    )Effect of foreign currency exchange rate changes
    
    
    (48
    )
    
    
    73
    
    
    
    (925
    )Change in cash and cash equivalents
    
    
    198,898
    
    
    
    (23,972
    )
    
    
    (229,079
    )Cash and cash equivalents  beginning of year
    
    
    273,671
    
    
    
    297,643
    
    
    
    526,722Cash and cash equivalents  end of year
    
    $
    472,569
    
    
    $
    273,671
    
    
    $
    297,643Supplementary disclosuresInterest paid during year
    
    $
    318
    
    
    $
    713
    
    
    $
    1,744Income taxes paid, net, during year
    
    
    30,017
    
    
    
    19,133
    
    
    
    17,960
 See notes to consolidated financial statements.
 52




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##### Table of Contents



WESCO FINANCIAL CORPORATION
 
 CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS EQUITYAND COMPREHENSIVE INCOME
 (Dollar amounts in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Capital stock:Balance at beginning and end of year
    
    $
    7,120
    
    
    $
    7,120
    
    
    $
    7,120Additional paid-in capital:Balance at beginning and end of year
    
    $
    26,204
    
    
    $
    26,204
    
    
    $
    26,204Retained earnings:Balance at beginning of year
    
    $
    2,234,493
    
    
    $
    2,191,669
    
    
    $
    2,120,518Net income
    
    
    72,212
    
    
    
    54,073
    
    
    
    82,116Cash dividends declared and paid
    
    
    (11,677
    )
    
    
    (11,249
    )
    
    
    (10,965
    )Balance at end of year
    
    $
    2,295,028
    
    
    $
    2,234,493
    
    
    $
    2,191,669Accumulated other comprehensive income:Unrealized appreciation (depreciation) of investments,
net
    
    $
    224,034
    
    
    $
    198,917
    
    
    $
    (341,277
    )Applicable income taxes
    
    
    (78,579
    )
    
    
    (69,526
    )
    
    
    119,474Reclassification of investment appreciation (depreciation)
in net earnings, including other-than-temporary impairment
    
    
    14,480
    
    
    
    
    
    
    
    (7,006
    )Applicable income taxes
    
    
    (5,068
    )
    
    
    
    
    
    
    2,452Foreign currency translation adjustments
    
    
    (618
    )
    
    
    1,434
    
    
    
    (2,687
    )Applicable income taxes
    
    
    216
    
    
    
    (688
    )
    
    
    790Other comprehensive income (loss)
    
    
    154,465
    
    
    
    130,137
    
    
    
    (228,254
    )Accumulated other comprehensive income at beginning
of year
    
    
    282,900
    
    
    
    152,763
    
    
    
    381,017Accumulated other comprehensive income at end
of year
    
    $
    437,365
    
    
    $
    282,900
    
    
    $
    152,763Comprehensive income (loss):Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116Other comprehensive income (loss)
    
    
    154,465
    
    
    
    130,137
    
    
    
    (228,254
    )Total comprehensive income (loss)
    
    $
    226,677
    
    
    $
    184,210
    
    
    $
    (146,138
    )
 See notes to consolidated financial statements.
 53




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WESCO FINANCIAL CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollar amounts in thousands except for amounts per share)
 Note 1.  Significant Accounting Policies and Practices
 Nature of operations, basis of consolidation, and presentation
     Use of estimates in preparation of financial statements
  54




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Fair Value Measurements
      Cash equivalents
  Dollar amounts in thousands except for amounts per share
 55




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##### Table of Contents



Investments
   Accounts receivable
  Rental furniture
  Goodwill of acquired businesses
  Dollar amounts in thousands except for amounts per share
 56




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##### Table of Contents



Inventories
  Capitalized construction costs
  Revenue recognition
  Dollar amounts in thousands except for amounts per share
 57




---



##### Table of Contents



Losses and loss adjustment expenses
     Dollar amounts in thousands except for amounts per share
 58




---



##### Table of Contents



Income taxes
     Foreign currency
  Accounting pronouncements adopted in 2010 and 2009
  Dollar amounts in thousands except for amounts per share
 59




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##### Table of Contents



Accounting pronouncements not yet in effect
  Note 2.  Investments
  December 31, 2010Amortized
    
    
    Unrealized
    
    
    Fair
    
    
    CarryingCost
    
    
    Gains (Losses)
    
    
    Value
    
    
    ValueMortgage-backed securities
    
    $
    17,031
    
    
    $
    1,941
    
    
    $
    18,972
    
    
    $
    18,972Corporate bonds
    
    
    206,800
    
    
    
    5,400
    
    
    
    212,200
    
    
    
    206,800Other
    
    
    9,407
    
    
    
    14
    
    
    
    9,421
    
    
    
    9,421$
    233,238
    
    
    $
    7,355
    
    
    $
    240,593
    
    
    $
    235,193December 31, 2009Amortized
    
    
    Unrealized
    
    
    Fair
    
    
    CarryingCost
    
    
    Gains (Losses)
    
    
    Value
    
    
    ValueMortgage-backed securities
    
    $
    18,865
    
    
    $
    1,837
    
    
    $
    20,702
    
    
    $
    20,702Corporate bonds
    
    
    200,000
    
    
    
    
    
    
    
    200,000
    
    
    
    200,000Other
    
    
    8,265
    
    
    
    905
    
    
    
    9,170
    
    
    
    9,170$
    227,130
    
    
    $
    2,742
    
    
    $
    229,872
    
    
    $
    229,872
   Dollar amounts in thousands except for amounts per share
 60




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##### Table of Contents



Amortized Cost
    
    
    Fair ValueDue in 2011  2013
    
    $
    9,407
    
    
    $
    9,421Due in 2014
    
    
    206,800
    
    
    
    212,200Mortgage-backed securities
    
    
    17,031
    
    
    
    18,972$
    233,238
    
    
    $
    240,593
  December 31, 2010
    
    
    December 31, 2009Fair
    
    
    
    
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueThe Procter & Gamble Company
    
    $
    372,480
    
    
    $
    401,419
    
    
    $
    372,480
    
    
    $
    378,331The Coca-Cola Company
    
    
    40,761
    
    
    
    473,912
    
    
    
    40,761
    
    
    
    410,719Wells Fargo & Company
    
    
    382,779
    
    
    
    391,813
    
    
    
    382,779
    
    
    
    341,240Kraft Foods Incorporated
    
    
    325,816
    
    
    
    315,100
    
    
    
    325,816
    
    
    
    271,800US Bancorp
    
    
    245,919
    
    
    
    269,700
    
    
    
    266,940
    
    
    
    225,100Other
    
    
    232,007
    
    
    
    420,309
    
    
    
    243,661
    
    
    
    438,437$
    1,599,762
    
    
    $
    2,272,253
    
    
    $
    1,632,437
    
    
    $
    2,065,627
     Dollar amounts in thousands except for amounts per share
 61




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Fixed Maturity Securities Gross gains
    
    $
    6,800
    
    
    $
    
    
    
    $
    Gross losses
    
    
    
    
    
    
    
    
    
    
    Equity securities Gross gains
    
    
    
    
    
    
    
    
    
    
    7,006Gross losses
    
    
    (259
    )
    
    
    
    
    
    
    Total
    
    $
    6,541
    
    
    $
    
    
    
    $
    7,006
 Note 3.  Accounts Receivable
  December 31,
    
    
    December 31,2010
    
    
    2009Trade accounts receivable
    
    $
    39,700
    
    
    $
    40,592Allowance for uncollectible accounts
    
    
    (2,509
    )
    
    
    (2,609
    )$
    37,191
    
    
    $
    37,983
 Note 4.  Rental Furniture
  December 31,
    
    
    December 31,2010
    
    
    2009Cost of rental furniture
    
    $
    303,526
    
    
    $
    294,266Less accumulated depreciation
    
    
    (125,846
    )
    
    
    (116,473
    )$
    177,680
    
    
    $
    177,793
 Note 5.  Goodwill
  December 31,
    
    
    December 31,2010
    
    
    2009Balance at beginning of year
    
    $
    277,590
    
    
    $
    277,742Foreign currency translation
    
    
    (76
    )
    
    
    (152
    )Acquisitions of businesses and other
    
    
    
    
    
    
    $
    277,514
    
    
    $
    277,590
   Dollar amounts in thousands except for amounts per share
 62




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Note 6.  Insurance Losses and Loss Adjustment Expenses Payable
   2010
    
    
    2009
    
    
    2008Gross liabilities at beginning of year
    
    $
    343,466
    
    
    $
    215,268
    
    
    $
    93,845Less ceded liabilities*
    
    
    (19,288
    )
    
    
    (17,914
    )
    
    
    (23,502
    )Net balance at beginning of year
    
    
    324,178
    
    
    
    197,354
    
    
    
    70,343Incurred losses recorded during year For current year
    
    
    196,870
    
    
    
    225,451
    
    
    
    175,962For all prior years
    
    
    (16,614
    )
    
    
    (12,144
    )
    
    
    (3,762
    )Total incurred losses
    
    
    180,256
    
    
    
    213,307
    
    
    
    172,200Payments made during year For current year
    
    
    12,893
    
    
    
    34,618
    
    
    
    19,433For all prior years
    
    
    107,428
    
    
    
    51,865
    
    
    
    25,756Total payments
    
    
    120,321
    
    
    
    86,483
    
    
    
    45,189Net liabilities at end of year
    
    
    384,113
    
    
    
    324,178
    
    
    
    197,354Plus ceded liabilities*
    
    
    24,271
    
    
    
    19,288
    
    
    
    17,914Gross liabilities at end of year
    
    $
    408,384
    
    
    $
    343,466
    
    
    $
    215,268
 
 *
    
    Principally represents Wes-FICs proportionate share of reinsurance purchased by the
aviation pools.  Dollar amounts in thousands except for amounts per share
 63




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Note 7.  Notes Payable and Other Contractual Obligations
  December 31,2010
    
    
    2009Revolving credit facility
    
    $
    51,000
    
    
    $
    28,000Other
    
    
    200
    
    
    
    200$
    51,200
    
    
    $
    28,200
    Note 8.  Fair Value Measurements
  Total Fair
    
    
    Fair Value Measurements UsingValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)December 31, 2010Investments in fixed maturity securities
    
    $
    28,393
    
    
    $
    
    
    
    $
    28,393
    
    
    $
    Investments in equity securities
    
    
    2,272,253
    
    
    
    1,944,271
    
    
    
    
    
    
    
    327,982December 31, 2009Investments in fixed maturity securities
    
    $
    29,872
    
    
    $
    
    
    
    $
    29,872
    
    
    $
    Investments in equity securities
    
    
    2,065,627
    
    
    
    1,726,878
    
    
    
    
    
    
    
    338,749
  Investments inEquity SecuritiesBalance at December 31, 2009
    
    $
    338,749Change in unrealized gains included in other comprehensive income
    
    
    (10,767
    )Purchases
    
    
    Balance at December 31, 2010
    
    $
    327,982
 Dollar amounts in thousands except for amounts per share
 64




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##### Table of Contents



Investments inEquity SecuritiesBalance at December 31, 2008
    
    $
    209,510Change in unrealized gains included in other comprehensive income
    
    
    129,239Purchases
    
    
    Balance at December 31, 2009
    
    $
    338,749
 Note 9.  Income Taxes
  December 31,2010
    
    
    2009Deferred tax liabilities, relating to Appreciation of investments
    
    $
    237,136
    
    
    $
    153,511Cost basis differences in investments
    
    
    116,368
    
    
    
    116,368Other items
    
    
    60,831
    
    
    
    63,794414,335
    
    
    
    333,673Deferred tax assets
    
    
    (54,069
    )
    
    
    (43,066
    )Net deferred tax liabilities
    
    
    360,266
    
    
    
    290,607Taxes currently payable
    
    
    2,374
    
    
    
    60Other
    
    
    670
    
    
    
    Income taxes payable
    
    $
    363,310
    
    
    $
    290,667
  2010
    
    
    2009
    
    
    2008Federal
    
    $
    18,784
    
    
    $
    12,786
    
    
    $
    24,958State
    
    
    652
    
    
    
    (2,517
    )
    
    
    (957
    )Foreign
    
    
    (463
    )
    
    
    (688
    )
    
    
    (1,002
    )Provision for income taxes
    
    $
    18,973
    
    
    $
    9,581
    
    
    $
    22,999Current
    
    $
    31,553
    
    
    $
    17,349
    
    
    $
    15,987Deferred
    
    
    (12,580
    )
    
    
    (7,768
    )
    
    
    7,012Provision for income taxes
    
    $
    18,973
    
    
    $
    9,581
    
    
    $
    22,999
  2010
    
    2009
    
    2008Statutory Federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase (decrease) resulting from Dividends received deduction
    
    
    (16.9
    )
    
    
    (25.1
    )
    
    
    (14.6
    )State income taxes, less Federal tax benefit
    
    
    (0.3
    )
    
    
    (2.7
    )
    
    
    (0.3
    )Other differences, net
    
    
    3.0
    
    
    
    7.9
    
    
    
    1.8Effective income tax provision rate
    
    
    20.8
    %
    
    
    15.1
    %
    
    
    21.9
    %
  Dollar amounts in thousands except for amounts per share
 65




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##### Table of Contents



Note 10.  Recent Events
  Note 11.  Litigation and Environmental Matters
  Joel Krieger v. Wesco Financial Corporation, et al. James Kinsey v. Wesco Financial Corporation, et al.
  Dollar amounts in thousands except for amounts per share
 66




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##### Table of Contents



Note 12.  Quarterly Financial Information
  Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    Total For Year2010Revenues
    
    $
    191,798
    
    
    $
    197,092
    
    
    $
    197,491
    
    
    $
    179,322
    
    
    $
    765,703Net income
    
    $
    12,327
    
    
    $
    31,270
    
    
    $
    17,748
    
    
    $
    10,867
    
    
    $
    72,212Per capital share
    
    
    1.73
    
    
    
    4.39
    
    
    
    2.49
    
    
    
    1.53
    
    
    
    10.142009Revenues
    
    $
    210,802
    
    
    $
    202,515
    
    
    $
    203,884
    
    
    $
    196,130
    
    
    $
    813,331Net income
    
    $
    19,959
    
    
    $
    12,930
    
    
    $
    9,882
    
    
    $
    11,302
    
    
    $
    54,073Per capital share
    
    
    2.80
    
    
    
    1.82
    
    
    
    1.39
    
    
    
    1.58
    
    
    
    7.59Realized investment
gains 
(losses) 2010Before taxes (included in
revenues)
    
    $
    (259
    )
    
    $
    
    
    
    $
    4,000
    
    
    $
    (18,221
    )*
    
    $
    (14,480
    )*After taxes (included in
net income)
    
    
    (168
    )
    
    
    
    
    
    
    2,600
    
    
    
    (11,844
    )*
    
    
    ($9,412
    )*2009None
 
 *
    
    Includes OTTI losses of $21.0 million ($13.7 million, after taxes), as applicable. Note 13.  Business Segment Data
    Dollar amounts in thousands except for amounts per share
 67




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Dollar amounts in thousands except for amounts per share
 68




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Insurance segment:Premiums earned
    
    $
    284,517
    
    
    $
    323,221
    
    
    $
    237,964Dividend and interest income
    
    
    75,643
    
    
    
    67,253
    
    
    
    77,914Income taxes
    
    
    19,269
    
    
    
    15,156
    
    
    
    12,055Net income
    
    
    73,051
    
    
    
    63,003
    
    
    
    61,332Depreciation and amortization other than of discounts and
premiums of investments
    
    
    27
    
    
    
    26
    
    
    
    36Advertising expense
    
    
    65
    
    
    
    111
    
    
    
    138Capital expenditures
    
    
    23
    
    
    
    7
    
    
    
    4Goodwill of acquired businesses
    
    
    26,991
    
    
    
    26,991
    
    
    
    26,991Assets at yearend
    
    
    3,184,937
    
    
    
    2,782,500
    
    
    
    2,363,454Furniture rental segment:Revenues
    
    $
    367,451
    
    
    $
    380,196
    
    
    $
    410,043Income taxes
    
    
    7,003
    
    
    
    (1,717
    )
    
    
    7,006Net income (loss)
    
    
    11,480
    
    
    
    (1,359
    )
    
    
    15,744Depreciation and amortization other than of discounts and
premiums of investments
    
    
    45,815
    
    
    
    53,783
    
    
    
    43,195Advertising expense
    
    
    10,355
    
    
    
    12,837
    
    
    
    16,762Interest expense
    
    
    504
    
    
    
    640
    
    
    
    1,798Capital expenditures
    
    
    4,642
    
    
    
    2,972
    
    
    
    7,197Goodwill of acquired businesses
    
    
    250,523
    
    
    
    250,599
    
    
    
    250,751Assets at yearend
    
    
    507,393
    
    
    
    502,779
    
    
    
    561,163Industrial segment:Sales, service and other revenues
    
    $
    48,266
    
    
    $
    38,380
    
    
    $
    60,872Income taxes
    
    
    554
    
    
    
    (357
    )
    
    
    759Net income (loss)
    
    
    1,079
    
    
    
    (648
    )
    
    
    842Depreciation and amortization
    
    
    404
    
    
    
    402
    
    
    
    409Advertising expense
    
    
    202
    
    
    
    211
    
    
    
    202Capital expenditures
    
    
    191
    
    
    
    230
    
    
    
    456Assets at yearend
    
    
    18,668
    
    
    
    19,502
    
    
    
    16,734Realized investment gains:Before taxes (included in revenues)
    
    $
    (14,480
    )
    
    $
    
    
    
    $
    7,006After taxes (included in net income)
    
    
    (9,412
    )
    
    
    
    
    
    
    4,554Other items unrelated to business segments:Dividend and interest income
    
    $
    164
    
    
    $
    205
    
    
    $
    1,165Other revenues
    
    
    4,142
    
    
    
    4,076
    
    
    
    3,990Income taxes
    
    
    (2,785
    )
    
    
    (3,501
    )
    
    
    726Net income (loss)
    
    
    (3,986
    )
    
    
    (6,923
    )
    
    
    (356
    )Depreciation and amortization
    
    
    321
    
    
    
    387
    
    
    
    351Capital expenditures
    
    
    48
    
    
    
    755
    
    
    
    95Assets at yearend
    
    
    80,946
    
    
    
    96,645
    
    
    
    109,344Consolidated revenues (total of those set forth above)
    
    $
    765,703
    
    
    $
    813,331
    
    
    $
    798,954Consolidated assets (total of those set forth above)
    
    $
    3,791,944
    
    
    $
    3,401,426
    
    
    $
    3,050,695
 Dollar amounts in thousands except for amounts per share
 69




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##### Table of Contents



WESCO FINANCIAL CORPORATION
SCHEDULE I  CONDENSED FINANCIAL
INFORMATION OF REGISTRANT
BALANCE SHEET
(Dollar amounts in thousands)
 December 31,2010
    
    
    2009Assets:Cash and cash equivalents
    
    $
    41
    
    
    $
    18Investment in subsidiaries, at cost plus equity in subsidiaries
undistributed earnings and unrealized appreciation
    
    
    2,980,774
    
    
    
    2,749,442$
    2,980,815
    
    
    $
    2,749,460Liabilities and shareholders equity:Loans from subsidiaries
    
    $
    212,192
    
    
    $
    198,268Income taxes payable
    
    
    (943
    )
    
    
    128Other liabilities
    
    
    3,849
    
    
    
    347Total liabilities
    
    
    215,098
    
    
    
    198,743Shareholders equity (see consolidated balance sheet and statement of
changes in shareholders equity)
    
    
    2,765,717
    
    
    
    2,550,717$
    2,980,815
    
    
    $
    2,749,460
 STATEMENT OF INCOME
(Dollar amounts in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues
    
    $
    
    
    
    $
    
    
    
    $
    Expenses:Intercompany interest
    
    
    1,791
    
    
    
    1,914
    
    
    
    5,083General and administrative
    
    
    5,373
    
    
    
    1,041
    
    
    
    1,2777,164
    
    
    
    2,955
    
    
    
    6,360Loss before items shown below
    
    
    (7,164
    )
    
    
    (2,955
    )
    
    
    (6,360
    )Income taxes
    
    
    (2,507
    )
    
    
    (1,034
    )
    
    
    (2,225
    )Equity in undistributed earnings of subsidiaries
    
    
    76,869
    
    
    
    55,994
    
    
    
    86,251Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116
 See notes to consolidated financial statements.
 70




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##### Table of Contents



WESCO FINANCIAL CORPORATION
SCHEDULE I  CONDENSED FINANCIAL
INFORMATION OF REGISTRANT (Continued)
STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    72,212
    
    
    $
    54,073
    
    
    $
    82,116Adjustments to reconcile net income with cash flows from
operating activities Change in income taxes payable currently
    
    
    (1,071
    )
    
    
    66
    
    
    
    (417
    )Equity in undistributed earnings of subsidiaries
    
    
    (76,869
    )
    
    
    (55,994
    )
    
    
    (86,251
    )Other, net
    
    
    3,502
    
    
    
    25
    
    
    
    202Net cash flows from operating activities
    
    
    (2,226
    )
    
    
    (1,830
    )
    
    
    (4,350
    )Cash flows from financing activities:Borrowings from subsidiaries, net
    
    
    13,924
    
    
    
    13,064
    
    
    
    15,331Payment of cash dividends
    
    
    (11,675
    )
    
    
    (11,249
    )
    
    
    (10,965
    )Net cash flows from financing activities
    
    
    2,249
    
    
    
    1,815
    
    
    
    4,366Increase (decrease) in cash and cash equivalents
    
    
    23
    
    
    
    (15
    )
    
    
    16Cash and cash equivalents  beginning of year
    
    
    18
    
    
    
    33
    
    
    
    17Cash and cash equivalents  end of year
    
    $
    41
    
    
    $
    18
    
    
    $
    33
 See notes to consolidated financial statements.
 71