Some investors in Berkshire may become impatient if it doesn’t do some big deals. The company’s cash pile had increased to $116 billion at the end of 2017, much of which was held in United States Treasuries.

Still Mr. Buffett said he and Charles T. Munger, Berkshire’s vice chairman, were happy to sit on the sidelines:

“Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.” “Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.”

Berkshire vs. S.&P. 500

Mr. Buffett has long set the goal of beating the Standard & Poor’s 500 index and in 2017, Berkshire did just that.

The company’s book value rose 23 percent, while its stock price climbed 21.9 percent. The S.&P. 500 climbed 21.8 percent.

For years, Berkshire’s book value was Mr. Buffett’s preferred measure for comparing Berkshire’s performance to the S.&P. 500 and he highlighted the comparison on a table on the first page of the letter. But outperforming the S.&P. 500 has become more difficult as Berkshire has grown and shifted to buying whole companies. A few years ago, Mr. Buffett added Berkshire’s annual stock price performance to the table.

Hurricanes and ‘Mega-cats’

Hurricanes. The insurance segment of Mr. Buffett’s letter contains an interesting discussion on hurricane losses. It says that the hurricanes that hit Texas, Florida and Puerto Rico last year will lead to $100 billion of losses for insurers. Berkshire estimates that its hit will total $2 billion after taxes, or less than 1 percent of its net worth. That percentage, according to Berkshire, is far below the 7 to 15 percent losses suffered by some reinsurance companies.

Introducing the mega-catastrophe. Mr. Buffett puts a 2 percent annual probability on the occurrence of a “mega-catastrophe” causing losses of $400 billion or more, but he said the risk could rise. “No one, of course, knows the correct probability,” he wrote. “We do know, however, that the risk increases over time because of growth in both the number and value of structures located in catastrophe-vulnerable areas.”

And according to Mr. Buffett, Berkshire need not fear a mega-cat. “No company comes close to Berkshire in being financially prepared for a $400 billion mega-cat. Our share of such a loss might be $12 billion or so, an amount far below the annual earnings we expect from our non-insurance activities,” he wrote.