FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ 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 001-14905

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

Delaware	47-0813844
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3555 Farnam Street, Omaha, Nebraska 68131

(Address of principal executive office) (Zip Code)

(402) 346-1400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Class A Common Stock Class B Common Stock 0.750% Senior Notes due 2023 1.125% Senior Notes due 2027 1.625% Senior Notes due 2035 1.300% Senior Notes due 2024 2.150% Senior Notes due 2028 0.625% Senior Notes due 2023 0.000% Senior Notes due 2025 2.375% Senior Notes due 2039 0.500% Senior Notes due 2041 2.625% Senior Notes due 2059	BRK.A BRK.B BRK23 BRK27 BRK35 BRK24 BRK28 BRK23A BRK25 BRK39 BRK41 BRK59	New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐    No  ☒

Number of shares of common stock outstanding as of July 26, 2021:

Class A —	623,466
Class B —	1,325,373,100

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information
Item 1.  Financial Statements
	Consolidated Balance Sheets—June 30, 2021 and December 31, 2020	2-3
	Consolidated Statements of Earnings—Second Quarter and First Six Months 2021 and 2020	4
	Consolidated Statements of Comprehensive Income—Second Quarter and First Six Months 2021 and 2020	5
	Consolidated Statements of Changes in Shareholders’ Equity—Second Quarter and First Six Months 2021 and 2020	5
	Consolidated Statements of Cash Flows—First Six Months 2021 and 2020	6
	Notes to Consolidated Financial Statements	7-23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24-42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
Part II – Other Information		43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signature		45

1

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	38,924	$	44,714
Short-term investments in U.S. Treasury Bills		101,760		90,300
Investments in fixed maturity securities		20,460		20,410
Investments in equity securities		307,942		281,170
Equity method investments		16,542		17,303
Loans and finance receivables		19,900		19,201
Other receivables		36,044		32,310
Inventories		19,393		19,208
Property, plant and equipment		20,865		21,200
Equipment held for lease		14,659		14,601
Goodwill		47,080		47,121
Other intangible assets		28,853		29,462
Deferred charges under retroactive reinsurance contracts		11,968		12,441
Other		15,638		14,580
		700,028		664,021
Railroad, Utilities and Energy:
Cash and cash equivalents*		3,374		3,276
Receivables		4,229		3,542
Property, plant and equipment		152,787		151,216
Goodwill		26,678		26,613
Regulatory assets		3,610		3,440
Other		21,787		21,621
		212,465		209,708
	$	912,493	$	873,729

* Includes U.S. Treasury Bills with maturities of three months or less when purchased of $16.6 billion at June 30, 2021 and $23.2 billion at December 31, 2020.

See accompanying Notes to Consolidated Financial Statements

2

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30 2021			December 31, 2020
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	82,958		$	79,854
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		40,237			40,966
Unearned premiums		23,732			21,395
Life, annuity and health insurance benefits		22,106			21,616
Other policyholder liabilities		8,528			8,670
Accounts payable, accruals and other liabilities		29,816			29,279
Derivative contract liabilities		355			1,065
Aircraft repurchase liabilities and unearned lease revenues		5,819			5,856
Notes payable and other borrowings		40,561			41,522
		254,112			250,223
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		15,728			15,224
Regulatory liabilities		7,614			7,475
Notes payable and other borrowings		74,662			75,373
		98,004			98,072
Income taxes, principally deferred		81,577			74,098
Total liabilities		433,693			422,393
Shareholders’ equity:
Common stock		8			8
Capital in excess of par value		35,635			35,626
Accumulated other comprehensive income		(4,219	)		(4,243	)
Retained earnings		484,431			444,626
Treasury stock, at cost		(45,446	)		(32,853	)
Berkshire Hathaway shareholders’ equity		470,409			443,164
Noncontrolling interests		8,391			8,172
Total shareholders’ equity		478,800			451,336
	$	912,493		$	873,729

See accompanying Notes to Consolidated Financial Statements

3

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

	Second Quarter					First Six Months
	2021		2020			2021		2020
	(Unaudited)					(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	17,163	$	15,595		$	33,587	$	31,343
Sales and service revenues		36,743		28,703			70,441		60,629
Leasing revenues		1,447		1,161			2,771		2,589
Interest, dividend and other investment income		1,898		2,150			3,749		4,426
		57,251		47,609			110,548		98,987
Railroad, Utilities and Energy:
Freight rail transportation revenues		5,778		4,573			11,156		9,953
Energy operating revenues		4,302		3,419			9,150		7,053
Service revenues and other income		1,783		1,239			2,859		2,112
		11,863		9,231			23,165		19,118
Total revenues		69,114		56,840			133,713		118,105
Investment and derivative contract gains (losses)		27,394		40,085			33,094		(30,190	)
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		12,175		10,066			23,139		21,045
Life, annuity and health insurance benefits		1,459		1,407			2,939		2,790
Insurance underwriting expenses		3,065		3,067			6,079		5,991
Cost of sales and services		28,761		23,216			55,291		48,608
Cost of leasing		982		749			1,864		1,751
Selling, general and administrative expenses		5,045		4,652			8,955		9,123
Goodwill and intangible asset impairments		—		10,634			—		10,634
Interest expense		298		258			574		554
		51,785		54,049			98,841		100,496
Railroad, Utilities and Energy:
Freight rail transportation expenses		3,588		2,871			7,098		6,464
Utilities and energy cost of sales and other expenses		3,220		2,503			6,809		5,225
Other expenses		1,563		1,092			2,656		1,941
Interest expense		778		744			1,552		1,472
		9,149		7,210			18,115		15,102
Total costs and expenses		60,934		61,259			116,956		115,598
Earnings (loss) before income taxes and equity method earnings		35,574		35,666			49,851		(27,683	)
Equity method earnings (loss)		147		(257	)		398		43
Earnings (loss) before income taxes		35,721		35,409			50,249		(27,640	)
Income tax expense (benefit)		7,296		9,002			9,984		(4,350	)
Net earnings (loss)		28,425		26,407			40,265		(23,290	)
Earnings attributable to noncontrolling interests		331		112			460		161
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	28,094	$	26,295		$	39,805	$	(23,451	)
Net earnings (loss) per average equivalent Class A share	$	18,488	$	16,314		$	26,078	$	(14,500	)
Net earnings (loss) per average equivalent Class B share*	$	12.33	$	10.88		$	17.39	$	(9.67	)
Average equivalent Class A shares outstanding		1,519,576		1,611,760			1,526,392		1,617,325
Average equivalent Class B shares outstanding		2,279,363,382		2,417,640,311			2,289,587,640		2,425,986,839

* Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings per average equivalent Class B share outstanding is equal to one-fifteen-hundredth of the equivalent Class A amount. See Note 17.

See accompanying Notes to Consolidated Financial Statements

4

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

	Second Quarter						First Six Months
	2021			2020			2021			2020
	(Unaudited)						(Unaudited)
Net earnings (loss)	$	28,425		$	26,407		$	40,265		$	(23,290	)
Other comprehensive income:
Unrealized appreciation of investments		12			203			(75	)		23
Applicable income taxes		(2	)		(50	)		18			(9	)
Foreign currency translation		312			586			27			(868	)
Applicable income taxes		(11	)		(10	)		(14	)		37
Defined benefit pension plans		43			15			104			110
Applicable income taxes		(9	)		(1	)		(29	)		(22	)
Other, net		13			24			7			(35	)
Other comprehensive income, net		358			767			38			(764	)
Comprehensive income		28,783			27,174			40,303			(24,054	)
Comprehensive income attributable to noncontrolling interests		202			125			338			121
Comprehensive income attributable to Berkshire Hathaway shareholders	$	28,581		$	27,049		$	39,965		$	(24,175	)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in millions)

(Unaudited)

	Berkshire Hathaway shareholders’ equity
	Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non- controlling interests			Total
For the second quarter and first six months of 2021
Balance at December 31, 2020	$	35,634		$	(4,243	)	$	444,626		$	(32,853	)	$	8,172		$	451,336
Net earnings (loss)		—			—			11,711			—			129			11,840
Other comprehensive income, net		—			(327	)		—			—			7			(320	)
Acquisition of common stock		—			—			—			(6,565	)		—			(6,565	)
Transactions with noncontrolling interests		4			—			—			—			(119	)		(115	)
Balance at March 31, 2021	$	35,638		$	(4,570	)	$	456,337		$	(39,418	)	$	8,189		$	456,176
Net earnings (loss)		—			—			28,094			—			331			28,425
Other comprehensive income, net		—			351			—			—			7			358
Acquisition of common stock		—			—			—			(6,028	)		—			(6,028	)
Transactions with noncontrolling interests		5			—			—			—			(136	)		(131	)
Balance at June 30, 2021	$	35,643		$	(4,219	)	$	484,431		$	(45,446	)	$	8,391		$	478,800
For the second quarter and first six months of 2020
Balance at December 31, 2019	$	35,666		$	(5,243	)	$	402,493		$	(8,125	)	$	3,772		$	428,563
Net earnings (loss)		—			—			(49,746	)		—			49			(49,697	)
Adoption of new accounting pronouncement		—			—			(388	)		—			—			(388	)
Other comprehensive income, net		—			(1,478	)		—			—			(53	)		(1,531	)
Acquisition of common stock		—			—			—			(1,575	)		—			(1,575	)
Transactions with noncontrolling interests		(39	)		—			—			—			(98	)		(137	)
Balance at March 31, 2020	$	35,627		$	(6,721	)	$	352,359		$	(9,700	)	$	3,670		$	375,235
Net earnings (loss)		—			—			26,295			—			112			26,407
Other comprehensive income, net		—			754			—			—			13			767
Acquisition of common stock		—			—			—			(5,115	)		—			(5,115	)
Transactions with noncontrolling interests		(4	)		—			—			—			(37	)		(41	)
Balance at June 30, 2020	$	35,623		$	(5,967	)	$	378,654		$	(14,815	)	$	3,758		$	397,253

See accompanying Notes to Consolidated Financial Statements

5

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

	First Six Months
	2021			2020
	(Unaudited)
Cash flows from operating activities:
Net earnings (loss)	$	40,265		$	(23,290	)
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses		(32,384	)		29,593
Depreciation and amortization		5,345			5,109
Other, including asset impairment charges		33			10,520
Changes in operating assets and liabilities:
Losses and loss adjustment expenses		2,357			2,140
Deferred charges reinsurance assumed		473			554
Unearned premiums		2,375			1,268
Receivables and originated loans		(4,825	)		(1,885	)
Other assets		(909	)		(760	)
Other liabilities		(664	)		(298	)
Income taxes		7,493			(5,485	)
Net cash flows from operating activities		19,559			17,466
Cash flows from investing activities:
Purchases of equity securities		(3,589	)		(4,800	)
Sales of equity securities		8,596			15,743
Purchases of U.S. Treasury Bills and fixed maturity securities		(99,731	)		(113,169	)
Sales of U.S. Treasury Bills and fixed maturity securities		10,814			12,689
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities		77,541			54,422
Purchases of loans and finance receivables		(56	)		(608	)
Collections of loans and finance receivables		218			156
Acquisitions of businesses, net of cash acquired		(104	)		(82	)
Purchases of property, plant and equipment and equipment held for lease		(5,663	)		(6,187	)
Other		541			(715	)
Net cash flows from investing activities		(11,433	)		(42,551	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		2,949			3,428
Repayments of borrowings of insurance and other businesses		(2,481	)		(2,092	)
Proceeds from borrowings of railroad, utilities and energy businesses		1,464			6,254
Repayments of borrowings of railroad, utilities and energy businesses		(2,546	)		(2,291	)
Changes in short term borrowings, net		(65	)		(1,166	)
Acquisition of treasury stock		(12,560	)		(6,739	)
Other		(339	)		(214	)
Net cash flows from financing activities		(13,578	)		(2,820	)
Effects of foreign currency exchange rate changes		(112	)		(140	)
Increase (decrease) in cash and cash equivalents and restricted cash		(5,564	)		(28,045	)
Cash and cash equivalents and restricted cash at beginning of year*		48,396			64,632
Cash and cash equivalents and restricted cash at end of second quarter*	$	42,832		$	36,587
*Cash and cash equivalents and restricted cash are comprised of the following:
Beginning of year—
Insurance and Other	$	44,714		$	61,151
Railroad, Utilities and Energy		3,276			3,024
Restricted cash included in other assets		406			457
	$	48,396		$	64,632
End of second quarter—
Insurance and Other	$	38,924		$	32,318
Railroad, Utilities and Energy		3,374			3,756
Restricted cash included in other assets		534			513
	$	42,832		$	36,587

See accompanying Notes to Consolidated Financial Statements

6

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

Note 1. General

The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (“Berkshire” or “Company”) consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds controlling financial interests as of the financial statement date. In these notes, the terms “us,” “we” or “our” refer to Berkshire and its consolidated subsidiaries. Reference is made to Berkshire’s most recently issued Annual Report on Form 10-K (“Annual Report”), which includes information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. Our significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report.

Financial information in this Quarterly Report reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States (“GAAP”). For a number of reasons, our results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be more significant to results of interim periods than to results for a full year. Given the size of our equity security investment portfolio, changes in market prices and the related changes in unrealized gains on equity securities will produce significant volatility in our interim and annual earnings. In addition, changes in the fair values of certain derivative contract liabilities, gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies and the magnitude of asset impairment charges can cause significant variations in periodic net earnings.

The novel coronavirus (“COVID-19”) spread rapidly across the world in 2020 and was declared a pandemic by the World Health Organization. The government and private sector responses to contain its spread began to significantly affect our operating businesses in March of 2020. The COVID-19 pandemic adversely affected nearly all of our operations during 2020 and in particular during the second quarter, although the effects varied significantly. The extent of the effects over longer terms cannot be reasonably estimated at this time. Risks and uncertainties resulting from the pandemic that may affect our future earnings, cash flows and financial condition include the ability to vaccinate a significant number of people in the U.S. and throughout the world as well as the long-term effect from the pandemic on the demand for certain of our products and services. Accordingly, significant estimates used in the preparation of our financial statements, including those associated with evaluations of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us and the estimations of certain losses assumed under insurance and reinsurance contracts, may be subject to significant adjustments in future periods.

Note 2. New accounting pronouncements

We adopted Accounting Standards Codification (“ASC”) 326 “Financial Instruments-Credit Losses” on January 1, 2020. ASC 326 provides for the measurement of expected credit losses on financial assets that are carried at amortized cost based on the net amounts expected to be collected. Measurements of expected credit losses therefore include provisions for non-collection, whether the risk is probable or remote. Prior to the adoption of ASC 326, credit losses were measured when non-collection was considered probable based on the prevailing facts and circumstances. Upon adoption of ASC 326, we recorded a charge to retained earnings of $388 million representing the cumulative after-tax increase in our allowances for credit losses, which was primarily related to our manufactured housing loans. 

In August 2018, the FASB issued ASU 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU 2018-12 requires periodic reassessment of actuarial and discount rate assumptions used to value policyholder liabilities and deferred acquisition costs of long-duration insurance and reinsurance contracts, with the effects of changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Currently, the actuarial and discount rate assumptions are set at the contract inception date and not subsequently changed, except under limited circumstances. ASU 2018-12 requires new disclosures and is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We are evaluating the effect this standard will have on our Consolidated Financial Statements.

7

Notes to Consolidated Financial Statements (Continued)

Note 3. Investments in fixed maturity securities

Investments in fixed maturity securities as of June 30, 2021 and December 31, 2020 are summarized below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2021
U.S. Treasury, U.S. government corporations and agencies	$	3,435	$	37	$	(1	)	$	3,471
Foreign governments		12,635		79		(10	)		12,704
Corporate bonds		3,426		452		(1	)		3,877
Other		352		57		(1	)		408
	$	19,848	$	625	$	(13	)	$	20,460
December 31, 2020
U.S. Treasury, U.S. government corporations and agencies	$	3,348	$	55	$	—		$	3,403
Foreign governments		11,233		110		(5	)		11,338
Corporate bonds		4,729		464		(2	)		5,191
Other		414		66		(2	)		478
	$	19,724	$	695	$	(9	)	$	20,410

Investments in foreign governments include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of June 30, 2021, approximately 89% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies. The amortized cost and estimated fair value of fixed maturity securities as of June 30, 2021 are summarized below by contractual maturity dates (in millions). Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.

	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Mortgage- backed securities		Total
Amortized cost	$	9,331	$	9,561	$	433	$	257	$	266	$	19,848
Fair value		9,383		9,645		657		458		317		20,460

Note 4. Investments in equity securities

Investments in equity securities as of June 30, 2021 and December 31, 2020 are summarized in the tables below (in millions).

	Cost Basis		Net Unrealized Gains		Fair Value
June 30, 2021*
Banks, insurance and finance	$	27,384	$	59,237	$	86,621
Consumer products		34,885		115,926		150,811
Commercial, industrial and other		42,950		27,560		70,510
	$	105,219	$	202,723	$	307,942

* Approximately 69% of the aggregate fair value was concentrated in four companies (American Express Company – $25.1 billion; Apple Inc. – $124.3 billion; Bank of America Corporation – $42.6 billion and The Coca-Cola Company – $21.6 billion).

	Cost Basis		Net Unrealized Gains		Fair Value
December 31, 2020*
Banks, insurance and finance	$	26,312	$	40,167	$	66,479
Consumer products		34,747		111,583		146,330
Commercial, industrial and other		47,561		20,800		68,361
	$	108,620	$	172,550	$	281,170

* Approximately 68% of the aggregate fair value was concentrated in four companies (American Express Company – $18.3 billion; Apple Inc. – $120.4 billion; Bank of America Corporation – $31.3 billion and The Coca-Cola Company – $21.9 billion).

8

Notes to Consolidated Financial Statements (Continued)

Note 4. Investments in equity securities (Continued)

Our equity security investments include $10 billion in Occidental Corporation (“Occidental”) Cumulative Perpetual Preferred Stock with an aggregate liquidation value of $10 billion and warrants to purchase up to 83.86 million shares of Occidental common stock at an exercise price of $59.62 per share. The preferred stock accrues dividends at 8% per annum and is redeemable at the option of Occidental commencing in 2029 at a redemption price equal to 105% of the liquidation preference plus any accumulated and unpaid dividends or is mandatorily redeemable under specified events. Dividends on the preferred stock are payable in cash or, at Occidental’s option, in shares of Occidental common stock. The warrants are exercisable in whole or in part until one year after the redemption of the preferred stock.

Note 5. Equity method investments

Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares.

Our investment in Kraft Heinz produced an equity method loss of $7 million in the second quarter and earnings of $143 million in the first six months of 2021. In 2020, we recorded losses attributable to Kraft Heinz of $440 million in the second quarter and $339 million in the first six months which included our proportionate share of the goodwill and intangible asset impairment charges recorded by Kraft Heinz of approximately $700 million for the second quarter and $750 million for the first six months. We received dividends on the common stock of $260 million in each of the first six months of 2021 and 2020, which were recorded as reductions to the carrying value of our investment.

Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $13.3 billion at June 30, 2021 and $11.3 billion at December 31, 2020. The carrying value of our investment was approximately $13.3 billion at both June 30, 2021 and December 31, 2020.

Summarized consolidated financial information of Kraft Heinz follows (in millions).

	June 26, 2021		December 26, 2020
Assets	$	97,038	$	99,830
Liabilities		46,896		49,587

	Second Quarter							First Six Months
	2021			2020				2021		2020
Sales	$	6,615		$	6,648			$	13,009	$	12,805
Net earnings (loss) attributable to Kraft Heinz common shareholders		(27	)		(1,651	)	*		536		(1,273	)	*

* Includes goodwill and identifiable intangible asset impairment charges of approximately $2.6 billion in the second quarter and $2.8 billion in the first six months.

Other investments that we account for pursuant to the equity method include Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC (“Pilot”) and Electric Transmission Texas, LLC (“ETT”). The aggregate carrying value of these investments was approximately $3.2 billion as of June 30, 2021 and $4.0 billion as of December 31, 2020. Our equity method earnings from these entities in the first six months were $255 million in 2021 and $382 million in 2020. During the first six months of 2021, we received distributions from these other investees of $982 million, including a non-recurring distribution received from Pilot of $849 million in the first quarter. Additional information concerning these investments follows.

We own a 50% interest in Berkadia, with Jefferies Financial Group Inc. (“Jefferies”) owning the other 50% interest. Berkadia provides capital solutions, investments sales advisory and mortgage servicing for multifamily and commercial real estate. A source of funding for Berkadia’s operations is through commercial paper, which was $1.47 billion at June 30, 2021 and is limited to $1.5 billion. Berkadia’s commercial paper is supported by a surety policy issued by a Berkshire insurance subsidiary. Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy.

9

Notes to Consolidated Financial Statements (Continued)

Note 5. Equity method investments (Continued)

A Berkshire Hathaway Energy Company subsidiary owns a 50% interest in ETT, an owner and operator of electric transmission assets in the Electric Reliability Council of Texas footprint. American Electric Power owns the other 50% interest. In 2017, we acquired a 38.6% interest in Pilot, headquartered in Knoxville, Tennessee. Pilot is the largest operator of travel centers in North America through more than 1,000 retail locations across 44 U.S. states and six Canadian provinces and through wholesale distribution. The Haslam family currently owns a 50.1% interest in Pilot and a third party owns the remaining 11.3% interest. We also entered into an agreement to acquire an additional 41.4% interest in Pilot in 2023, with the Haslam family retaining a 20% interest. As a result, Berkshire will become the majority owner of Pilot in 2023.

Note 6. Investment and derivative contract gains/losses

Investment and derivative contract gains/losses in the second quarter and first six months of 2021 and 2020 are summarized as follows (in millions).

	Second Quarter						First Six Months
	2021			2020			2021			2020
Investment gains (losses):
Equity securities:
Change in unrealized investment gains (losses) during the period on    securities held at the end of the period	$	27,014		$	39,369		$	31,548		$	(18,377	)
Investment gains (losses) on securities sold during the period		144			(87	)		670			(11,233	)
		27,158			39,282			32,218			(29,610	)
Fixed maturity securities:
Gross realized gains		15			25			35			41
Gross realized losses		(12	)		(14	)		(13	)		(20	)
Other		12			(4	)		144			(4	)
Investment gains (losses)		27,173			39,289			32,384			(29,593	)
Derivative contract gains (losses)		221			796			710			(597	)
	$	27,394		$	40,085		$	33,094		$	(30,190	)

Equity securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own, as well as gains and losses on securities we sold during the period. As reflected in the Consolidated Statements of Cash Flows, we received proceeds from sales of equity securities of approximately $8.6 billion in the first six months of 2021 and $15.7 billion in the first six months of 2020. In the preceding table, investment gains and losses on equity securities sold during the period reflect the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable quarterly period or, if later, the purchase date. Our taxable gains/losses on equity securities sold are generally the difference between the proceeds from sales and original cost. Taxable gains in the second quarter and first six months of 2021 were $228 million and $2.0 billion, respectively, and taxable losses were $4.5 billion and $3.3 billion in the second quarter and first six months of 2020, respectively.

The derivative contract gains and losses derive from equity index put option contracts written prior to March 2008 on four major equity indexes. Information related to these contracts follows (dollars in millions).

	June 30, 2021		December 31, 2020
Balance sheet liabilities - at fair value	$	355	$	1,065
Notional value		9,809		10,991
Intrinsic value		72		727
Weighted average remaining life (in years)		0.8		1.2

Notional value in the preceding table represents the aggregate undiscounted amounts payable assuming the value of each index is zero at each contract’s expiration date. Intrinsic value is the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date. Substantially all open contracts as of June 30, 2021 will expire by February 2023. Future payments, if any, under any given contract will be required if the prevailing index value is below the contract strike price at the contract expiration date. We received aggregate premiums on the contract inception dates of $1.9 billion with respect to unexpired contracts as of June 30, 2021 and we have no counterparty credit risk.

10

Notes to Consolidated Financial Statements (Continued)

Note 7. Loans and finance receivables

Loans and finance receivables are summarized as follows (in millions).

	June 30, 2021			December 31, 2020
Loans and finance receivables before allowances and discounts	$	21,281		$	20,436
Allowances for uncollectible loans		(739	)		(712	)
Unamortized acquisition discounts and points		(642	)		(523	)
	$	19,900		$	19,201

Loans and finance receivables are principally manufactured home loans, and to a lesser extent, commercial loans and site-built home loans. Reconciliations of the allowance for credit losses on loans and finance receivables for each of the first six months of 2021 and 2020 follow (in millions).

	2021			2020
Balance at beginning of year	$	712		$	167
Adoption of ASC 326		—			486
Provision for credit losses		49			130
Charge-offs, net of recoveries		(22	)		(51	)
Balance at June 30	$	739		$	732

As of June 30, 2021, approximately 99% of home loan balances were evaluated collectively for impairment. As of June 30, 2021, we considered approximately 98% of the loan balances to be current as to payment status. A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of June 30, 2021 follows (in millions).

	Origination Year
	2021		2020		2019		2018		2017		Prior		Total
Performing	$	2,815	$	3,365	$	2,381	$	1,810	$	1,343	$	7,420	$	19,134
Non-performing		2		2		7		6		4		41		62
	$	2,817	$	3,367	$	2,388	$	1,816	$	1,347	$	7,461	$	19,196

We are party to an agreement with Seritage Growth Properties to provide a $2.0 billion term loan facility, which expires on July 31, 2023. The outstanding loan under the facility was approximately $1.6 billion at June 30, 2021 and December 31, 2020, and is secured by mortgages on real estate properties. In the first quarter of 2020, we provided a loan to Lee Enterprises, Inc. in connection with its acquisition of our newspaper operations and the repayment of its then outstanding credit facilities. The loan balance was $485 million as of June 30, 2021 and $524 million at December 31, 2020. We are the sole lender to each of these entities and each of these loans is current as to payment status.

Note 8. Other receivables

Other receivables are comprised of the following (in millions).

	June 30, 2021			December 31, 2020
Insurance and other:
Insurance premiums receivable	$	15,421		$	14,025
Reinsurance recoverables		4,841			4,805
Trade receivables		13,182			11,521
Other		3,279			2,637
Allowances for uncollectible accounts		(679	)		(678	)
	$	36,044		$	32,310
Railroad, utilities and energy:
Trade receivables	$	3,709		$	3,235
Other		689			438
Allowances for uncollectible accounts		(169	)		(131	)
	$	4,229		$	3,542

Provisions for credit losses in the first six months with respect to receivables summarized above were $209 million in 2021 and $424 million in 2020. Charge-offs, net of recoveries, in the first six months were $171 million in 2021 and $139 million in 2020.

11

Notes to Consolidated Financial Statements (Continued)

Note 9. Inventories

Inventories are comprised of the following (in millions).

	June 30, 2021		December 31, 2020
Raw materials	$	5,016	$	4,821
Work in process and other		2,949		2,541
Finished manufactured goods		4,502		4,412
Goods acquired for resale		6,926		7,434
	$	19,393	$	19,208

Note 10. Property, plant and equipment

A summary of property, plant and equipment of our insurance and other businesses follows (in millions).

	June 30, 2021			December 31, 2020
Land, buildings and improvements	$	13,859		$	13,799
Machinery and equipment		25,665			25,488
Furniture, fixtures and other		4,592			4,530
		44,116			43,817
Accumulated depreciation		(23,251	)		(22,617	)
	$	20,865		$	21,200

A summary of property, plant and equipment of railroad and utilities and energy businesses follows (in millions). The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.

	June 30, 2021			December 31, 2020
Railroad:
Land, track structure and other roadway	$	64,721		$	63,824
Locomotives, freight cars and other equipment		13,601			13,523
Construction in progress		981			916
		79,303			78,263
Accumulated depreciation		(14,138	)		(13,175	)
		65,165			65,088
Utilities and energy:
Utility generation, transmission and distribution systems		88,748			86,730
Interstate natural gas pipeline assets		16,772			16,667
Independent power plants and other assets		12,969			12,671
Construction in progress		3,887			3,308
		122,376			119,376
Accumulated depreciation		(34,754	)		(33,248	)
		87,622			86,128
	$	152,787		$	151,216

Depreciation expense for the first six months of 2021 and 2020 is summarized below (in millions).

	First Six Months
	2021		2020
Insurance and other	$	1,148	$	1,147
Railroad, utilities and energy		2,990		2,716
	$	4,138	$	3,863

12

Notes to Consolidated Financial Statements (Continued)

Note 11. Equipment held for lease

Equipment held for lease includes railcars, aircraft, over-the-road trailers, intermodal tank containers, cranes, storage units and furniture. A summary of equipment held for lease follows (in millions).

	June 30, 2021			December 31, 2020
Railcars	$	9,525		$	9,402
Aircraft		8,560			8,204
Other		4,952			4,868
		23,037			22,474
Accumulated depreciation		(8,378	)		(7,873	)
	$	14,659		$	14,601

Depreciation expense for equipment held for lease in the first six months was $570 million in 2021 and $599 million in 2020. Fixed and variable operating lease revenues for the second quarter and first six months of 2021 and 2020 are summarized below (in millions).

	Second Quarter				First Six Months
	2021		2020		2021		2020
Fixed lease revenue	$	1,105	$	1,062	$	2,167	$	2,158
Variable lease revenue		342		99		604		431
	$	1,447	$	1,161	$	2,771	$	2,589

Note 12. Goodwill and other intangible assets

Reconciliations of the changes in the carrying value of goodwill for the first six months of 2021 and for the year ended December 31, 2020 follow (in millions).

	June 30, 2021			December 31, 2020
Balance at beginning of year	$	73,734		$	81,882
Acquisitions of businesses		25			1,758
Impairment charges		—			(10,033	)
Other, including foreign currency translation		(1	)		127
Balance at end of period*	$	73,758		$	73,734

* Net of accumulated goodwill impairments of $11.0 billion as of June 30, 2021 and December 31, 2020.

Other intangible assets and related accumulated amortization are summarized as follows (in millions).

	June 30, 2021				December 31, 2020
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other:
Customer relationships	$	27,310	$	6,113	$	27,374	$	5,756
Trademarks and trade names		5,176		790		5,206		779
Patents and technology		4,667		3,314		4,766		3,313
Other		3,328		1,411		3,339		1,375
	$	40,481	$	11,628	$	40,685	$	11,223
Railroad, utilities and energy:
Customer relationships	$	678	$	380	$	678	$	361
Trademarks, trade names and other		1,003		121		1,003		98
	$	1,681	$	501	$	1,681	$	459

13

Notes to Consolidated Financial Statements (Continued)

Note 12. Goodwill and other intangible assets (Continued)

Intangible asset amortization expense in the first six months was $637 million in 2021 and $647 million in 2020. Intangible assets with indefinite lives were $18.3 billion as of June 30, 2021 and December 31, 2020 and primarily related to certain customer relationships and trademarks and trade names.

During 2020, we concluded it was necessary to reevaluate goodwill and indefinite-lived intangible assets of certain of our reporting units for impairment due to the disruptions arising from the COVID-19 pandemic. We recorded pre-tax goodwill impairment charges of approximately $10 billion and pre-tax indefinite-lived intangible asset impairment charges of $638 million in the second quarter of 2020. Approximately $10 billion of these charges related to Precision Castparts Corp. (“PCC”), the largest business within Berkshire's manufacturing segment. The carrying value of PCC-related goodwill and indefinite-lived intangible assets prior to the impairment charges was approximately $31 billion.

Note 13. Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 14), for each of the six-month periods ending June 30, 2021 and 2020 follows (in millions).

	2021			2020
Balances at beginning of year:
Gross liabilities	$	79,854		$	73,019
Reinsurance recoverable on unpaid losses		(2,912	)		(2,855	)
Net liabilities		76,942			70,164
Incurred losses and loss adjustment expenses:
Current accident year events		23,651			20,278
Prior accident years’ events		(1,064	)		189
Total		22,587			20,467
Paid losses and loss adjustment expenses:
Current accident year events		(8,406	)		(6,638	)
Prior accident years’ events		(11,169	)		(11,155	)
Total		(19,575	)		(17,793	)
Foreign currency translation adjustment		31			(78	)
Balances at June 30:
Net liabilities		79,985			72,760
Reinsurance recoverable on unpaid losses		2,973			2,909
Gross liabilities	$	82,958		$	75,669

Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). We recorded a net reduction of estimated ultimate liabilities for prior accident years of $1.1 billion in the first six months of 2021 compared to a net increase of $189 million in 2020, which produced a corresponding decrease in 2021 and an increase in 2020 in incurred losses and loss adjustment expenses. These amounts represented 1.4% in 2021 and 0.3% in 2020 of the net liabilities at the beginning of each year.

Estimated ultimate liabilities for prior years’ loss events in the first six months were reduced $1.1 billion in 2021 and $250 million in 2020 with respect to primary insurance. In each period, the reductions were primarily attributable to private passenger automobile, medical professional liability and workers’ compensation claims. Estimated ultimate liabilities for prior years’ loss events related to reinsurance assumed in the first six months increased $35 million in 2021 and $439 million in 2020, which included increased provisions for legacy casualty exposures. 

14

Notes to Consolidated Financial Statements (Continued)

Note 14. Retroactive reinsurance contracts

Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date. Claims payments may commence immediately after the contract date or, when applicable, once a contractual retention amount has been reached. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related deferred charge reinsurance assumed assets for each of the six-month periods ending June 30, 2021 and 2020 follow (in millions).

	2021						2020
	Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed			Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed
Balances at beginning of year	$	40,966		$	(12,441	)	$	42,441		$	(13,747	)
Incurred losses and loss adjustment expenses:
Current year contracts		82			—			—			—
Prior years’ contracts		(3	)		473			24			554
Total		79			473			24			554
Paid losses and loss adjustment expenses		(808	)		—			(628	)		—
Balances at June 30	$	40,237		$	(11,968	)	$	41,837		$	(13,193	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	552					$	578

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts, which reflects when our exposure to losses begins. Incurred losses and loss adjustment expenses for prior years’ contracts were $470 million in 2021 and $578 million in 2020, which consisted of recurring amortization of deferred charges and the effects of changes in the expected timing and amount of future loss payments. Berkshire’s subsidiary, National Indemnity Company (“NICO”), is party to a contract with certain subsidiaries of American International Group, Inc. (collectively, “AIG”), in which NICO’s ultimate liability is contractually limited to $20 billion. Our estimated unpaid claim liabilities with regard to the AIG contract were approximately $17.1 billion at June 30, 2021, reflecting paid claims of $549 million during the first six months of 2021, and $17.7 billion at December 31, 2020. Deferred charge assets related to the AIG contract were approximately $5.1 billion at June 30, 2021 and $5.4 billion at December 31, 2020.

Note 15. Notes payable and other borrowings

Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of June 30, 2021.

	Weighted Average Interest Rate			June 30, 2021		December 31, 2020
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2021-2047		3.3	%	$	7,314	$	8,308
Euro denominated due 2023-2041		1.0	%		8,123		8,326
Japanese Yen denominated due 2023-2060		0.6	%		7,038		6,031
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2022-2051		3.6	%		10,756		10,766
Great Britain Pound denominated due 2039-2059		2.5	%		2,376		2,347
Other subsidiary borrowings due 2021-2045		4.1	%		4,568		4,682
Subsidiary short-term borrowings		2.5	%		386		1,062
				$	40,561	$	41,522

15

Notes to Consolidated Financial Statements (Continued)

Note 15. Notes payable and other borrowings (Continued)

In the first quarter of 2021, Berkshire repaid €550 million and $1.0 billion of maturing senior notes and issued €600 million of 0.5% senior notes due in 2041. In April 2021, Berkshire issued ¥160 billion (approximately $1.5 billion) of senior notes with maturity dates ranging from 2026 to 2041 and a weighted average interest rate of 0.5%.

Borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. In January 2021, BHFC repaid $750 million of maturing senior notes and issued $750 million of 2.5% senior notes due in 2051.

The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€6.9 billion, £1.75 billion and ¥785.5 billion par at June 30, 2021) reflect the applicable exchange rates as of the balance sheet dates. The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling, general and administrative expenses. Changes in the exchange rates resulted in pre-tax gains of $675 million in the first six months of 2021 and $102 million in the first six months of 2020.

In addition to BHFC borrowings, Berkshire guaranteed approximately $4.0 billion of other subsidiary borrowings at June 30, 2021. Generally, Berkshire’s guarantee of a subsidiary’s debt obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all payment obligations.

	Weighted Average Interest Rate			June 30, 2021		December 31, 2020
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2051		4.3	%	$	13,000	$	13,447
Subsidiary and other debt due 2021-2064		4.2	%		35,873		36,420
Short-term borrowings		1.5	%		2,536		2,286
Burlington Northern Santa Fe ("BNSF") and subsidiaries due 2021-2097		4.6	%		23,253		23,220
				$	74,662	$	75,373

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure such debt. These borrowing arrangements generally contain various covenants, which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios. In the first six months of 2021, BHE and its subsidiaries repaid $1.7 billion of term debt. In April 2021, a BHE subsidiary issued $550 million of 3.4% term debt due in 2051.

BNSF’s borrowings are primarily senior unsecured debentures. During the first six months of 2021, BNSF repaid $886 million of debt. In April 2021, BNSF issued $925 million of 3.3% term debt due in 2051. As of June 30, 2021, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

As of June 30, 2021, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $9.9 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included approximately $8.4 billion related to BHE and its subsidiaries.

16

Notes to Consolidated Financial Statements (Continued)

Note 16. Fair value measurements

Our financial assets and liabilities are summarized below as of June 30, 2021 and December 31, 2020, with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, other receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values.

	Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	3,471	$	3,471	$	3,428	$	43	$	—
Foreign governments		12,704		12,704		10,355		2,349		—
Corporate bonds		3,877		3,877		—		3,877		—
Other		408		408		—		408		—
Investments in equity securities		307,942		307,942		295,990		8		11,944
Investment in Kraft Heinz common stock		13,300		13,272		13,272		—		—
Loans and finance receivables		19,900		21,175		—		2,438		18,737
Derivative contract assets (1)		414		414		5		209		200
Derivative contract liabilities:
Railroad, utilities and energy (1)		141		141		4		83		54
Equity index put options		355		355		—		—		355
Notes payable and other borrowings:
Insurance and other		40,561		44,162		—		44,118		44
Railroad, utilities and energy		74,662		87,965		—		87,965		—
December 31, 2020
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	3,403	$	3,403	$	3,358	$	45	$	—
Foreign governments		11,338		11,338		9,259		2,079		—
Corporate bonds		5,191		5,191		—		5,191		—
Other		478		478		—		478		—
Investments in equity securities		281,170		281,170		271,848		38		9,284
Investment in Kraft Heinz common stock		13,336		11,280		11,280		—		—
Loans and finance receivables		19,201		20,554		—		2,692		17,862
Derivative contract assets (1)		270		270		1		72		197
Derivative contract liabilities:
Railroad, utilities and energy (1)		121		121		6		96		19
Equity index put options		1,065		1,065		—		—		1,065
Notes payable and other borrowings:
Insurance and other		41,522		46,676		—		46,665		11
Railroad, utilities and energy		75,373		92,593		—		92,593		—

⁽¹⁾ Assets are included in other assets and liabilities are included in accounts payable, accruals and other liabilities.

17

Notes to Consolidated Financial Statements (Continued)

Note 16. Fair value measurements (Continued)

The fair values of substantially all of our financial instruments were measured using market or income approaches. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.

Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the six months ended June 30, 2021 and 2020 follow (in millions).

	Balance at beginning of year			Gains (losses) included in earnings			Acquisitions, dispositions and settlements		Balance at June 30
Investments in equity securities:
2021	$	8,978		$	1,559		$	1,100	$	11,637
2020		10,405			(2,469	)		—		7,936
Equity index put option contract liabilities:
2021		(1,065	)		710			—		(355	)
2020		(968	)		(597	)		—		(1,565	)

Quantitative information as of June 30, 2021 with respect to significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (dollars in millions).

	Fair Value		Principal Valuation Techniques	Unobservable Inputs	Weighted Average
Investments in equity securities:
Preferred stock	$	10,935	Discounted cash flow	Expected duration	8 years
				Discount for transferability    restrictions and subordination	355 basis points
Common stock warrants		702	Warrant pricing model	Expected duration	8 years
				Volatility	36%
Equity index put option contract liabilities		355	Option pricing model	Volatility	17%

Investments in equity securities in the preceding table include our investments in certain preferred stocks and common stock warrants that do not have readily determinable market values as defined under GAAP. These investments are subject to contractual restrictions on transferability and may contain provisions that prevent us from economically hedging our investments. We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of subordination in liquidation. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration and volatility of the warrants.

18

Notes to Consolidated Financial Statements (Continued)

Note 16. Fair value measurements (Continued)

Our equity index put option derivative contracts are illiquid and contain contract terms that are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts. We determine the fair value of the equity index put option contract liabilities based on the Black-Scholes option valuation model.

Note 17. Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the first six months of 2021 are shown in the table below. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.

	Class A, $5 Par Value (1,650,000 shares authorized)									Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
	Issued			Treasury			Outstanding			Issued		Treasury			Outstanding
Balances at December 31, 2020		678,523			(34,592	)		643,931			1,469,359,852		(119,316,381	)		1,350,043,471
Conversions of Class A to Class B common stock		(11,479	)		—			(11,479	)		17,218,500		—			17,218,500
Treasury stock acquired		—			(8,156	)		(8,156	)		—		(36,862,234	)		(36,862,234	)
Balances at June 30, 2021		667,044			(42,748	)		624,296			1,486,578,352		(156,178,615	)		1,330,399,737

Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were 1,511,229 shares outstanding as of June 30, 2021 and 1,543,960 shares outstanding as of December 31, 2020.

Since we have two classes of common stock, we provide earnings per share data on the Consolidated Statements of Earnings for average equivalent Class A shares outstanding and average equivalent Class B shares outstanding. Class B shares are economically equivalent to one-fifteen-hundredth (1/1,500) of a Class A share. Average equivalent Class A shares outstanding represents average Class A shares outstanding plus one-fifteen-hundredth (1/1,500) of the average Class B shares outstanding. Average equivalent Class B shares outstanding represents average Class B shares outstanding plus 1,500 times the average Class A shares outstanding.

Berkshire’s common stock repurchase program permits Berkshire to repurchase its Class A and Class B shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The program continues to allow share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $30 billion. The repurchase program does not obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the program.

Note 18. Income taxes

Our consolidated effective income tax rates were 20.4% for the second quarter and 19.9% for the first six months of 2021 compared to 25.4% for the second quarter and 15.7% for the first six months of 2020. Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S. Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings, the magnitude of gains or losses with respect to our investments in equity securities, the amount of non-deductible goodwill impairment charges and other expenses and the underlying income tax rates applicable in the various taxing jurisdictions.

19

Notes to Consolidated Financial Statements (Continued)

Note 19. Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for the six months ending June 30, 2021 and 2020 follows (in millions).

	Unrealized appreciation of investments, net			Foreign currency translation			Defined benefit pension plans			Other			Accumulated other comprehensive income
First six months of 2021
Balance at beginning of year	$	536		$	(3,082	)	$	(1,645	)	$	(52	)	$	(4,243	)
Other comprehensive income, net		(58	)		(1	)		73			10			24
Balance at end of period	$	478		$	(3,083	)	$	(1,572	)	$	(42	)	$	(4,219	)
First six months of 2020
Balance at beginning of year	$	481		$	(4,346	)	$	(1,369	)	$	(9	)	$	(5,243	)
Other comprehensive income, net		14			(794	)		83			(27	)		(724	)
Balance at end of period	$	495		$	(5,140	)	$	(1,286	)	$	(36	)	$	(5,967	)

Note 20. Supplemental cash flow information

A summary of supplemental cash flow information is presented in the following table (in millions).

	First Six Months
	2021		2020
Cash paid during the period for:
Income taxes	$	2,508	$	980
Interest:
Insurance and other		699		591
Railroad, utilities and energy		1,580		1,438

Note 21. Contingencies and commitments

We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.

On November 1, 2020, Berkshire Hathaway Energy (“BHE”) acquired a large portion of the natural gas transmission and storage business of Dominion Energy, Inc. (“Dominion”) for approximately $2.5 billion. The acquisition included a partial ownership of a liquefied natural gas export, import and storage facility (“Cove Point”), consisting of 100% of the general partnership interest and 25% of the limited partnership interests. We treat Cove Point as a consolidated subsidiary because we have the power to direct the activities that most significantly affect its economic performance and the obligation to absorb losses and the right to receive benefits which could be significant to Cove Point. The preliminary fair value of the assets acquired was $13.4 billion, including residual goodwill of $1.7 billion, and the fair value of the liabilities assumed was $7.0 billion, including the assumption of approximately $5.6 billion of debt. We also recorded noncontrolling interests of $3.9 billion attributable to limited partnership interests in Cove Point that are held by third parties. In addition, BHE previously agreed to acquire certain other of Dominion’s pipeline business for approximately $1.3 billion. Effective July 9, 2021, BHE and Dominion agreed to terminate this planned transaction due to ongoing uncertainty in obtaining the necessary regulatory approvals.

20

Notes to Consolidated Financial Statements (Continued)

Note 22. Revenues from contracts with customers

We recognize revenue when a good or service is transferred to a customer. A good or service is transferred when or as the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers.

The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for the second quarter and first six months of 2021 and 2020 (in millions). Other revenues included in consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues, which are not considered to be revenues from contracts with customers under GAAP.

	Manufacturing		McLane Company		Service and Retailing		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending June 30, 2021
Manufactured products:
Industrial and commercial products	$	5,586	$	—	$	49	$	—	$	—	$	—	$	5,635
Building products		5,114		—		—		—		—		—		5,114
Consumer products		4,604		—		—		—		—		—		4,604
Grocery and convenience store distribution		—		7,729		—		—		—		—		7,729
Food and beverage distribution		—		4,356		—		—		—		—		4,356
Auto sales		—		—		2,750		—		—		—		2,750
Other retail and wholesale distribution		754		—		4,008		—		—		—		4,762
Service		370		183		1,053		5,763		1,593		—		8,962
Electricity and natural gas		—		—		—		—		4,198		—		4,198
Total		16,428		12,268		7,860		5,763		5,791		—		48,110
Other revenues		947		27		1,094		15		294		18,627		21,004
	$	17,375	$	12,295	$	8,954	$	5,778	$	6,085	$	18,627	$	69,114
Six months ending June 30, 2021
Manufactured products:
Industrial and commercial products	$	10,949	$	—	$	99	$	—	$	—	$	—	$	11,048
Building products		9,513		—		—		—		—		—		9,513
Consumer products		8,767		—		—		—		—		—		8,767
Grocery and convenience store distribution		—		15,171		—		—		—		—		15,171
Food and beverage distribution		—		8,360		—		—		—		—		8,360
Auto sales		—		—		5,062		—		—		—		5,062
Other retail and wholesale distribution		1,457		—		7,664		—		—		—		9,121
Service		699		334		1,987		11,128		2,633		—		16,781
Electricity and natural gas		—		—		—		—		8,910		—		8,910
Total		31,385		23,865		14,812		11,128		11,543		—		92,733
Other revenues		1,870		52		2,085		28		466		36,479		40,980
	$	33,255	$	23,917	$	16,897	$	11,156	$	12,009	$	36,479	$	133,713

21

Notes to Consolidated Financial Statements (Continued)

Note 22. Revenues from contracts with customers (Continued)

	Manufacturing		McLane Company		Service and Retailing		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending June 30, 2020
Manufactured products:
Industrial and commercial products	$	4,631	$	—	$	45	$	—	$	—	$	—	$	4,676
Building products		3,665		—		—		—		—		—		3,665
Consumer products		3,009		—		—		—		—		—		3,009
Grocery and convenience store distribution		—		7,287		—		—		—		—		7,287
Food and beverage distribution		—		3,787		—		—		—		—		3,787
Auto sales		—		—		1,895		—		—		—		1,895
Other retail and wholesale distribution		487		—		2,620		—		—		—		3,107
Service		348		122		634		4,558		971		—		6,633
Electricity and natural gas		—		—		—		—		3,319		—		3,319
Total		12,140		11,196		5,194		4,558		4,290		—		37,378
Other revenues		877		22		827		14		369		17,353		19,462
	$	13,017	$	11,218	$	6,021	$	4,572	$	4,659	$	17,353	$	56,840
Six months ending June 30, 2020
Manufactured products:
Industrial and commercial products	$	10,750	$	—	$	89	$	—	$	—	$	—	$	10,839
Building products		7,360		—		—		—		—		—		7,360
Consumer products		6,337		—		—		—		—		—		6,337
Grocery and convenience store distribution		—		15,146		—		—		—		—		15,146
Food and beverage distribution		—		7,593		—		—		—		—		7,593
Auto sales		—		—		3,804		—		—		—		3,804
Other retail and wholesale distribution		1,092		—		5,553		—		—		—		6,645
Service		735		254		1,595		9,924		1,764		—		14,272
Electricity and natural gas		—		—		—		—		6,834		—		6,834
Total		26,274		22,993		11,041		9,924		8,598		—		78,830
Other revenues		1,757		46		1,918		28		568		34,958		39,275
	$	28,031	$	23,039	$	12,959	$	9,952	$	9,166	$	34,958	$	118,105

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of June 30, 2021 and the timing of when the performance obligations are expected to be satisfied follows (in millions).

	Less than 12 months		Greater than 12 months		Total
Electricity and natural gas	$	2,912	$	21,728	$	24,640
Other sales and service contracts		1,361		2,211		3,572

22

Notes to Consolidated Financial Statements (Continued)

Note 23. Business segment data

Our operating businesses include a large and diverse group of insurance, manufacturing, service and retailing businesses. We organize our reportable business segments in a manner that reflects how management views those business activities. Certain businesses are grouped together for segment reporting based upon similar products or product lines, marketing, selling and distribution characteristics, even though those business units are operated under separate local management. Revenues and earnings before income taxes by segment for the second quarter and first six months of 2021 and 2020 were as follows (in millions).

	Second Quarter					First Six Months
	2021			2020		2021			2020
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO	$	9,546		$	9,040	$	18,469		$	18,149
Berkshire Hathaway Primary Group		2,755			2,244		5,409			4,613
Berkshire Hathaway Reinsurance Group		4,862			4,311		9,709			8,581
Investment income		1,459			1,615		2,873			3,263
Total insurance		18,622			17,210		36,460			34,606
BNSF		5,809			4,602		11,210			10,019
Berkshire Hathaway Energy		6,085			4,659		12,009			9,166
Manufacturing		17,412			13,033		33,325			28,068
McLane Company		12,295			11,218		23,917			23,039
Service and retailing		8,977			6,037		16,935			12,993
		69,200			56,759		133,856			117,891
Reconciliation of segments to consolidated amount
Corporate, eliminations and other		(86	)		81		(143	)		214
	$	69,114		$	56,840	$	133,713		$	118,105

	Second Quarter						First Six Months
	2021			2020			2021			2020
Earnings (Loss) Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO	$	626		$	2,060		$	1,649		$	3,044
Berkshire Hathaway Primary Group		166			96			372			63
Berkshire Hathaway Reinsurance Group		(327	)		(1,103	)		(590	)		(1,592	)
Investment income		1,456			1,613			2,868			3,260
Total insurance		1,921			2,666			4,299			4,775
BNSF		1,979			1,494			3,638			3,078
Berkshire Hathaway Energy		739			533			1,422			952
Manufacturing		2,714			1,399			5,150			3,510
McLane Company		84			44			187			109
Service and retailing		1,186			408			2,124			966
		8,623			6,544			16,820			13,390
Reconciliation of segments to consolidated amount
Investment and derivative gains (losses)		27,394			40,085			33,094			(30,190	)
Interest expense, not allocated to segments		(144	)		(111	)		(258	)		(247	)
Equity method investments		147			(257	)		398			43
Goodwill and intangible impairments		—			(10,634	)		—			(10,634	)
Corporate, eliminations and other		(299	)		(218	)		195			(2	)
	$	35,721		$	35,409		$	50,249		$	(27,640	)

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Net earnings/loss attributable to Berkshire Hathaway shareholders are disaggregated in the table that follows. Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests (in millions).

	Second Quarter							First Six Months
	2021			2020				2021		2020
Insurance – underwriting	$	376		$	806			$	1,140	$	1,169
Insurance – investment income		1,219			1,368				2,427		2,754
Railroad		1,516			1,131				2,767		2,321
Utilities and energy		740			633				1,443		1,194
Manufacturing, service and retailing		3,004			1,449				5,623		3,487
Investment and derivative gains (losses)		21,408			31,645				26,101		(23,972	)
Other		(169	)		(10,737	)	*		304		(10,404	)	*
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	28,094		$	26,295			$	39,805	$	(23,451	)

*Includes goodwill and indefinite-lived asset impairment charges of $10.9 billion.

Through our subsidiaries, we engage in numerous diverse business activities. We manage our operating businesses on an unusually decentralized basis. There are few centralized or integrated business functions. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. The business segment data (Note 23 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

The COVID-19 pandemic negatively affected most of our operating businesses beginning in March of 2020, with the initial effects to date ranging from relatively minor to severe. Earnings of most of our manufacturing, service and retailing businesses declined considerably, and in certain instances severely, in the second quarter of 2020. Over the second half of 2020 and continuing in 2021, many of these businesses experienced significant recoveries in revenues and earnings, in some instances exceeding pre-pandemic levels. Consequently, earnings over the first six months of 2021 for these businesses were considerably higher than in the first half of 2020, although earnings in 2021 were negatively affected by major winter storms in North America during February 2021, ongoing supply chain disruptions and higher input costs. We cannot reliably predict future economic effects of the pandemic or when business activities at our operations will completely normalize. Nor can we predict how these events will alter the future consumption patterns of consumers and businesses we serve.

Insurance underwriting produced after-tax earnings of $376 million in the second quarter and $1.1 billion in the first six months of 2021. In 2021, our primary insurance operations generated underwriting earnings, while our reinsurance operations produced underwriting losses. Underwriting results in 2021 reflected earned premium reductions from the GEICO Giveback program, higher private passenger auto claims frequencies and higher losses in the life reinsurance business. After-tax earnings from insurance investment income declined $149 million (10.9%) in the second quarter and $327 million (11.9%) in the first six months of 2021 as compared to 2020. The declines were primarily due to lower interest income earned on cash and short-term investments in U.S. Treasury Bills.

After-tax earnings of our railroad business increased 34.0% in the second quarter and 19.2% in the first six months of 2021 compared to 2020. The increases reflected overall higher freight volumes and lower costs due to improved productivity. After-tax earnings of our utilities and energy business increased 20.9% in the first half of 2021 compared to 2020. The increase reflected increased earnings from the natural gas pipelines, including the effects of a business acquisition, and from the real estate brokerage businesses. Earnings from our manufacturing, service and retailing businesses increased $1.6 billion in the second quarter and $2.1 billion in the first six months of 2021 versus 2020. Many of our businesses generated significantly higher earnings over the first half of 2021 compared to 2020, which included significant adverse effects from the pandemic. Earnings of our manufacturing, service and retail businesses in 2021 benefitted from higher customer demand in many of our businesses and exceeded earnings in 2019 as well.

Investment and derivative gains and losses in 2021 and 2020 predominantly derived from our investments in equity securities and included significant unrealized gains and losses from market price changes. We believe that investment and derivative gains/losses, whether realized from dispositions or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Insurance—Underwriting

Our management views our insurance businesses as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett and Berkshire’s corporate investment managers. Accordingly, we evaluate performance of underwriting operations without any allocation of investment income or investment gains and losses. We consider investment income as an integral component of our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized as non-operating. We believe that such gains and losses are not meaningful in understanding the operating results of our insurance businesses.

The timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to our reinsurance businesses. Generally, we consider incurred losses in excess of $100 million from a current year catastrophic event to be significant.

Changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years, can also significantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts, were approximately $123.2 billion as of June 30, 2021. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated liabilities of our U.S.-based insurance subsidiaries due to foreign currency exchange rate fluctuations.

Underwriting results for certain of our commercial insurance and reinsurance businesses were negatively affected in 2021 and 2020 by estimated losses and costs associated with the COVID-19 pandemic, including estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels. The effects of the pandemic in future periods may be affected by judicial rulings and regulatory and legislative actions pertaining to insurance coverage and claims and by its effects on general economic activity, which we cannot reasonably estimate at this time.

Underwriting results of our insurance businesses are summarized below (dollars in millions).

	Second Quarter						First Six Months
	2021			2020			2021			2020
Pre-tax underwriting earnings (loss):
GEICO	$	626		$	2,060		$	1,649		$	3,044
Berkshire Hathaway Primary Group		166			96			372			63
Berkshire Hathaway Reinsurance Group		(327	)		(1,103	)		(590	)		(1,592	)
Pre-tax underwriting earnings		465			1,053			1,431			1,515
Income taxes and noncontrolling interests		89			247			291			346
Net underwriting earnings	$	376		$	806		$	1,140		$	1,169
Effective income tax rate		19.0	%		23.4	%		20.3	%		22.8	%

GEICO

GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone. A summary of GEICO’s underwriting results follows (dollars in millions).

	Second Quarter								First Six Months
	2021				2020				2021				2020
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	9,230			$	8,090			$	19,236			$	17,771
Premiums earned	$	9,546		100.0	$	9,040		100.0	$	18,469		100.0	$	18,149		100.0
Losses and loss adjustment expenses		7,617		79.8		5,614		62.1		14,080		76.2		12,380		68.2
Underwriting expenses		1,303		13.6		1,366		15.1		2,740		14.9		2,725		15.0
Total losses and expenses		8,920		93.4		6,980		77.2		16,820		91.1		15,105		83.2
Pre-tax underwriting earnings	$	626			$	2,060			$	1,649			$	3,044

GEICO’s pre-tax underwriting earnings in 2021 and 2020 were significantly affected by changes in average claims frequencies. Beginning in the first quarter of 2020 and continuing through the first quarter of 2021, average claims frequencies were significantly below historical levels from the effects of less driving by policyholders during the COVID-19 pandemic. These effects were partially offset by lower premiums earned from the GEICO Giveback program and higher average claims severities. In the second quarter of 2021, average claims frequencies began to increase as driving by policyholders increased.

25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Insurance—Underwriting (Continued)

GEICO (Continued)

Premiums written increased $1.1 billion (14.1%) in the second quarter and $1.5 billion (8.2%) in the first six months of 2021 compared to 2020. The premium increases were primarily attributable to the $1.3 billion reduction in premiums written during the second quarter of 2020 from the GEICO Giveback Program and also by a 4.9% increase in average premiums per auto policy over the past twelve months. The GEICO Giveback program provided a 15% premium credit to all new and renewal voluntary auto and motorcycle policies written between April 8, 2020 and October 7, 2020. Over that six-month period, the GEICO Giveback program reduced premiums written by approximately $2.9 billion. Voluntary auto policies-in-force increased approximately 183,000 during the first six months of 2021.

Premiums earned increased $506 million (5.6%) in the second quarter and $320 million (1.8%) in the first six months of 2021 compared to 2020. Premiums earned in the first six months of 2021 included reductions of approximately $460 million attributable to the remaining impact of the GEICO Giveback premium credit.

Losses and loss adjustment expenses increased $2.0 billion (35.7%) in the second quarter and $1.7 billion (13.7%) in the first six months of 2021 compared to 2020. GEICO’s ratio of losses and loss adjustment expenses to premiums earned increased 17.7 percentage points in the second quarter and 8.0 percentage points in the first six months of 2021 compared to the same periods in 2020. The increases reflected overall increases in average claims frequencies and severities, partially offset by increased reductions of claim loss estimates for prior years’ loss events.

Claims frequencies in the first six months of 2021 were higher for all coverages, including property damage (eleven to twelve percent range), bodily injury (thirteen to fourteen percent range), personal injury (sixteen to seventeen percent range) and collision (twenty-one to twenty-two percent range). Average claims severities in the first six months of 2021 were higher for property damage coverage (two to three percent range), collision coverage (ten to eleven percent range) and bodily injury coverage (ten to thirteen percent range). Losses and loss adjustment expenses included reductions in the ultimate claim loss estimates for prior years’ loss events of $846 million in the first six months of 2021 compared to $166 million in 2020.

Underwriting expenses were relatively flat in the first six months of 2021 compared to 2020, reflecting higher advertising and technology costs, offset by lower travel and employee-related expenses and provisions for uncollectible premiums. GEICO’s expense ratio (underwriting expense to premiums earned) in the first six months of 2021 was relatively unchanged compared to 2020.

Berkshire Hathaway Primary Group

The Berkshire Hathaway Primary Group (“BH Primary”) provides a variety of commercial insurance solutions, including healthcare malpractice, workers’ compensation, automobile, general liability, property and various specialty coverages for small, medium and large clients. BH Primary insurers include Berkshire Hathaway Specialty Insurance (“BH Specialty”), Berkshire Hathaway Homestate Companies (“BHHC”), MedPro Group, Berkshire Hathaway GUARD Insurance Companies (“GUARD”), National Indemnity Company (“NICO Primary”), U.S. Liability Insurance Company (“USLI”), Central States Indemnity Company and MLMIC Insurance Company. A summary of BH Primary underwriting results follows (dollars in millions).

	Second Quarter								First Six Months
	2021				2020				2021				2020
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	2,943			$	2,149			$	5,851			$	4,604
Premiums earned	$	2,755		100.0	$	2,244		100.0	$	5,409		100.0	$	4,613		100.0
Losses and loss adjustment expenses		1,955		71.0		1,582		70.5		3,804		70.3		3,393		73.6
Underwriting expenses		634		23.0		566		25.2		1,233		22.8		1,157		25.0
Total losses and expenses		2,589		94.0		2,148		95.7		5,037		93.1		4,550		98.6
Pre-tax underwriting earnings	$	166			$	96			$	372			$	63

Premiums written increased 36.9% in the second quarter and 27.1% in the first six months of 2021 compared to 2020, driven by increases at BH Specialty and MedPro Group. BH Specialty premiums written increased 44% for the second quarter and 43% for the first six months, primarily attributable to increases in professional liability, casualty and property lines of business. MedPro Group premiums increased 45% for the second quarter and 31% for the first six months of 2021, attributable to increased volume across its product categories. Commercial auto volumes at NICO Primary and BHHC also increased during the second quarter of 2021 compared to 2020, which was adversely impacted by the COVID-19 pandemic. USLI premiums written increased 27% in the second quarter and 20% in the first six months, attributable to increases in its retail and wholesale customer bases. BH Primary’s workers’ compensation business continues to experience increased price competition in the market.

26

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Insurance—Underwriting (Continued)

Berkshire Hathaway Primary Group (Continued)

BH Primary’s loss ratio was relatively unchanged in the second quarter and declined 3.3 percentage points in the first six months of 2021 versus 2020. The year-to-date decline reflected net reductions in estimated ultimate liabilities for prior years’ loss events of $253 million in the first six months of 2021 compared to $84 million in the first six months of 2020. Estimated losses and loss adjustment expenses incurred in the first six months of 2021 from the major winter storm in North America (“Winter Storm Uri”) were $156 million. Incurred losses attributable to the pandemic were approximately $180 million in the first six months of 2020. BH Primary insurers write significant levels of commercial and professional liability and workers’ compensation business and the related claim costs may be subject to high severity and long claim-tails. Accordingly, we could experience significant increases in claims liabilities in the future, attributable to higher-than-expected claim settlements, adverse litigation outcomes or judicial rulings and other factors not currently anticipated.

Underwriting expenses in the second quarter and first six months of 2021 increased 12.0% and 6.6%, respectively, compared to 2020. The expense ratio declined 2.2 percentage points in the first six months of 2021, reflecting changes in business mix, improved leverage on internal underwriting expenses at BH Specialty and the impact of pandemic-related allowances for expected credit losses recorded in the first six months of 2020.

Berkshire Hathaway Reinsurance Group

The Berkshire Hathaway Reinsurance Group (“BHRG”) offers excess-of-loss and quota-share reinsurance coverages on property and casualty risks to insurers and reinsurers worldwide through several subsidiaries, led by National Indemnity Company (“NICO”), General Reinsurance Corporation and General Reinsurance AG. We also offer life and health reinsurance coverages through General Re Life Corporation, General Reinsurance AG and Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”). We periodically assume property and casualty risks under retroactive reinsurance contracts written through NICO. In addition, we write periodic payment annuity contracts predominantly through BHLN.

Generally, we strive to generate underwriting profits. However, time-value-of-money concepts are important elements in establishing prices for retroactive reinsurance and periodic payment annuity businesses due to the expected long durations of the liabilities. We expect to incur pre-tax underwriting losses from such businesses, primarily through deferred charge amortization and discount accretion charges. We receive premiums at the inception of these contracts, which are then available for investment. A summary of Berkshire Hathaway Reinsurance Group’s premiums and pre-tax underwriting results follows (in millions).

	Second Quarter										First Six Months
	Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)
	2021		2020		2021			2020			2021		2020		2021			2020
Property/casualty	$	3,354	$	2,708	$	202		$	(643	)	$	6,748	$	5,431	$	368		$	(805	)
Life/health		1,299		1,418		(169	)		41			2,604		2,769		(341	)		46
Retroactive reinsurance		82		—		(220	)		(460	)		82		34		(462	)		(502	)
Periodic payment annuity		123		182		(144	)		(146	)		267		341		(280	)		(202	)
Variable annuity		4		3		4			105			8		6		125			(129	)
	$	4,862	$	4,311	$	(327	)	$	(1,103	)	$	9,709	$	8,581	$	(590	)	$	(1,592	)

Property/casualty

A summary of property/casualty reinsurance underwriting results follows (dollars in millions).

	Second Quarter									First Six Months
	2021				2020					2021				2020
	Amount		%		Amount			%		Amount		%		Amount			%
Premiums written	$	3,426			$	2,995				$	7,809			$	7,051
Premiums earned	$	3,354		100.0	$	2,708			100.0	$	6,748		100.0	$	5,431			100.0
Losses and loss adjustment expenses		2,296		68.5		2,577			95.2		4,703		69.7		4,697			86.5
Underwriting expenses		856		25.5		774			28.5		1,677		24.8		1,539			28.3
Total losses and expenses		3,152		94.0		3,351			123.7		6,380		94.5		6,236			114.8
Pre-tax underwriting earnings (loss)	$	202			$	(643	)			$	368			$	(805	)

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Insurance—Underwriting (Continued)

Property/casualty (Continued)

Premiums written increased 14.4% in the second quarter and 10.8% in the first six months of 2021 compared to the same periods in 2020. The increases reflected net new business, increased participations on renewals, improved pricing and favorable foreign currency translation effects.

Losses and loss adjustment expenses decreased 10.9% in the second quarter and were relatively unchanged in the first six months of 2021 compared to 2020. In 2021, the loss ratio decreased 26.7 percentage points in the second quarter and 16.8 percentage points in the first six months compared to 2020. Losses and loss adjustment expenses in the first six months of 2021 included estimated losses from Winter Storm Uri of $418 million and a net increase in estimated ultimate liabilities for prior years’ loss events of $35 million. Losses and loss adjustment expenses in the first six months of 2020 included a net increase in estimated ultimate liabilities for prior years’ loss events of $439 million, primarily attributable to an increase in legacy environmental, asbestos and other latent injury liabilities recorded in the second quarter. In 2020, losses and loss adjustment expenses also included approximately $350 million in the second quarter and $575 million in the first six months attributable to the COVID-19 pandemic.

Underwriting expenses are primarily commissions and brokerage costs. The expense ratio in 2021 decreased 3.0 percentage points in the second quarter and 3.5 percentage points in the first six months compared to the same periods in 2020, attributable to changes in business mix and the impact of pandemic-related charges in the 2020 periods.

Life/health

A summary of our life/health reinsurance underwriting results follows (dollars in millions).

	Second Quarter									First Six Months
	2021					2020				2021					2020
	Amount			%		Amount		%		Amount			%		Amount		%
Premiums written	$	1,296				$	1,418			$	2,597				$	2,770
Premiums earned	$	1,299			100.0	$	1,418		100.0	$	2,604			100.0	$	2,769		100.0
Life and health insurance benefits		1,235			95.1		1,132		79.8		2,486			95.5		2,186		78.9
Underwriting expenses		233			17.9		245		17.3		459			17.6		537		19.4
Total benefits and expenses		1,468			113.0		1,377		97.1		2,945			113.1		2,723		98.3
Pre-tax underwriting earnings (loss)	$	(169	)			$	41			$	(341	)			$	46