UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2022

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 0.625% Senior Notes due 2023 1.300% Senior Notes due 2024 0.000% Senior Notes due 2025 1.125% Senior Notes due 2027 2.150% Senior Notes due 2028 1.500% Senior Notes due 2030 2.000% Senior Notes due 2034 1.625% Senior Notes due 2035 2.375% Senior Notes due 2039 0.500% Senior Notes due 2041 2.625% Senior Notes due 2059	BRK.A BRK.B BRK23 BRK23A BRK24 BRK25 BRK27 BRK28 BRK30 BRK34 BRK35 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 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, 2022:

Class A —	599,924
Class B —	1,301,126,370

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information
Item 1.  Financial Statements
	Consolidated Balance Sheets—June 30, 2022 and December 31, 2021	2-3
	Consolidated Statements of Earnings—Second Quarter and First Six Months 2022 and 2021	4
	Consolidated Statements of Comprehensive Income—Second Quarter and First Six Months 2022 and 2021	5
	Consolidated Statements of Changes in Shareholders’ Equity—Second Quarter and First Six Months 2022 and 2021	5
	Consolidated Statements of Cash Flows—First Six Months 2022 and 2021	6
	Notes to Consolidated Financial Statements	7-23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24-43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
Part II – Other Information
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, 2022		December 31, 2021
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	26,534	$	85,319
Short-term investments in U.S. Treasury Bills		74,803		58,535
Investments in fixed maturity securities		21,136		16,434
Investments in equity securities		327,662		350,719
Equity method investments		17,494		17,375
Loans and finance receivables		21,877		20,751
Other receivables		39,678		35,388
Inventories		24,560		20,954
Property, plant and equipment		20,517		20,834
Equipment held for lease		15,125		14,918
Goodwill		46,951		47,117
Other intangible assets		27,992		28,486
Deferred charges - retroactive reinsurance		10,213		10,639
Other		16,302		15,854
		690,844		743,323
Railroad, Utilities and Energy:
Cash and cash equivalents*		4,074		2,865
Receivables		4,815		4,177
Property, plant and equipment		156,771		155,530
Goodwill		26,667		26,758
Regulatory assets		4,259		3,963
Other		22,430		22,168
		219,016		215,461
	$	909,860	$	958,784

* Includes U.S. Treasury Bills with maturities of three months or less when purchased of $1.4 billion at June 30, 2022 and $61.7 billion at December 31, 2021.

See accompanying Notes to Consolidated Financial Statements

2

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30, 2022			December 31, 2021
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	88,560		$	86,664
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		37,234			38,256
Unearned premiums		25,727			23,512
Life, annuity and health insurance benefits		22,562			22,452
Other policyholder liabilities		8,998			9,330
Accounts payable, accruals and other liabilities		31,387			30,376
Aircraft repurchase liabilities and unearned lease revenues		5,907			5,849
Notes payable and other borrowings		42,640			39,272
		263,015			255,711
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		16,193			15,696
Regulatory liabilities		7,290			7,214
Notes payable and other borrowings		76,441			74,990
		99,924			97,900
Income taxes, principally deferred		77,268			90,243
Total liabilities		440,207			443,854
Shareholders’ equity:
Common stock		8			8
Capital in excess of par value		35,204			35,592
Accumulated other comprehensive income		(6,175	)		(4,027	)
Retained earnings		496,126			534,421
Treasury stock, at cost		(63,934	)		(59,795	)
Berkshire Hathaway shareholders’ equity		461,229			506,199
Noncontrolling interests		8,424			8,731
Total shareholders’ equity		469,653			514,930
	$	909,860		$	958,784

See accompanying Notes to Consolidated Financial Statements

3

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

(Unaudited)

	Second Quarter					First Six Months
	2022			2021		2022			2021
Revenues:
Insurance and Other:
Insurance premiums earned	$	18,087		$	17,163	$	35,579		$	33,587
Sales and service revenues		40,220			36,743		78,082			70,441
Leasing revenues		1,887			1,447		3,559			2,771
Interest, dividend and other investment income		2,861			1,898		4,723			3,749
		63,055			57,251		121,943			110,548
Railroad, Utilities and Energy:
Freight rail transportation revenues		6,612			5,778		12,556			11,156
Energy operating revenues		4,935			4,302		9,753			9,150
Service revenues and other income		1,578			1,783		2,738			2,859
		13,125			11,863		25,047			23,165
Total revenues		76,180			69,114		146,990			133,713
Investment and derivative contract gains (losses)		(66,919	)		27,394		(68,897	)		33,094
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		13,620			12,175		26,952			23,139
Life, annuity and health insurance benefits		1,282			1,459		2,605			2,939
Insurance underwriting expenses		2,461			3,065		5,228			6,079
Cost of sales and services		31,633			28,761		61,418			55,291
Cost of leasing		1,498			982		2,730			1,864
Selling, general and administrative expenses		3,762			5,045		8,013			8,955
Interest expense		302			298		566			574
		54,558			51,785		107,512			98,841
Railroad, Utilities and Energy:
Freight rail transportation expenses		4,260			3,588		8,185			7,098
Utilities and energy cost of sales and other expenses		3,844			3,220		7,435			6,809
Other expenses		1,527			1,563		2,683			2,656
Interest expense		785			778		1,555			1,552
		10,416			9,149		19,858			18,115
Total costs and expenses		64,974			60,934		127,370			116,956
Earnings (loss) before income taxes and equity method earnings		(55,713	)		35,574		(49,277	)		49,851
Equity method earnings		231			147		607			398
Earnings (loss) before income taxes		(55,482	)		35,721		(48,670	)		50,249
Income tax expense (benefit)		(12,106	)		7,296		(10,879	)		9,984
Net earnings (loss)		(43,376	)		28,425		(37,791	)		40,265
Earnings attributable to noncontrolling interests		379			331		504			460
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(43,755	)	$	28,094	$	(38,295	)	$	39,805
Net earnings (loss) per average equivalent Class A share	$	(29,754	)	$	18,488	$	(26,005	)	$	26,078
Net earnings (loss) per average equivalent Class B share*	$	(19.84	)	$	12.33	$	(17.34	)	$	17.39
Average equivalent Class A shares outstanding		1,470,577			1,519,576		1,472,628			1,526,392
Average equivalent Class B shares outstanding		2,205,865,262			2,279,363,382		2,208,942,539			2,289,587,640

* Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings (loss) 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)

(Unaudited)

	Second Quarter						First Six Months
	2022			2021			2022			2021
Net earnings (loss)	$	(43,376	)	$	28,425		$	(37,791	)	$	40,265
Other comprehensive income:
Unrealized appreciation of investments		(211	)		12			(447	)		(75	)
Applicable income taxes		44			(2	)		95			18
Foreign currency translation		(1,751	)		312			(2,067	)		27
Applicable income taxes		63			(11	)		52			(14	)
Defined benefit pension plans		15			43			41			104
Applicable income taxes		(4	)		(9	)		(9	)		(29	)
Other, net		68			13			155			7
Other comprehensive income, net		(1,776	)		358			(2,180	)		38
Comprehensive income		(45,152	)		28,783			(39,971	)		40,303
Comprehensive income attributable to noncontrolling interests		350			202			472			338
Comprehensive income attributable to Berkshire Hathaway shareholders	$	(45,502	)	$	28,581		$	(40,443	)	$	39,965

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 2022
Balance at December 31, 2021	$	35,600		$	(4,027	)	$	534,421		$	(59,795	)	$	8,731		$	514,930
Net earnings		—			—			5,460			—			125			5,585
Other comprehensive income, net		—			(401	)		—			—			(3	)		(404	)
Acquisition of common stock		—			—			—			(3,111	)		—			(3,111	)
Transactions with noncontrolling interests		(6	)		—			—			—			(129	)		(135	)
Balance at March 31, 2022	$	35,594		$	(4,428	)	$	539,881		$	(62,906	)	$	8,724		$	516,865
Net earnings (loss)		—			—			(43,755	)		—			379			(43,376	)
Other comprehensive income, net		—			(1,747	)		—			—			(29	)		(1,776	)
Acquisition of common stock		—			—			—			(1,028	)		—			(1,028	)
Transactions with noncontrolling interests		(382	)		—			—			—			(650	)		(1,032	)
Balance at June 30, 2022	$	35,212		$	(6,175	)	$	496,126		$	(63,934	)	$	8,424		$	469,653
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		—			—			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		—			—			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

See accompanying Notes to Consolidated Financial Statements

5

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

(Unaudited)

	First Six Months
	2022			2021
Cash flows from operating activities:
Net earnings (loss)	$	(37,791	)	$	40,265
Adjustments to reconcile net earnings (loss) to operating cash flows:
Investment (gains) losses		68,589			(32,384	)
Depreciation and amortization		5,413			5,345
Other		(2,586	)		33
Changes in operating assets and liabilities:
Unpaid losses and loss adjustment expenses		1,505			2,357
Deferred charges - retroactive reinsurance		426			473
Unearned premiums		2,384			2,375
Receivables and originated loans		(6,372	)		(4,825	)
Other assets		(4,686	)		(909	)
Other liabilities		1,467			(664	)
Income taxes		(12,988	)		7,493
Net cash flows from operating activities		15,361			19,559
Cash flows from investing activities:
Purchases of equity securities		(57,269	)		(3,589	)
Sales of equity securities		12,044			8,596
Purchases of U.S. Treasury Bills and fixed maturity securities		(100,355	)		(99,731	)
Sales of U.S. Treasury Bills and fixed maturity securities		54,637			10,814
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities		23,681			77,541
Purchases of loans and finance receivables		(22	)		(56	)
Collections of loans and finance receivables		130			218
Acquisitions of businesses, net of cash acquired		(103	)		(104	)
Purchases of property, plant and equipment and equipment held for lease		(6,833	)		(5,663	)
Other		(83	)		541
Net cash flows from investing activities		(74,173	)		(11,433	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		6,972			2,949
Repayments of borrowings of insurance and other businesses		(1,440	)		(2,481	)
Proceeds from borrowings of railroad, utilities and energy businesses		3,189			1,464
Repayments of borrowings of railroad, utilities and energy businesses		(1,374	)		(2,546	)
Changes in short term borrowings, net		(85	)		(65	)
Acquisition of treasury stock		(4,191	)		(12,560	)
Other		(1,464	)		(339	)
Net cash flows from financing activities		1,607			(13,578	)
Effects of foreign currency exchange rate changes		(277	)		(112	)
Increase (decrease) in cash and cash equivalents and restricted cash		(57,482	)		(5,564	)
Cash and cash equivalents and restricted cash at beginning of year*		88,706			48,396
Cash and cash equivalents and restricted cash at end of second quarter*	$	31,224		$	42,832
*Cash and cash equivalents and restricted cash are comprised of:
Beginning of year—
Insurance and Other	$	85,319		$	44,714
Railroad, Utilities and Energy		2,865			3,276
Restricted cash included in other assets		522			406
	$	88,706		$	48,396
End of second quarter—
Insurance and Other	$	26,534		$	38,924
Railroad, Utilities and Energy		4,074			3,374
Restricted cash included in other assets		616			534
	$	31,224		$	42,832

See accompanying Notes to Consolidated Financial Statements

6

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

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 and losses on equity securities will produce significant volatility in our interim and annual earnings. In addition, gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies and the magnitude of asset impairment charges may cause significant variations in periodic net earnings.

To varying degrees, the COVID-19 pandemic continues to affect our operating businesses. Significant government and private sector actions have been taken since 2020 to control the spread and mitigate the economic effects of the virus. Actions in the latter part of 2021 and during 2022 included temporary business closures or restrictions of business activities in various parts of the world in response to the emergence of variants of the virus. Notwithstanding these efforts, significant disruptions of supply chains and higher costs have persisted in 2022. Further, the development of geopolitical conflicts in 2022 have contributed to disruptions of supply chains, resulting in cost increases for commodities, goods and services in many parts of the world. The economic effects from these events over longer terms cannot be reasonably estimated at this time. 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

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts” (“ASU 2018-12”). ASU 2018-12 requires reassessment of cash flow assumptions at least annually and revision of discount rate assumptions each reporting period in valuing policyholder liabilities of long-duration contracts. Under ASU 2018-12, the effects from changes in cash flow assumptions are reflected in earnings and the effects from changes in discount rate assumptions are reflected in other comprehensive income. Currently, the cash flow and discount rate assumptions are set at the contract inception date and not subsequently changed, except under limited circumstances. ASU 2018-12 is to be applied retrospectively to the earliest period presented in the financial statements, will require new disclosures and is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

We will adopt ASU 2018-12 as of January 1, 2023 using the modified retrospective method, whereby revised cash flow and discount rate assumptions as of January 1, 2021 (the transition date) are applied to contracts then in-force, with liabilities then remeasured as provided under the standard. The cumulative effects from discount rate assumption changes as of the transition date will be recorded in accumulated other comprehensive income and the cumulative effect from cash flow assumption changes will be recorded in retained earnings. While we have not finalized our assessment of the impact of the adoption as of the transition date, we currently believe that the changes in discount rate assumptions will have a greater effect on our recorded liabilities than changes in cash flow assumptions. We currently estimate that as of January 1, 2021, the adoption of ASU 2018-12 will reduce our consolidated shareholders’ equity between $6 billion and $7 billion from the amount previously reported, primarily due to the low interest rate environment at that time. However, the ultimate impact of adopting ASU 2018-12 will be based on the discount rate and cash flow assumptions determined as of the January 1, 2023 adoption date. We, therefore, continue to evaluate 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, 2022 and December 31, 2021 are summarized by type below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2022
U.S. Treasury, U.S. government corporations and agencies	$	8,893	$	7	$	(159	)	$	8,741
Foreign governments		10,935		14		(122	)		10,827
Corporate bonds		993		257		(3	)		1,247
Other		293		30		(2	)		321
	$	21,114	$	308	$	(286	)	$	21,136
December 31, 2021
U.S. Treasury, U.S. government corporations and agencies	$	3,286	$	22	$	(5	)	$	3,303
Foreign governments		10,998		29		(33	)		10,994
Corporate bonds		1,363		412		(1	)		1,774
Other		317		47		(1	)		363
	$	15,964	$	510	$	(40	)	$	16,434

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, 2022, approximately 94% 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 at June 30, 2022 are summarized below by contractual maturity dates. Amounts are in millions. Actual maturities may differ from contractual maturities due to 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	$	10,305	$	10,057	$	460	$	84	$	208	$	21,114
Fair value		10,220		9,888		702		92		234		21,136

Note 4. Investments in equity securities

Investments in equity securities as of June 30, 2022 and December 31, 2021 are summarized as follows (in millions).

	Cost Basis		Net Unrealized Gains		Fair Value
June 30, 2022*
Banks, insurance and finance	$	36,837	$	39,655	$	76,492
Consumer products		41,785		118,294		160,079
Commercial, industrial and other		71,100		19,991		91,091
	$	149,722	$	177,940	$	327,662

* Approximately 69% of the aggregate fair value was concentrated in five companies (American Express Company – $21.0 billion; Apple Inc. – $125.1 billion; Bank of America Corporation – $32.2 billion; The Coca-Cola Company – $25.2 billion and Chevron Corporation – $23.7 billion).

	Cost Basis		Net Unrealized Gains		Fair Value
December 31, 2021*
Banks, insurance and finance	$	26,822	$	62,236	$	89,058
Consumer products		36,076		154,945		191,021
Commercial, industrial and other		41,707		28,933		70,640
	$	104,605	$	246,114	$	350,719

* Approximately 73% of the aggregate fair value was concentrated in four companies (American Express Company – $24.8 billion; Apple Inc. – $161.2 billion; Bank of America Corporation – $46.0 billion and The Coca-Cola Company – $23.7 billion).

8

Notes to Consolidated Financial Statements (Continued)

Note 4. Investments in equity securities (Continued)

As of June 30, 2022, we owned 151.6 million shares of American Express Company (“American Express”) common stock representing 20.2% of the American Express outstanding common stock. Since 1995, we have been party to an agreement with American Express whereby we agreed to vote a significant portion of our shares in accordance with the recommendations of the American Express Board of Directors and agreed to passivity commitments to the Board of Governors of the Federal Reserve System, which collectively restrict our ability to exercise significant influence over the operating and financial policies of American Express. Accordingly, we have not applied the equity method of accounting with respect to our investment in American Express and continue to record our investment at fair value.

Our equity security investments also include Occidental Petroleum 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 and 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. During the first six months of 2022, we also acquired approximately 17% of the outstanding common stock of Occidental, which had a fair value of $9.3 billion as of June 30, 2022.

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 manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 26.6% of the outstanding shares of Kraft Heinz common stock.

We recorded equity method earnings from our investment in Kraft Heinz of $71 million in the second quarter and $277 million in the first six months of 2022. We recorded an equity method loss of $7 million in the second quarter and earnings of $143 million in the first six months of 2021. We received dividends on the common stock of $260 million in the first six months of both 2022 and 2021, 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 $12.4 billion at June 30, 2022 and $11.7 billion at December 31, 2021. The carrying value of our investment was approximately $13.0 billion at June 30, 2022 and $13.1 billion at December 31, 2021. As of June 30, 2022, the carrying value of our investment exceeded the fair value based on the quoted market price by 5% of the carrying value. We evaluated our investment in Kraft Heinz for impairment as of June 30, 2022. Based on the prevailing facts and circumstances, we concluded recognition of an impairment loss in earnings was not required.

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

	June 25, 2022		December 25, 2021
Assets	$	91,676	$	93,394
Liabilities		42,674		43,942

	Second Quarter					First Six Months
	2022		2021			2022		2021
Sales	$	6,554	$	6,615		$	12,599	$	13,009
Net earnings (loss) attributable to Kraft Heinz common shareholders		265		(27	)		1,041		536

Other investments that we account for pursuant to the equity method include Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC (“Pilot”), Electric Transmission Texas, LLC (“ETT”) and Iroquois Gas Transmission System L.P. (“Iroquois”). The aggregate carrying value of these investments was approximately $4.5 billion as of June 30, 2022 and $4.3 billion as of December 31, 2021. We recorded equity method earnings from these entities in the first six months of $330 million in 2022 and $255 million in 2021. We received aggregate distributions in the first six months of $137 million in 2022 and $982 million in 2021, including a special distribution received from Pilot of $849 million in the first quarter of 2021. Additional information concerning these investments follows.

9

Notes to Consolidated Financial Statements (Continued)

Note 5. Equity method investments (Continued)

We own a 50% interest in Berkadia, with Jefferies Financial Group Inc. (“Jefferies”) owning the other 50% interest. Berkadia provides capital solutions, investment 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, 2022 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. Berkshire Hathaway Energy (“BHE”) subsidiaries own 50% noncontrolling interests in ETT, an owner and operator of electric transmission assets in Texas, and Iroquois, which owns and operates a natural gas pipeline located in New York and Connecticut.

We own a 38.6% interest in Pilot, headquartered in Knoxville, Tennessee. Pilot operates travel centers in North America through more than 800 retail locations across 44 U.S. states and six Canadian provinces and is a leading supplier of fuel to third parties. The Haslam family currently owns a 50.1% interest in Pilot and a third party owns the remaining 11.3% interest. We have 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 2022 and 2021 are summarized as follows (in millions).

	Second Quarter						First Six Months
	2022			2021			2022			2021
Investment gains (losses):
Equity securities:
Change in unrealized investment gains (losses) during the period on    securities held at the end of the period	$	(66,860	)	$	27,014		$	(68,548	)	$	31,548
Investment gains on securities sold during the period		32			144			34			670
		(66,828	)		27,158			(68,514	)		32,218
Fixed maturity securities:
Gross realized gains		6			15			12			35
Gross realized losses		(27	)		(12	)		(76	)		(13	)
Other		(5	)		12			(11	)		144
Investment gains (losses)		(66,854	)		27,173			(68,589	)		32,384
Derivative contract gains (losses)		(65	)		221			(308	)		710
	$	(66,919	)	$	27,394		$	(68,897	)	$	33,094

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 $12.0 billion in the first six months of 2022 and $8.6 billion in the first six months of 2021. In the preceding table, investment gains and losses on equity securities sold during the period represent the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable period or, if later, the purchase date. Taxable gains/losses on equity securities sold are generally the difference between the proceeds from sales and original cost. Equity securities sold produced taxable gains of $76 million in the second quarter of 2022 and taxable losses of $663 million in the first six months of 2022 compared to taxable gains of $228 million in the second quarter and $2.0 billion in the first six months of 2021.

Our derivative contract gains and losses derive from equity index put option contracts written prior to March 2008 on four major equity indexes. As of June 30, 2022, we had six open contracts, which had an aggregate fair value liability of $186 million and an aggregate notional value of $2.5 billion.

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, 2022			December 31, 2021
Loans and finance receivables before allowances and discounts	$	23,238		$	22,065
Allowances for credit losses		(803	)		(765	)
Unamortized acquisition discounts and points		(558	)		(549	)
	$	21,877		$	20,751

Loans and finance receivables are principally manufactured home loans, and to a lesser extent, site-built home loans and commercial loans. Reconciliations of the allowance for credit losses on loans and finance receivables for the first six months of 2022 and 2021 follow (in millions).

	First Six Months
	2022			2021
Balance at beginning of year	$	765		$	712
Provision for credit losses		50			49
Charge-offs, net of recoveries		(12	)		(22	)
Balance at June 30	$	803		$	739

As of June 30, 2022, approximately 99% of manufactured and site-built home loans were evaluated collectively for impairment. As of June 30, 2022, we considered approximately 97% of these loans 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, 2022 follows (in millions).

	Origination Year
	2022		2021		2020		2019		2018		Prior		Total
Performing	$	3,322	$	3,807	$	2,972	$	2,098	$	1,588	$	7,480	$	21,267
Non-performing		1		4		7		7		6		43		68
	$	3,323	$	3,811	$	2,979	$	2,105	$	1,594	$	7,523	$	21,335

We are also party to two commercial loan agreements with an aggregate carrying value of $1.9 billion at June 30, 2022 and December 31, 2021. The larger of these loans is with Seritage Growth Properties (“Seritage”), which had a carrying value of $1.44 billion as of June 30, 2022 and December 31, 2021. The Seritage loan is pursuant to a $2.0 billion term loan facility and the outstanding loan is secured by mortgages on its real estate properties. The Seritage loan agreement, as amended, allows optional loan prepayments without penalty and further provides Seritage with the option to extend the maturity of the loan to July 31, 2025, if the outstanding principal has been reduced to $800 million by the original expiration date of July 31, 2023. Each of these commercial loans is current as to payment status.

Note 8. Other receivables

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

	June 30, 2022			December 31, 2021
Insurance and other:
Insurance premiums receivable	$	17,391		$	15,050
Reinsurance recoverables		4,836			4,900
Trade receivables		14,511			12,971
Other		3,648			3,146
Allowances for credit losses		(708	)		(679	)
	$	39,678		$	35,388
Railroad, utilities and energy:
Trade receivables	$	4,167		$	3,678
Other		789			650
Allowances for credit losses		(141	)		(151	)
	$	4,815		$	4,177

11

Notes to Consolidated Financial Statements (Continued)

Note 8. Other receivables (Continued)

Provisions for credit losses in the first six months with respect to receivables summarized above were $211 million in 2022 and $209 million in 2021. Charge-offs, net of recoveries, in the first six months were $189 million in 2022 and $171 million in 2021.

Note 9. Inventories

Inventories are comprised of the following (in millions).

	June 30, 2022		December 31, 2021
Raw materials	$	6,558	$	5,743
Work in process and other		3,750		3,192
Finished manufactured goods		5,396		4,530
Goods acquired for resale		8,856		7,489
	$	24,560	$	20,954

Note 10. Property, plant and equipment

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

	June 30, 2022			December 31, 2021
Land, buildings and improvements	$	14,055		$	14,070
Machinery and equipment		26,082			26,063
Furniture, fixtures and other		4,872			4,640
		45,009			44,773
Accumulated depreciation		(24,492	)		(23,939	)
	$	20,517		$	20,834

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, 2022			December 31, 2021
Railroad:
Land, track structure and other roadway	$	65,821		$	65,843
Locomotives, freight cars and other equipment		15,957			13,822
Construction in progress		1,186			1,027
		82,964			80,692
Accumulated depreciation		(16,988	)		(14,978	)
		65,976			65,714
Utilities and energy:
Utility generation, transmission and distribution systems		90,810			90,223
Interstate natural gas pipeline assets		17,547			17,423
Independent power plants and other assets		14,488			13,695
Construction in progress		4,774			4,196
		127,619			125,537
Accumulated depreciation		(36,824	)		(35,721	)
		90,795			89,816
	$	156,771		$	155,530

Depreciation expense for the first six months of 2022 and 2021 is summarized below (in millions).

	First Six Months
	2022		2021
Insurance and other	$	1,127	$	1,148
Railroad, utilities and energy		3,091		2,990
	$	4,218	$	4,138

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. Equipment held for lease is summarized below (in millions).

	June 30, 2022			December 31, 2021
Railcars	$	9,558		$	9,448
Aircraft		9,798			9,234
Other		5,116			5,053
		24,472			23,735
Accumulated depreciation		(9,347	)		(8,817	)
	$	15,125		$	14,918

Depreciation expense for equipment held for lease in the first six months was $593 million in 2022 and $570 million in 2021. Fixed and variable operating lease revenues for the second quarter and first six months of 2022 and 2021 are summarized below (in millions).

	Second Quarter				First Six Months
	2022		2021		2022		2021
Fixed lease revenue	$	1,264	$	1,105	$	2,452	$	2,167
Variable lease revenue		623		342		1,107		604
	$	1,887	$	1,447	$	3,559	$	2,771

Note 12. Goodwill and other intangible assets

Reconciliations of the changes in the carrying value of goodwill for the first six months of 2022 and for the year ended December 31, 2021 follow (in millions).

	June 30, 2022			December 31, 2021
Balance at beginning of year	$	73,875		$	73,734
Business acquisitions		35			353
Other, including foreign currency translation		(292	)		(212	)
Balance at end of period*	$	73,618		$	73,875

* Net of accumulated goodwill impairments of $11.0 billion as of June 30, 2022 and December 31, 2021.

The gross carrying amounts and related accumulated amortization of other intangible assets are summarized as follows (in millions).

	June 30, 2022						December 31, 2021
	Gross carrying amount		Accumulated amortization		Net carrying value		Gross carrying amount		Accumulated amortization		Net carrying value
Insurance and other:
Customer relationships	$	27,308	$	6,763	$	20,545	$	27,335	$	6,450	$	20,885
Trademarks and trade names		5,174		811		4,363		5,176		802		4,374
Patents and technology		4,846		3,598		1,248		4,763		3,484		1,279
Other		3,304		1,468		1,836		3,390		1,442		1,948
	$	40,632	$	12,640	$	27,992	$	40,664	$	12,178	$	28,486
Railroad, utilities and energy:
Customer relationships	$	678	$	412	$	266	$	678	$	396	$	282
Trademarks, trade names and other		1,014		168		846		1,015		146		869
	$	1,692	$	580	$	1,112	$	1,693	$	542	$	1,151

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 $602 million in 2022 and $637 million in 2021. Intangible assets with indefinite lives were $18.4 billion as of June 30, 2022 and $18.5 billion as of December 31, 2021 and primarily related to certain customer relationships and trademarks and trade names.

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, 2022 and 2021 follows (in millions).

	2022			2021
Balances at beginning of year:
Gross liabilities	$	86,664		$	79,854
Reinsurance recoverable on unpaid losses		(2,960	)		(2,912	)
Net liabilities		83,704			76,942
Incurred losses and loss adjustment expenses:
Current accident year		27,427			23,651
Prior accident years		(887	)		(1,064	)
Total		26,540			22,587
Paid losses and loss adjustment expenses:
Current accident year		(10,085	)		(8,406	)
Prior accident years		(13,820	)		(11,169	)
Total		(23,905	)		(19,575	)
Foreign currency effect		(568	)		31
Balances at June 30:
Net liabilities		85,771			79,985
Reinsurance recoverable on unpaid losses		2,789			2,973
Gross liabilities	$	88,560		$	82,958

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”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries. In the first six months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $887 million in 2022 and $1.1 billion in 2021, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods. These reductions, as percentages of the net liabilities at the beginning of each year, were 1.1% in 2022 and 1.4% in 2021.

Estimated ultimate liabilities for prior accident years from primary insurance in the first six months were reduced by $313 million in 2022 and $1.1 billion in 2021. The reductions in each period derived primarily from private passenger automobile, medical professional liability and workers’ compensation claims and in 2022 were partly offset by increases in ultimate liabilities for other casualty claims. Estimated ultimate liabilities for prior years attributable to property and casualty reinsurance in the first six months decreased $574 million in 2022 and increased $35 million in 2021. 

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, after 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 charges for each of the six-month periods ending June 30, 2022 and 2021 follow (in millions).

	2022						2021
	Unpaid losses and loss adjustment expenses			Deferred charges - retroactive reinsurance			Unpaid losses and loss adjustment expenses			Deferred charges - retroactive reinsurance
Balances at beginning of year	$	38,256		$	(10,639	)	$	40,966		$	(12,441	)
Incurred losses and loss adjustment expenses:
Current year contracts		—			—			82			—
Prior years’ contracts		(14	)		426			(3	)		473
Total		(14	)		426			79			473
Paid losses and loss adjustment expenses		(1,008	)		—			(808	)		—
Balances at June 30	$	37,234		$	(10,213	)	$	40,237		$	(11,968	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	412					$	552

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts, which reflect when our exposure to losses began. Incurred losses and loss adjustment expenses in the first six months for prior years’ contracts were $412 million in 2022 and $470 million in 2021 and included recurring amortization of deferred charges and the effect of changes in the timing and amount of expected future loss payments. Currently, our largest retroactive reinsurance contract is between our subsidiary, National Indemnity Company, and certain subsidiaries of American International Group, Inc. (collectively, “AIG”). Our estimated claim liabilities with regard to the AIG contract were approximately $15.2 billion at June 30, 2022 and $15.8 billion at December 31, 2021. Deferred charges related to the AIG contract were $4.24 billion at June 30, 2022 and $4.45 billion at December 31, 2021.

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, 2022.

	Weighted Average Interest Rate			June 30, 2022		December 31, 2021
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2023-2047		3.3	%	$	6,225	$	6,820
Euro denominated due 2023-2041		1.0	%		7,189		7,792
Japanese Yen denominated due 2023-2060		0.6	%		6,706		6,797
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2027-2052		3.6	%		14,455		10,758
Great Britain Pound denominated due 2039-2059		2.5	%		2,093		2,325
Euro denominated due 2030-2034		1.8	%		1,304		—
Other subsidiary borrowings due 2022-2045		4.1	%		4,375		4,438
Subsidiary short-term borrowings		3.7	%		293		342
				$	42,640	$	39,272

15

Notes to Consolidated Financial Statements (Continued)

Note 15. Notes payable and other borrowings (Continued)

In January 2022, Berkshire repaid $600 million of maturing senior notes and issued ¥128.5 billion (approximately $1.1 billion) of senior notes with maturity dates ranging from 2027 to 2052 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 March 2022, BHFC issued $4.5 billion of senior notes with maturity dates ranging from 2027 to 2052 with a weighted average interest rate of 3.4% and €1.25 billion (approximately $1.4 billion) of senior notes maturing in 2030 and 2034 with a weighted average interest rate of 1.8%. In May 2022, BHFC repaid $775 million of maturing senior notes.

The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€8.15 billion, £1.75 billion and ¥914 billion par at June 30, 2022) reflect the applicable exchange rates as of each balance sheet date. 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 $1.4 billion in the second quarter and $2.1 billion in the first six months of 2022 as compared to pre-tax losses of $45 million in the second quarter and pre-tax gains of $675 million in the first six months of 2021.

Berkshire also guarantees debt of other subsidiaries, aggregating approximately $3.8 billion at June 30, 2022. 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, 2022		December 31, 2021
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2053		4.3	%	$	13,992	$	13,003
Subsidiary and other debt due 2022-2064		4.1	%		37,125		36,759
Short-term borrowings		2.8	%		1,948		2,009
Burlington Northern Santa Fe ("BNSF") and subsidiaries due 2022-2097		4.5	%		23,376		23,219
				$	76,441	$	74,990

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 April 2022, BHE issued $1.0 billion of 4.6% senior notes due in 2053. During the first six months of 2022, BHE subsidiaries issued approximately $1.3 billion of term debt with a weighted average interest rate of 3.5% and maturity dates ranging from 2024 to 2052.

BNSF’s borrowings are primarily senior unsecured debentures. In June 2022, BNSF issued $1.0 billion of 4.45% debentures due in 2053. During the first six months of 2022, BNSF repaid $800 million of term debt. As of June 30, 2022, 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.

Our subsidiaries have unused lines of credit and commercial paper capacity to support short-term borrowing programs and provide additional liquidity. Unused lines of credit were approximately $10.3 billion at June 30, 2022, which included approximately $8.8 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, 2022 and December 31, 2021, 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, 2022
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	8,741	$	8,741	$	8,704	$	37	$	—
Foreign governments		10,827		10,827		10,367		460		—
Corporate bonds		1,247		1,247		—		1,247		—
Other		321		321		—		321		—
Investments in equity securities		327,662		327,662		315,715		7		11,940
Investment in Kraft Heinz common stock		12,959		12,412		12,412		—		—
Loans and finance receivables		21,877		22,827		—		2,048		20,779
Derivative contract assets (1)		669		669		27		541		101
Derivative contract liabilities (1)		617		617		14		345		258
Notes payable and other borrowings:
Insurance and other		42,640		39,474		—		39,430		44
Railroad, utilities and energy		76,441		73,513		—		73,513		—
December 31, 2021
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	3,303	$	3,303	$	3,261	$	42	$	—
Foreign governments		10,994		10,994		10,286		708		—
Corporate bonds		1,774		1,774		—		1,774		—
Other		363		363		—		363		—
Investments in equity securities		350,719		350,719		339,225		8		11,486
Investment in Kraft Heinz common stock		13,112		11,683		11,683		—		—
Loans and finance receivables		20,751		22,174		—		2,178		19,996
Derivative contract assets (1)		329		329		6		230		93
Derivative contract liabilities (1)		376		376		2		150		224
Notes payable and other borrowings:
Insurance and other		39,272		42,339		—		42,292		47
Railroad, utilities and energy		74,990		87,065		—		87,065		—

⁽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, 2022 and 2021 follow (in millions).

	Balance at beginning of year			Gains included in earnings		Acquisitions, dispositions and settlements		Transfers out of Level 3		Balance at June 30
Investments in equity securities:
2022	$	11,480		$	455	$	—	$	—	$	11,935
2021		8,978			1,559		1,100		—		11,637
Equity index put option contract liabilities:
2021		(1,065	)		710		—		—		(355	)

Quantitative information as of June 30, 2022 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	$	10,051	Discounted cash flow	Expected duration	7 years
				Discount for transferability    restrictions and subordination	372 bps
Common stock warrants		1,884	Warrant pricing model	Expected duration	7 years
				Volatility	38%

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 17. Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the first six months of 2022 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, 2021		665,901			(48,788	)		617,113			1,488,292,852		(197,818,349	)		1,290,474,503
Conversions of Class A common stock to Class B    common stock		(11,544	)		—			(11,544	)		17,316,000		—			17,316,000
Treasury stock acquired		—			(4,402	)		(4,402	)		—		(6,850,133	)		(6,850,133	)
Balances at June 30, 2022		654,357			(53,190	)		601,167			1,505,608,852		(204,668,482	)		1,300,940,370

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 equal 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 1,468,461 shares outstanding as of June 30, 2022 and 1,477,429 shares outstanding as of December 31, 2021.

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 21.8% in the second quarter and 22.4% in the first six months of 2022 compared to 20.4% in the second quarter and 19.9% in the first six months of 2021. Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in certain 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, including investment 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, 2022 and 2021 follows (in millions).

	Unrealized appreciation of fixed maturity securities, net			Foreign currency translation			Defined benefit pension plans			Other			Accumulated other comprehensive income
First six months of 2022
Balance at beginning of year	$	369		$	(4,092	)	$	(347	)	$	43		$	(4,027	)
Other comprehensive income, net		(352	)		(1,971	)		27			148			(2,148	)
Balance at end of period	$	17		$	(6,063	)	$	(320	)	$	191		$	(6,175	)
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	)

Note 20. Supplemental cash flow information

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

	First Six Months
	2022		2021
Cash paid during the period for:
Income taxes	$	1,951	$	2,508
Interest:
Insurance and other		567		699
Railroad, utilities and energy		1,564		1,580

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.

Berkshire and Alleghany Corporation (“Alleghany”) entered into a definitive agreement and plan of merger dated as of March 20, 2022, whereby Berkshire will acquire all of Alleghany’s outstanding common stock for cash of approximately $11.6 billion. The Alleghany shareholders voted to approve and adopt the agreement and plan of merger on June 9, 2022. The acquisition of Alleghany is expected to close in the fourth quarter of 2022 and is subject to the receipt of various regulatory approvals and customary closing conditions. Alleghany owns property and casualty reinsurance and insurance businesses as well as a diverse portfolio of non-financial businesses.

In June 2022, BHE acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman - non-insurance operations, for $870 million. The purchase was pursuant to the terms of a shareholders agreement between Berkshire, BHE and BHE’s non-controlling shareholders. Berkshire recorded a charge of $362 million to capital in excess of par value for the excess of the consideration paid over the carrying value of the acquired noncontrolling interest.

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 2022 and 2021 (in millions). Other revenues, which are not considered to be revenues from contracts with customers under GAAP, are primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues.

	Manufacturing		McLane		Service and Retailing		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending June 30, 2022
Manufactured products:
Industrial and commercial products	$	6,142	$	—	$	48	$	—	$	—	$	—	$	6,190
Building products		5,970		—		—		—		—		—		5,970
Consumer products		5,509		—		—		—		—		—		5,509
Grocery and convenience store distribution		—		7,979		—		—		—		—		7,979
Food and beverage distribution		—		5,002		—		—		—		—		5,002
Auto sales		—		—		2,675		—		—		—		2,675
Other retail and wholesale distribution		818		—		4,265		—		—		—		5,083
Service		302		248		1,078		6,596		1,561		—		9,785
Electricity and natural gas		—		—		—		—		4,740		—		4,740
Total		18,741		13,229		8,066		6,596		6,301		—		52,933
Other revenues		995		33		1,527		16		212		20,464		23,247
	$	19,736	$	13,262	$	9,593	$	6,612	$	6,513	$	20,464	$	76,180
Six months ending June 30, 2022
Manufactured products:
Industrial and commercial products	$	12,074	$	—	$	97	$	—	$	—	$	—	$	12,171
Building products		11,389		—		—		—		—		—		11,389
Consumer products		10,602		—		—		—		—		—		10,602
Grocery and convenience store distribution		—		15,685		—		—		—		—		15,685
Food and beverage distribution		—		9,564		—		—		—		—		9,564
Auto sales		—		—		5,202		—		—		—		5,202
Other retail and wholesale distribution		1,540		—		8,440		—		—		—		9,980
Service		566		462		2,084		12,527		2,673		—		18,312
Electricity and natural gas		—		—		—		—		9,454		—		9,454
Total		36,171		25,711		15,823		12,527		12,127		—		102,359
Other revenues		1,950		65		2,861		29		364		39,362		44,631
	$	38,121	$	25,776	$	18,684	$	12,556	$	12,491	$	39,362	$	146,990

21

Notes to Consolidated Financial Statements (Continued)

Note 22. Revenues from contracts with customers (Continued)

	Manufacturing		McLane		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

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, 2022 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	$	4,019	$	22,226	$	26,245
Other sales and service contracts		1,642		2,789		4,431

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 and 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 2022 and 2021 were as follows (in millions).

	Second Quarter					First Six Months
	2022		2021			2022			2021
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO	$	9,807	$	9,546		$	19,361		$	18,469
Berkshire Hathaway Primary Group		3,313		2,755			6,431			5,409
Berkshire Hathaway Reinsurance Group		4,967		4,862			9,787			9,709
Investment income		2,284		1,459			3,648			2,873
Total insurance		20,371		18,622			39,227			36,460
BNSF		6,640		5,809			12,608			11,210
BHE		6,518		6,085			12,501			12,009
Manufacturing		19,772		17,412			38,193			33,325
McLane		13,262		12,295			25,777			23,917
Service and retailing		9,617		8,977			18,732			16,935
		76,180		69,200			147,038			133,856
Reconciliation of segments to consolidated amount
Corporate, eliminations and other		—		(86	)		(48	)		(143	)
	$	76,180	$	69,114		$	146,990		$	133,713

	Second Quarter						First Six Months
	2022			2021			2022			2021
Earnings (Loss) Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO	$	(487	)	$	626		$	(665	)	$	1,649
Berkshire Hathaway Primary Group		242			166			334			372
Berkshire Hathaway Reinsurance Group		967			(327	)		1,123			(590	)
Investment income		2,283			1,456			3,644			2,868
Total insurance		3,005			1,921			4,436			4,299
BNSF		2,151			1,979			3,960			3,638
BHE		564			739			1,240			1,422
Manufacturing		3,028			2,714			5,852			5,150
McLane		76			84			158			187
Service and retailing		1,199			1,186			2,334			2,124
		10,023			8,623			17,980			16,820
Reconciliation of segments to consolidated amount
Investment and derivative gains (losses)		(66,919	)		27,394			(68,897	)		33,094
Interest expense, not allocated to segments		(100	)		(144	)		(204	)		(258	)
Equity method investments		231			147			607			398
Corporate, eliminations and other		1,283			(299	)		1,844			195
	$	(55,482	)	$	35,721		$	(48,670	)	$	50,249

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
	2022			2021			2022			2021
Insurance – underwriting	$	581		$	376		$	628		$	1,140
Insurance – investment income		1,906			1,219			3,076			2,427
Railroad		1,664			1,516			3,035			2,767
Utilities and energy		766			740			1,516			1,443
Manufacturing, service and retailing		3,249			3,004			6,274			5,623
Investment and derivative contract gains (losses)		(53,038	)		21,408			(54,618	)		26,101
Other		1,117			(169	)		1,794			304
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(43,755	)	$	28,094		$	(38,295	)	$	39,805

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.

In varying degrees, the COVID-19 pandemic continues to affect our operating businesses. Significant government and private sector actions have been taken since 2020 to control the spread and mitigate the economic effects of the virus. Actions in the latter part of 2021 and during 2022 included periodic temporary business closures or restrictions of business activities in various parts of the world in response to the emergence of variants of the virus. Notwithstanding these efforts, significant disruptions of supply chains and higher costs have persisted. Further, geopolitical conflicts, including the Russia-Ukraine conflict, have developed in 2022. While direct losses to-date have not been material to consolidated results, these events had indirect impacts by contributing to the disruptions of global supply chains, resulting in cost increases for goods and services in parts of the world where we operate. We cannot reliably predict future economic effects of these events on our businesses or when our operations will normalize. Nor can we reliably predict how these events will alter the future consumption patterns of consumers and businesses we serve.

Insurance underwriting after-tax earnings increased $205 million (54.5%) in the second quarter and decreased $512 million (44.9%) in the first six months of 2022 versus 2021. In each period, underwriting earnings from GEICO declined, primarily attributable to increases in claims frequencies and severities and lower reductions of ultimate claim estimates for prior years’ losses. Underwriting earnings in 2022 from reinsurance activities increased compared to 2021, reflecting foreign currency exchange rate gains arising from the remeasurement of non-U.S. Dollar denominated liabilities on insurance contracts of our U.S. insurance subsidiaries due to strengthening of the U.S. Dollar and improved life results. After-tax earnings from insurance investment income increased 56.4% in the second quarter and 26.7% in the first six months of 2022 compared to 2021, attributable to increased dividend income and higher interest rates.

After-tax earnings of our railroad business increased 9.8% in the second quarter and 9.7% in the first six months of 2022 compared to 2021. These increases reflected higher revenue per car/unit, partly offset by lower overall freight volumes and higher fuel costs. After-tax earnings of our utilities and energy business increased 3.5% in the second quarter and 5.1% in the first six months of 2022 compared to 2021. The increases reflected higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid businesses, partly offset by lower earnings from the U.S. regulated utilities and real estate brokerage businesses. After-tax earnings from our manufacturing, service and retailing businesses increased 8.2% in the second quarter and 11.6% in the first six months of 2022 versus 2021. Results were mixed among our various businesses. While customer demand for products and services was relatively good in the first six months of 2022, we continue to experience the negative effects of higher materials, freight, labor and other input costs.

Investment and derivative contract gains and losses in 2022 and 2021 predominantly derived from our investments in equity securities and includes unrealized gains and losses from market price changes during the period. 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 quarterly or annual results or in evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. Other earnings included after-tax foreign currency exchange gains related to non-U.S. Dollar denominated debt of $1.1 billion in the second quarter and $1.6 billion in the first six months of 2022, compared to after-tax losses of $45 million and after-tax gains of $480 million in the second quarter and first six months of 2021, respectively.

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 quarterly or annual operating results of our insurance businesses.

The timing and magnitude of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to our reinsurance businesses. Generally, we consider incurred losses exceeding $100 million from a current year catastrophic event to be significant. Significant catastrophe events in the first six months included floods in Australia and South Africa in 2022 and Winter Storm Uri in 2021.

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 $126 billion as of June 30, 2022. 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 of certain of our commercial insurance and reinsurance businesses have been affected by estimated losses and costs associated with the COVID-19 pandemic. While the effects of the pandemic on underwriting results in the first six months of 2022 were insignificant, results in future periods may be affected by legal and regulatory actions pertaining to insurance coverage, which we cannot reasonably estimate at this time.

We provide primary insurance and reinsurance products covering property and casualty risks, as well as life and health risks. Our insurance and reinsurance businesses are GEICO, Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group. Underwriting results of our insurance businesses are summarized below (dollars in millions).

	Second Quarter						First Six Months
	2022			2021			2022			2021
Pre-tax underwriting earnings (loss):
GEICO	$	(487	)	$	626		$	(665	)	$	1,649
Berkshire Hathaway Primary Group		242			166			334			372
Berkshire Hathaway Reinsurance Group		967			(327	)		1,123			(590	)
Pre-tax underwriting earnings		722			465			792			1,431
Income taxes and noncontrolling interests		141			89			164			291
Net underwriting earnings	$	581		$	376		$	628		$	1,140
Effective income tax rate		19.4	%		19.0	%		20.7	%		20.3	%

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
	2022					2021				2022					2021
	Amount			%		Amount		%		Amount			%		Amount		%
Premiums written	$	9,416				$	9,230			$	19,681				$	19,236
Premiums earned	$	9,807			100.0	$	9,546		100.0	$	19,361			100.0	$	18,469		100.0
Losses and loss adjustment expenses		9,105			92.8		7,617		79.8		17,649			91.2		14,080		76.2
Underwriting expenses		1,189			12.2		1,303		13.6		2,377			12.2		2,740		14.9
Total losses and expenses		10,294			105.0		8,920		93.4		20,026			103.4		16,820		91.1
Pre-tax underwriting earnings (loss)	$	(487	)			$	626			$	(665	)			$	1,649

25

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

Insurance—Underwriting (Continued)

GEICO (Continued)

GEICO’s pre-tax underwriting loss in the first half of 2022 reflected increased claims severities, primarily due to significant cost inflation in automobile markets, which began to accelerate in the second half of 2021. Increases in used car prices are producing increased claims severities on total losses and shortages of car parts are contributing to increased claims severities on partial losses. In addition, injury claims severities continue to trend higher than general inflation rates.

Premiums written increased $186 million (2.0%) in the second quarter and $445 million (2.3%) in the first six months of 2022 compared to 2021. The increases were primarily attributable to increases in average premiums per auto policy due to rate increases, partially offset by a decrease in policies in-force. Premiums earned increased $261 million (2.7%) in the second quarter and $892 million (4.8%) in the first six months of 2022 compared to 2021. Premiums earned in the first six months of 2021 included a reduction of approximately $460 million attributable to the remaining impact of the GEICO Giveback program that provided a 15% premium credit to new and renewing voluntary auto and motorcycle policies written between April 8, 2020 and October 7, 2020.

Losses and loss adjustment expenses increased $1.5 billion (19.5%) in the second quarter and $3.6 billion (25.3%) in the first six months of 2022 compared to 2021. GEICO’s ratio of losses and loss adjustment expenses to premiums earned was 92.8% in the second quarter and 91.2% in the first six months of 2022, increases of 13.0 percentage points and 15.0 percentage points, respectively, compared to the same periods in 2021, which reflected increases in claims frequencies and severities for the current year and lower reductions of loss estimates for prior years’ loss events.

Claims frequencies in the first six months of 2022 were higher for all coverages, including property damage (four to five percent range), collision (ten to eleven percent range), bodily injury (six to seven percent range) and personal injury (seven to eight percent range). Average claims severities in the first six months of 2022 were higher for property damage coverage (eleven to twelve percent range), collision coverage (nineteen to twenty percent range) and bodily injury coverage (nine to eleven percent range). Losses and loss adjustment expenses reflected reductions in the ultimate loss estimates for prior years’ loss events of $207 million in the first six months of 2022 compared to $846 million in the first six months of 2021. The reductions in 2022 reflected decreases for bodily and personal injury coverages, partially offset by increases for collision and property damage coverages, while the reductions in 2021 were across all major coverages.

Underwriting expenses decreased $114 million (8.7%) in the second quarter and $363 million (13.2%) in the first six months of 2022 compared to 2021, reflecting lower advertising costs in both periods and lower employee-related costs in the first six months. GEICO’s expense ratio (underwriting expense to premiums earned) was 12.2% in the second quarter and first six months of 2022, decreases of 1.4 percentage points and 2.7 percentage points, respectively, compared to the same periods in 2021, attributable to both the decreases in expenses as well as the increases in earned premiums.

Berkshire Hathaway Primary Group

The Berkshire Hathaway Primary Group (“BH Primary”) provides a variety of commercial insurance solutions, including healthcare professional liability, workers’ compensation, automobile, general liability, property and specialty coverages for small, medium and large clients. BH Primary’s larger 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”) and U.S. Liability Insurance Company (“USLI”). A summary of BH Primary underwriting results follows (dollars in millions).

	Second Quarter								First Six Months
	2022				2021				2022				2021
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	3,504			$	2,943			$	6,896			$	5,851
Premiums earned	$	3,313		100.0	$	2,755		100.0	$	6,431		100.0	$	5,409		100.0
Losses and loss adjustment expenses		2,243		67.7		1,955		71.0		4,517		70.2		3,804		70.3
Underwriting expenses		828		25.0		634		23.0		1,580		24.6		1,233		22.8
Total losses and expenses		3,071		92.7		2,589		94.0		6,097		94.8		5,037		93.1
Pre-tax underwriting earnings	$	242			$	166			$	334			$	372

Premiums written increased $561 million (19.1%) in the second quarter and $1.0 billion (17.9%) in the first six months of 2022 compared to 2021, reflecting year-to-date increases at BH Specialty (26%), USLI (17%) and BHHC (14%). The increases were primarily on property and casualty coverages in the U.S. across several markets.

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 67.7% in the second quarter and 70.2% in the first six months of 2022, a decrease of 3.3 percentage points in the second quarter and relatively unchanged in the first six months compared to 2021. Losses and loss adjustment expenses from significant catastrophe events were $75 million in the first six months of 2022 compared to $156 million in 2021. Losses and loss adjustment expenses also included net reductions in estimated ultimate liabilities for prior years’ loss events of $106 million in the first six months of 2022 compared to $253 million in 2021. BH Primary insurers write significant levels of workers’ compensation, commercial and professional liability insurance and the related claim costs may be subject to high severity and long claim-tails. 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 increased $194 million (30.6%) in the second quarter and $347 million (28.1%) in the first six months of 2022 compared to the same periods in 2021. The expense ratio increased 2.0 percentage points in the second quarter and 1.8 percentage points in the first six months compared to 2021. These increases reflected costs associated with new business development and changes in business mix.

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 write 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 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 business due to the expected long durations of the claim liabilities. We expect to incur pre-tax underwriting losses from such business, 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 BHRG’s premiums and pre-tax underwriting results follows (dollars in millions).

	Second Quarter										First Six Months
	Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)
	2022		2021		2022			2021			2022		2021		2022			2021
Property/casualty	$	3,531	$	3,354	$	976		$	202		$	6,930	$	6,748	$	1,381		$	368
Life/health		1,265		1,299		75			(169	)		2,513		2,604		63			(341	)
Retroactive reinsurance		—		82		(52	)		(220	)		—		82		(242	)		(462	)
Periodic payment annuity		168		123		(27	)		(144	)		337		267		(130	)		(280	)
Variable annuity		3		4		(5	)		4			7		8		51			125
	$	4,967	$	4,862	$	967		$	(327	)	$	9,787	$	9,709	$	1,123		$	(590	)

Property/casualty

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

	Second Quarter								First Six Months
	2022				2021				2022				2021
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	4,159			$	3,426			$	8,545			$	7,809
Premiums earned	$	3,531		100.0	$	3,354		100.0	$	6,930		100.0	$	6,748		100.0
Losses and loss adjustment expenses		2,067		58.5		2,296		68.5		4,374		63.1		4,703		69.7
Underwriting expenses		488		13.9		856		25.5		1,175		17.0		1,677		24.8
Total losses and expenses		2,555		72.4		3,152		94.0		5,549		80.1		6,380		94.5
Pre-tax underwriting earnings	$	976			$	202			$	1,381			$	368

27

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Property/casualty (Continued)

Premiums written increased $733 million (21.4%) in the second quarter and $736 million (9.4%) in the first six months of 2022 compared to the same periods in 2021, reflecting net increases from new property business and rates, partially offset by unfavorable foreign currency translation effects. Losses and loss adjustment expenses decreased $229 million (10.0%) in the second quarter and $329 million (7.0%) in the first six months, while the loss ratio declined 10.0 percentage points in the second quarter and 6.6 percentage points in the first six months of 2022 compared to 2021. Losses incurred arising from significant catastrophe events were $443 million in the second quarter and $758 million in the first six months of 2022, which were partially offset by reductions in estimated ultimate liabilities for losses occurring in prior years of $437 million in the second quarter and $574 million in the first six months. Losses incurred from significant catastrophe events were $108 million in the second quarter and $418 million in the first six months of 2021. Changes in estimated ultimate liabilities for prior years’ loss events were relatively insignificant in the second quarter and first six months of 2021.

Underwriting expenses as percentages of premiums earned decreased 11.6 percentage points in the second quarter and 7.8 percentage points in the first six months of 2022 compared to 2021, primarily attributable to foreign currency effects and changes in business mix. Underwriting expenses included foreign currency exchange gains of $308 million in the second quarter and $389 million in the first six months of 2022, primarily related to a third quarter 2021 intercompany reinsurance agreement in which a non-U.S. based Berkshire subsidiary ceded non-U.S. Dollar denominated liabilities to a U.S. based Berkshire subsidiary. Under U.S. GAAP, the effects of exchange rate changes from the remeasurement of liabilities assumed by the U.S. subsidiary are reflected in earnings as its functional currency is the U.S. Dollar. The net foreign currency exchange rate effects from translating the financial statements of the non-U.S. subsidiary to the U.S. Dollar are included in other comprehensive income.

Life/health

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

	Second Quarter									First Six Months
	2022				2021					2022				2021
	Amount		%		Amount			%		Amount		%		Amount			%
Premiums written	$	1,249			$	1,296				$	2,492			$	2,597
Premiums earned	$	1,265		100.0	$	1,299			100.0	$	2,513		100.0	$	2,604			100.0
Life and health insurance benefits		964		76.2		1,235			95.1		2,015		80.2		2,486			95.5
Underwriting expenses		226		17.8		233			17.9		435		17.3		459			17.6
Total benefits and expenses		1,190		94.0		1,468			113.0		2,450		97.5		2,945			113.1
Pre-tax underwriting earnings (loss)	$	75			$	(169	)			$	63			$	(341	)

Life/health premiums written decreased $47 million (3.6%) in the second quarter and $105 million (4.0%) in the first six months of 2022 compared to the same periods in 2021, primarily due to lower volumes in the Asia Pacific and North America regions and from unfavorable foreign currency translation effects. Life and health benefits declined $271 million (21.9%) in the second quarter and $471 million (18.9%) in the first six months of 2022 compared to 2021, attributable to lower mortality. Underwriting results in 2021 were negatively affected by significant, pandemic-related increases in mortality in the U.S., South Africa, India and Latin America.

Retroactive reinsurance

Pre-tax underwriting losses in each period derived from the amortization of deferred charges and changes in the estimated timing and amounts of future claim payments. Underwriting results also include foreign currency exchange gains and losses from the effects of changes in foreign currency exchange rates on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. Foreign currency exchange gains were $157 million in the first six months of 2022, substantially all of which was in the second quarter. Foreign currency exchange gains/losses were insignificant in the corresponding 2021 periods. Pre-tax underwriting losses before foreign currency exchange effects were $204 million in the second quarter and $399 million in the first six months of 2022 compared to $220 million in the second quarter and $463 million in the first six months of 2021.

Unpaid losses assumed under retroactive reinsurance contracts declined $1.0 billion in the first six months of 2022 to $37.2 billion at June 30, 2022, primarily due to loss payments. Unamortized deferred charges related to retroactive reinsurance contracts declined $426 million in the first six months of 2022 to $10.2 billion at June 30, 2022, primarily attributable to periodic amortization. Deferred charge amortization will be included in underwriting earnings over the expected remaining claims settlement periods.

28

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Periodic payment annuity

Periodic payment annuity premiums earned increased $45 million (36.6%) in the second quarter and $70 million (26.2%) in the first six months of 2022 compared to the same periods in 2021. Periodic payment annuity business is both price and demand sensitive and the supply of available business is affected by the timing of underlying legal claim settlements. Our volumes written may change rapidly due to changes in prices, which are affected by prevailing interest rates, the perceived risks and durations associated with the expected annuity payments, as well as the level of competition.

Periodic payment annuity contracts normally produce pre-tax underwriting losses deriving from the recurring discount accretion of annuity liabilities. Underwriting results also include gains or losses from the effects of changes in mortality and interest rates and from foreign currency exchange rate changes on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. Pre-tax underwriting results included foreign currency gains of $116 million in the second quarter and $160 million in the first six months of 2022 compared to losses of $10 million in the second quarter and $20 million in the first six months of 2021.

Pre-tax underwriting losses before foreign currency exchange effects were $143 million in the second quarter and $290 million in the first six months of 2022 and $134 million in the second quarter and $260 million in the first six months of 2021. Discounted annuity liabilities were $15.4 billion at June 30, 2022 and had a weighted average discount rate of approximately 3.9%.

Variable annuity

Variable annuity guarantee reinsurance contracts produced pre-tax losses of $5 million in the second quarter and gains of $51 million in the first six months of 2022 compared to pre-tax gains of $4 million in the second quarter and $125 million in the first six months of 2021. The results from these contracts are affected by changes in securities markets, interest rates and foreign currency exchange rates, which can be volatile, and from the periodic amortization of expected profit margins. Underwriting earnings in the first six months of 2022 and 2021 were primarily attributable to the net effects of interest rate changes and changes in securities markets which were unfavorable in 2022 and favorable in 2021.

Insurance—Investment Income

A summary of net investment income attributable to our insurance operations follows (dollars in millions).

	Second Quarter				First Six Months				Percentage Change
	2022		2021		2022		2021		Second Quarter			First Six Months
Dividend income	$	2,055	$	1,298	$	3,252	$	2,551		58.3	%		27.5	%
Interest and other investment income		228		158		392		317		44.3			23.7
Pre-tax net investment income		2,283		1,456		3,644		2,868		56.8			27.1
Income taxes and noncontrolling interests		377		237