Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	September 30, 2021				December 31, 2020
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	65,156			$	44,714
Short-term investments in U.S. Treasury Bills		79,209				90,300
Investments in fixed maturity securities		18,125				20,410
Investments in equity securities		310,739				281,170
Equity method investments		16,658				17,303
Loans and finance receivables		20,397				19,201
Other receivables		37,277				32,310
Inventories		20,191				19,208
Property, plant and equipment		20,722				21,200
Equipment held for lease		14,752				14,601
Goodwill		47,090				47,121
Other intangible assets		28,643				29,462
Deferred charges under retroactive reinsurance contracts		11,732				12,441
Other		16,301				14,580
		706,992				664,021
Railroad, Utilities and Energy:
Cash and cash equivalents*		4,833				3,276
Receivables		4,324				3,542
Property, plant and equipment		153,401				151,216
Goodwill		26,680				26,613
Regulatory assets		3,842				3,440
Other		20,686				21,621
		213,766				209,708
	$	920,758			$	873,729

***	Includes U.S. Treasury Bills with maturities of three months or less when purchased of $37.9 billion at September 30, 2021 and $23.2 billion at December 31, 2020.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	September 30, 2021				December 31, 2020
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	85,754			$	79,854
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		39,721				40,966
Unearned premiums		25,239				21,395
Life, annuity and health insurance benefits		22,409				21,616
Other policyholder liabilities		8,863				8,670
Accounts payable, accruals and other liabilities		31,154				29,279
Derivative contract liabilities		286				1,065
Aircraft repurchase liabilities and unearned lease revenues		5,840				5,856
Notes payable and other borrowings		39,645				41,522
		258,911				250,223
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		15,978				15,224
Regulatory liabilities		7,226				7,475
Notes payable and other borrowings		75,320				75,373
		98,524				98,072
Income taxes, principally deferred		82,248				74,098
Total liabilities		439,683				422,393
Shareholders’ equity:
Common stock		8				8
Capital in excess of par value		35,603				35,626
Accumulated other comprehensive income		(4,834	)			(4,243	)
Retained earnings		494,775				444,626
Treasury stock, at cost		(53,072	)			(32,853	)
Berkshire Hathaway shareholders’ equity		472,480				443,164
Noncontrolling interests		8,595				8,172
Total shareholders’ equity		481,075				451,336
	$	920,758			$	873,729

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

(Unaudited)

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Revenues:
Insurance and Other:
Insurance premiums earned	$	17,727			$	15,913			$	51,314			$	47,256
Sales and service revenues		36,722				32,703				107,163				93,332
Leasing revenues		1,565				1,316				4,336				3,905
Interest, dividend and other investment income		1,795				1,717				5,544				6,143
		57,809				51,649				168,357				150,636
Railroad, Utilities and Energy:
Freight rail transportation revenues		5,761				5,148				16,917				15,101
Energy operating revenues		5,225				4,451				14,375				11,504
Service revenues and other income		1,788				1,776				4,647				3,888
		12,774				11,375				35,939				30,493
Total revenues		70,583				63,024				204,296				181,129
Investment and derivative contract gains		4,921				31,582				38,015				1,392
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		13,939				11,667				37,078				32,712
Life, annuity and health insurance benefits		1,568				1,311				4,507				4,101
Insurance underwriting expenses		3,239				3,228				9,318				9,219
Cost of sales and services		28,984				25,957				84,275				74,565
Cost of leasing		1,116				854				2,980				2,605
Selling, general and administrative expenses		4,889				5,181				13,844				14,304
Goodwill and intangible asset impairments		—				25				—				10,659
Interest expense		286				263				860				817
		54,021				48,486				152,862				148,982
Railroad, Utilities and Energy:
Freight rail transportation expenses		3,527				3,161				10,625				9,625
Utilities and energy cost of sales and other expenses		3,497				3,101				10,306				8,326
Other expenses		1,582				1,481				4,238				3,422
Interest expense		770				737				2,322				2,209
		9,376				8,480				27,491				23,582
Total costs and expenses		63,397				56,966				180,353				172,564
Earnings before income taxes and equity method earnings		12,107				37,640				61,958				9,957
Equity method earnings		377				290				775				333
Earnings before income taxes		12,484				37,930				62,733				10,290
Income tax expense		1,840				7,517				11,824				3,167
Net earnings		10,644				30,413				50,909				7,123
Earnings attributable to noncontrolling interests		300				276				760				437
Net earnings attributable to Berkshire Hathaway shareholders	$	10,344			$	30,137			$	50,149			$	6,686
Net earnings per average equivalent Class A share	$	6,882			$	18,994			$	33,025			$	4,160
Net earnings per average equivalent Class B share*	$	4.59			$	12.66			$	22.02			$	2.77
Average equivalent Class A shares outstanding		1,503,013				1,586,698				1,518,513				1,607,041
Average equivalent Class B shares outstanding		2,254,518,838				2,380,046,304				2,277,769,582				2,410,561,550

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

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

(Unaudited)

		Third Quarter								First Nine Months
		2021				2020				2021				2020
Net earnings		$	10,644			$	30,413			$	50,909			$	7,123
Other comprehensive income:
Unrealized appreciation of investments			(89	)			19				(164	)			42
Applicable income taxes			20				(4	)			38				(13	)
Foreign currency translation			(643	)			791				(616	)			(77	)
Applicable income taxes			6				(3	)			(8	)			34
Defined benefit pension plans			54				(24	)			158				86
Applicable income taxes			(13	)			8				(42	)			(14	)
Other, net			38				16				45				(19	)
Other comprehensive income, net			(627	)			803				(589	)			39
Comprehensive income			10,017				31,216				50,320				7,162
Comprehensive income attributable to noncontrolling interests			288				302				762				423
Comprehensive income attributable to Berkshire Hathaway shareholders		$	9,729			$	30,914			$	49,558			$	6,739

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

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 third quarter and first nine 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
Net earnings			—				—				10,344				—				300				10,644
Other comprehensive income, net			—				(615	)			—				—				(12	)			(627	)
Acquisition of common stock			—				—				—				(7,626	)			—				(7,626	)
Transactions with noncontrolling interests			(32	)			—				—				—				(84	)			(116	)
Balance at September 30, 2021		$	35,611			$	(4,834	)		$	494,775			$	(53,072	)		$	8,595			$	481,075
For the third quarter and first nine months of 2020
Balance at December 31, 2019		$	35,666			$	(5,243	)		$	402,493			$	(8,125	)		$	3,772			$	428,563
Net earnings (loss)			—				—				(49,746	)			—				49				(49,697	)
Adoption of new accounting pronouncement			—				—				(388	)			—				—				(388	)
Other comprehensive income, net			—				(1,478	)			—				—				(53	)			(1,531	)
Acquisition of common stock			—				—				—				(1,575	)			—				(1,575	)
Transactions with noncontrolling interests			(39	)			—				—				—				(98	)			(137	)
Balance at March 31, 2020		$	35,627			$	(6,721	)		$	352,359			$	(9,700	)		$	3,670			$	375,235
Net earnings			—				—				26,295				—				112				26,407
Other comprehensive income, net			—				754				—				—				13				767
Acquisition of common stock			—				—				—				(5,115	)			—				(5,115	)
Transactions with noncontrolling interests			(4	)			—				—				—				(37	)			(41	)
Balance at June 30, 2020		$	35,623			$	(5,967	)		$	378,654			$	(14,815	)		$	3,758			$	397,253
Net earnings			—				—				30,137				—				276				30,413
Other comprehensive income, net			—				777				—				—				26				803
Acquisition of common stock			—				—				—				(9,260	)			—				(9,260	)
Transactions with noncontrolling interests			6				—				—				—				—				6
Balance at September 30, 2020		$	35,629			$	(5,190	)		$	408,791			$	(24,075	)		$	4,060			$	419,215

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

(Unaudited)

		First Nine Months
		2021				2020
Cash flows from operating activities:
Net earnings		$	50,909			$	7,123
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses			(37,235	)			(2,032	)
Depreciation and amortization			8,013				7,692
Other, including asset impairment charges			(717	)			10,934
Changes in operating assets and liabilities:
Losses and loss adjustment expenses			4,809				4,480
Deferred charges reinsurance assumed			709				735
Unearned premiums			3,958				2,544
Receivables and originated loans			(6,810	)			(3,223	)
Other assets			(1,558	)			(1,673	)
Other liabilities			1,928				2,446
Income taxes			7,620				201
Net cash flows from operating activities			31,626				29,227
Cash flows from investing activities:
Purchases of equity securities			(5,004	)			(22,406	)
Sales of equity securities			11,975				28,564
Purchases of U.S. Treasury Bills and fixed maturity securities			(106,399	)			(153,897	)
Sales of U.S. Treasury Bills and fixed maturity securities			15,945				23,744
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities			103,294				81,252
Purchases of loans and finance receivables			(70	)			(619	)
Collections of loans and finance receivables			283				268
Acquisitions of businesses, net of cash acquired			(204	)			(111	)
Purchases of property, plant and equipment and equipment held for lease			(9,244	)			(9,516	)
Other			1,505				(1,685	)
Net cash flows from investing activities			12,081				(54,406	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses			2,952				3,435
Repayments of borrowings of insurance and other businesses			(3,010	)			(2,116	)
Proceeds from borrowings of railroad, utilities and energy businesses			2,939				6,424
Repayments of borrowings of railroad, utilities and energy businesses			(2,609	)			(2,449	)
Changes in short term borrowings, net			(689	)			(1,062	)
Acquisition of treasury stock			(20,192	)			(15,712	)
Other			(755	)			(196	)
Net cash flows from financing activities			(21,364	)			(11,676	)
Effects of foreign currency exchange rate changes			(98	)			(340	)
Increase (decrease) in cash and cash equivalents and restricted cash			22,245				(37,195	)
Cash and cash equivalents and restricted cash at beginning of year*			48,396				64,632
Cash and cash equivalents and restricted cash at end of third quarter*		$	70,641			$	27,437
*Cash and cash equivalents and restricted cash are comprised of the following:
Beginning of year—
Insurance and Other		$	44,714			$	61,151
Railroad, Utilities and Energy			3,276				3,024
Restricted cash included in other assets			406				457
		$	48,396			$	64,632
End of third quarter—
Insurance and Other		$	65,156			$	23,078
Railroad, Utilities and Energy			4,833				3,739
Restricted cash included in other assets			652				620
		$	70,641			$	27,437

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

Note 1. General

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

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

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

Note 2. New accounting pronouncements

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

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

Notes to Consolidated Financial Statements (Continued)

Note 3. Investments in fixed maturity securities

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

		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
September 30, 2021
U.S. Treasury, U.S. government corporations and agencies		$	3,358			$	30			$	—			$	3,388
Foreign governments			12,407				38				(27	)			12,418
Corporate bonds			1,510				431				—				1,941
Other			327				52				(1	)			378
		$	17,602			$	551			$	(28	)		$	18,125
December 31, 2020
U.S. Treasury, U.S. government corporations and agencies		$	3,348			$	55			$	—			$	3,403
Foreign governments			11,233				110				(5	)			11,338
Corporate bonds			4,729				464				(2	)			5,191
Other			414				66				(2	)			478
		$	19,724			$	695			$	(9	)		$	20,410

Investments in foreign governments include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of September 30, 2021, approximately 90% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies. The amortized cost and estimated fair value of fixed maturity securities as of September 30, 2021 are summarized below by contractual maturity dates (in millions). Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.

		Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Mortgage- backed securities				Total
Amortized cost		$	9,433			$	7,225			$	487			$	206			$	251			$	17,602
Fair value			9,436				7,283				758				350				298				18,125

Note 4. Investments in equity securities

Investments in equity securities as of September 30, 2021 and December 31, 2020 are summarized as follows (in millions).

		Cost Basis				Net Unrealized Gains				Fair Value
September 30, 2021*
Banks, insurance and finance		$	26,809			$	60,931			$	87,740
Consumer products			34,973				119,421				154,394
Commercial, industrial and other			42,406				26,199				68,605
		$	104,188			$	206,551			$	310,739

***	Approximately 70% of the aggregate fair value was concentrated in four companies (American Express Company – $25.4 billion; Apple Inc. – $128.4 billion; Bank of America Corporation – $43.9 billion and The Coca-Cola Company – $21.0 billion).

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

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

Notes to Consolidated Financial Statements (Continued)

Note 4. Investments in equity securities (Continued)

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

Note 5. Equity method investments

Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.5% of the outstanding shares.

Our investment in Kraft Heinz produced equity method earnings of $194 million in the third quarter and $337 million in the first nine months of 2021. In 2020, our Kraft Heinz investment generated equity method earnings of $159 million in the third quarter and losses of $180 million in the first nine months. Our earnings in the first nine months of 2020 included charges of approximately $850 million for our proportionate share of the goodwill and intangible asset impairment charges recorded by Kraft Heinz. We received dividends on the common stock of $391 million in each of the first nine months of 2021 and 2020, which were recorded as reductions to the carrying value of our investment.

Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $12.0 billion at September 30, 2021 and $11.3 billion at December 31, 2020. The carrying value of our investment was approximately $13.3 billion at September 30, 2021 and December 31, 2020. As of September 30, 2021, the carrying value of our investment exceeded the fair value based on the quoted market price by approximately 10%. We evaluated our investment in Kraft Heinz for impairment. Based on the prevailing facts and circumstances, we concluded recognition of an impairment loss in earnings was not required as of September 30, 2021.

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

	September 25, 2021				December 26, 2020
Assets	$	94,897			$	99,830
Liabilities		44,659				49,587

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Sales	$	6,324			$	6,441			$	19,333			$	19,246
Net earnings (loss) attributable to Kraft Heinz common shareholders		733				597				1,269				(676	)	*

***	Includes goodwill and identifiable intangible asset impairment charges of approximately $3.2 billion in the first nine months.

Other investments that we account for pursuant to the equity method include Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC (“Pilot”) and Electric Transmission Texas, LLC (“ETT”). The aggregate carrying value of these investments was approximately $3.4 billion as of September 30, 2021 and $4.0 billion as of December 31, 2020. Our equity method earnings from these entities in the first nine months were $438 million in 2021 and $513 million in 2020. During the first nine months of 2021, we received distributions of $1.0 billion from these other investees, including a non-recurring distribution received from Pilot of $849 million in the first quarter. Additional information concerning these investments follows.

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

Notes to Consolidated Financial Statements (Continued)

Note 5. Equity method investments (Continued)

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

Note 6. Investment and derivative contract gains/losses

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

		Third Quarter								First Nine Months
		2021				2020				2021				2020
Investment gains (losses):
Equity securities:
Change in unrealized investment gains (losses) during the period on securities held at the end of the period		$	4,759			$	30,837			$	36,163			$	16,458
Investment gains (losses) on securities sold during the period			75				1,330				889				(13,901	)
			4,834				32,167				37,052				2,557
Fixed maturity securities:
Gross realized gains			24				12				59				53
Gross realized losses			(7	)			(2	)			(20	)			(22	)
Other			—				(552	)			144				(556	)
Investment gains (losses)			4,851				31,625				37,235				2,032
Derivative contract gains (losses)			70				(43	)			780				(640	)
		$	4,921			$	31,582			$	38,015			$	1,392

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 nine months of 2021 and $28.6 billion in the first nine months of 2020. 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. Our taxable gains/losses on equity securities sold are generally the difference between the proceeds from sales and original cost. Taxable gains in the third quarter and first nine months of 2021 were $941 million and $2.9 billion, respectively, and were $3.9 billion and $666 million in the third quarter and first nine months of 2020, respectively.

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

		September 30, 2021				December 31, 2020
Balance sheet liabilities - at fair value		$	286			$	1,065
Notional value			8,251				10,991
Intrinsic value			83				727
Weighted average remaining life (in years)			0.6				1.2

Notional value in the preceding table represents the aggregate undiscounted amounts payable assuming the value of each index is zero at each contract’s expiration date. Intrinsic value is the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date. Substantially all open contracts as of September 30, 2021 will expire by February 2023. Future payments, if any, under any given contract will be required if the index value is below the contract strike price at the contract expiration date. We received aggregate premiums on the contract inception dates of $1.5 billion with respect to unexpired contracts as of September 30, 2021 and we have no counterparty credit risk.

Notes to Consolidated Financial Statements (Continued)

Note 7. Loans and finance receivables

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

	September 30, 2021				December 31, 2020
Loans and finance receivables before allowances and discounts	$	21,685			$	20,436
Allowances for uncollectible loans		(744	)			(712	)
Unamortized acquisition discounts and points		(544	)			(523	)
	$	20,397			$	19,201

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

	2021				2020
Balance at beginning of year	$	712			$	167
Adoption of ASC 326		—				486
Provision for credit losses		65				177
Charge-offs, net of recoveries		(33	)			(99	)
Balance at September 30	$	744			$	731

As of September 30, 2021, approximately 99% of home loan balances were evaluated collectively for impairment. As of September 30, 2021, we considered approximately 97% of the loan balances to be current as to payment status. A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of September 30, 2021 follows (in millions).

	Origination Year
	2021				2020				2019				2018				2017				Prior				Total
Performing	$	3,794			$	3,264			$	2,308			$	1,748			$	1,300			$	7,126			$	19,540
Non-performing		2				3				6				6				5				40				62
	$	3,796			$	3,267			$	2,314			$	1,754			$	1,305			$	7,166			$	19,602

We are party to an agreement with Seritage Growth Properties to provide a $2.0 billion term loan facility, which expires on July 31, 2023. The outstanding loan under the facility was approximately $1.6 billion at September 30, 2021 and December 31, 2020, and is secured by mortgages on real estate properties. In the first quarter of 2020, we provided a loan to Lee Enterprises, Inc. in connection with its acquisition of our newspaper operations and the repayment of its then outstanding credit facilities. The loan balance was $483 million as of September 30, 2021 and $524 million at December 31, 2020. We are the sole lender to each of these entities and each of these loans is current as to payment status.

Note 8. Other receivables

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

	September 30, 2021				December 31, 2020
Insurance and other:
Insurance premiums receivable	$	16,151			$	14,025
Reinsurance recoverables		4,892				4,805
Trade receivables		13,579				11,521
Other		3,344				2,637
Allowances for uncollectible accounts		(689	)			(678	)
	$	37,277			$	32,310
Railroad, utilities and energy:
Trade receivables	$	3,780			$	3,235
Other		720				438
Allowances for uncollectible accounts		(176	)			(131	)
	$	4,324			$	3,542

Notes to Consolidated Financial Statements (Continued)

Note 8. Other receivables (Continued)

Provisions for credit losses in the first nine months with respect to receivables summarized above were $335 million in 2021 and $449 million in 2020. Charge-offs, net of recoveries, in the first nine months were $279 million in 2021 and $238 million in 2020.

Note 9. Inventories

Inventories are comprised of the following (in millions).

	September 30, 2021				December 31, 2020
Raw materials	$	5,389			$	4,821
Work in process and other		3,290				2,541
Finished manufactured goods		4,446				4,412
Goods acquired for resale		7,066				7,434
	$	20,191			$	19,208

Note 10. Property, plant and equipment

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

		September 30, 2021				December 31, 2020
Land, buildings and improvements		$	13,846			$	13,799
Machinery and equipment			25,849				25,488
Furniture, fixtures and other			4,670				4,530
			44,365				43,817
Accumulated depreciation			(23,643	)			(22,617	)
		$	20,722			$	21,200

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

		September 30, 2021				December 31, 2020
Railroad:
Land, track structure and other roadway		$	65,167			$	63,824
Locomotives, freight cars and other equipment			13,784				13,523
Construction in progress			1,030				916
			79,981				78,263
Accumulated depreciation			(14,641	)			(13,175	)
			65,340				65,088
Utilities and energy:
Utility generation, transmission and distribution systems			89,026				86,730
Interstate natural gas pipeline assets			17,044				16,667
Independent power plants and other assets			13,009				12,671
Construction in progress			4,343				3,308
			123,422				119,376
Accumulated depreciation			(35,361	)			(33,248	)
			88,061				86,128
		$	153,401			$	151,216

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

		First Nine Months
		2021				2020
Insurance and other		$	1,725			$	1,725
Railroad, utilities and energy			4,485				4,105
		$	6,210			$	5,830

Notes to Consolidated Financial Statements (Continued)

Note 11. Equipment held for lease

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

	September 30, 2021				December 31, 2020
Railcars	$	9,482			$	9,402
Aircraft		8,852				8,204
Other		5,031				4,868
		23,365				22,474
Accumulated depreciation		(8,613	)			(7,873	)
	$	14,752			$	14,601

Depreciation expense for equipment held for lease in the first nine months was $861 million in 2021 and $900 million in 2020. Fixed and variable operating lease revenues for the third quarter and first nine months of 2021 and 2020 are summarized below (in millions).

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Fixed lease revenue	$	1,151			$	1,047			$	3,318			$	3,205
Variable lease revenue		414				269				1,018				700
	$	1,565			$	1,316			$	4,336			$	3,905

Note 12. Goodwill and other intangible assets

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

		September 30, 2021				December 31, 2020
Balance at beginning of year		$	73,734			$	81,882
Acquisitions of businesses			182				1,758
Impairment charges			—				(10,033	)
Other, including foreign currency translation			(146	)			127
Balance at end of period*		$	73,770			$	73,734

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

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

		September 30, 2021								December 31, 2020
		Gross carrying amount				Accumulated amortization				Gross carrying amount				Accumulated amortization
Insurance and other:
Customer relationships		$	27,331			$	6,281			$	27,374			$	5,756
Trademarks and trade names			5,178				797				5,206				779
Patents and technology			4,763				3,442				4,766				3,313
Other			3,317				1,426				3,339				1,375
		$	40,589			$	11,946			$	40,685			$	11,223
Railroad, utilities and energy:
Customer relationships		$	678			$	388			$	678			$	361
Trademarks, trade names and other			1,005				133				1,003				98
		$	1,683			$	521			$	1,681			$	459

Notes to Consolidated Financial Statements (Continued)

Note 12. Goodwill and other intangible assets (Continued)

Intangible asset amortization expense in the first nine months was $942 million in 2021 and $962 million in 2020. Intangible assets with indefinite lives were $18.3 billion as of September 30, 2021 and December 31, 2020 and primarily related to certain customer relationships and trademarks and trade names.

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

Note 13. Unpaid losses and loss adjustment expenses

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

	2021				2020
Balances at beginning of year:
Gross liabilities	$	79,854			$	73,019
Reinsurance recoverable on unpaid losses		(2,912	)			(2,855	)
Net liabilities		76,942				70,164
Incurred losses and loss adjustment expenses:
Current accident year events		38,447				31,777
Prior accident years’ events		(2,151	)			69
Total		36,296				31,846
Paid losses and loss adjustment expenses:
Current accident year events		(15,277	)			(11,691	)
Prior accident years’ events		(15,076	)			(15,259	)
Total		(30,353	)			(26,950	)
Foreign currency translation adjustment		(119	)			124
Balances at September 30:
Net liabilities		82,766				75,184
Reinsurance recoverable on unpaid losses		2,988				2,857
Gross liabilities	$	85,754			$	78,041

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”). Current accident year incurred losses in 2021 included approximately $2.7 billion from significant catastrophe events (losses in excess of $100 million per event) in the U.S. and Europe, including approximately $2.2 billion in the third quarter, primarily from Hurricane Ida and floods in Europe.

We recorded a net reduction of estimated ultimate liabilities for prior accident years of $2.2 billion in the first nine months of 2021 compared to a net increase of $69 million in 2020, which produced a corresponding decrease in 2021 and an increase in 2020 in incurred losses and loss adjustment expenses. These amounts represented 2.8% in 2021 and 0.1% in 2020 of the net liabilities at the beginning of each year.

Estimated ultimate liabilities for prior years’ loss events with respect to primary insurance were reduced $1.6 billion in the first nine months of 2021 compared to $273 million in 2020. The reduction in 2021 derived primarily from private passenger automobile claims, and to a lesser extent medical professional liability and workers’ compensation claims. Estimated ultimate liabilities for prior years’ loss events related to reinsurance assumed in the first nine months decreased $564 million in 2021 and increased $342 million in 2020, which included increased provisions for legacy casualty exposures.

Notes to Consolidated Financial Statements (Continued)

Note 14. Retroactive reinsurance contracts

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

	2021								2020
	Unpaid losses and loss adjustment expenses				Deferred charges reinsurance assumed				Unpaid losses and loss adjustment expenses				Deferred charges reinsurance assumed
Balances at beginning of year	$	40,966			$	(12,441	)		$	42,441			$	(13,747	)
Incurred losses and loss adjustment expenses:
Current year contracts		82				—				—				—
Prior years’ contracts		(9	)			709				131				735
Total		73				709				131				735
Paid losses and loss adjustment expenses		(1,318	)			—				(786	)			—
Balances at September 30	$	39,721			$	(11,732	)		$	41,786			$	(13,012	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	782							$	866

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 begins. Incurred losses and loss adjustment expenses for prior years’ contracts were $700 million in 2021 and $866 million in 2020, which consisted of recurring amortization of deferred charges and the effects of changes in the expected timing and amount of future loss payments. Berkshire’s subsidiary, National Indemnity Company (“NICO”), is party to a contract with certain subsidiaries of American International Group, Inc. (collectively, “AIG”), in which NICO’s ultimate liability is contractually limited to $20 billion. Claim payments to AIG commenced in 2021. Our estimated unpaid claim liabilities with regard to the AIG contract were approximately $16.8 billion at September 30, 2021, reflecting paid claims of $837 million during the first nine months of 2021, and $17.7 billion at December 31, 2020. Deferred charges related to the AIG contract were approximately $5.0 billion at September 30, 2021 and $5.4 billion at December 31, 2020.

Note 15. Notes payable and other borrowings

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

		Weighted Average Interest Rate				September 30, 2021				December 31, 2020
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2022-2047			3.3	%		$	6,817			$	8,308
Euro denominated due 2023-2041			1.0	%			7,934				8,326
Japanese Yen denominated due 2023-2060			0.6	%			7,028				6,031
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2022-2051			3.6	%			10,757				10,766
Great Britain Pound denominated due 2039-2059			2.5	%			2,315				2,347
Other subsidiary borrowings due 2021-2045			4.1	%			4,497				4,682
Subsidiary short-term borrowings			2.8	%			297				1,062
						$	39,645			$	41,522

Notes to Consolidated Financial Statements (Continued)

Note 15. Notes payable and other borrowings (Continued)

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

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

The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€6.9 billion, £1.75 billion and ¥785.5 billion par at September 30, 2021) reflect the applicable exchange rates as of the balance sheet dates. The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling, general and administrative expenses. Changes in the exchange rates resulted in pre-tax gains of $264 million in the third quarter and $939 million in the first nine months of 2021. In 2020, exchange rate changes produced pre-tax losses of $549 million in the third quarter and $447 million in the first nine months.

In addition to BHFC borrowings, Berkshire guaranteed approximately $3.9 billion of other subsidiary borrowings at September 30, 2021. Generally, Berkshire’s guarantee of a subsidiary’s debt obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all payment obligations.

		Weighted Average Interest Rate				September 30, 2021				December 31, 2020
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2051			4.3	%		$	13,001			$	13,447
Subsidiary and other debt due 2021-2064			4.1	%			37,096				36,420
Short-term borrowings			1.6	%			1,968				2,286
Burlington Northern Santa Fe ("BNSF") and subsidiaries due 2021-2097			4.5	%			23,255				23,220
						$	75,320			$	75,373

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure such debt. These borrowing arrangements generally contain various covenants, which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios. In the first nine months of 2021, BHE and its subsidiaries repaid $1.7 billion of term debt and issued $2.1 billion of term debt with a weighted average interest rate of 3.0% and maturities ranging from 2051 to 2052.

BNSF’s borrowings are primarily senior unsecured debentures. During the first nine months of 2021, BNSF repaid $888 million of debt and issued $925 million of 3.3% term debt due in 2051. As of September 30, 2021, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

As of September 30, 2021, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $10.5 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included approximately $8.8 billion related to BHE and its subsidiaries.

Notes to Consolidated Financial Statements (Continued)

Note 16. Fair value measurements

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

		Carrying Value				Fair Value				Quoted Prices (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
September 30, 2021
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	3,388			$	3,388			$	3,345			$	43			$	—
Foreign governments			12,418				12,418				11,074				1,344				—
Corporate bonds			1,941				1,941				—				1,941				—
Other			378				378				—				378				—
Investments in equity securities			310,739				310,739				298,633				8				12,098
Investment in Kraft Heinz common stock			13,290				11,983				11,983				—				—
Loans and finance receivables			20,397				21,743				—				2,391				19,352
Derivative contract assets (1)			540				540				15				407				118
Derivative contract liabilities:
Railroad, utilities and energy (1)			130				130				3				69				58
Equity index put options			286				286				—				—				286
Notes payable and other borrowings:
Insurance and other			39,645				42,851				—				42,810				41
Railroad, utilities and energy			75,320				87,965				—				87,965				—
December 31, 2020
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	3,403			$	3,403			$	3,358			$	45			$	—
Foreign governments			11,338				11,338				9,259				2,079				—
Corporate bonds			5,191				5,191				—				5,191				—
Other			478				478				—				478				—
Investments in equity securities			281,170				281,170				271,848				38				9,284
Investment in Kraft Heinz common stock			13,336				11,280				11,280				—				—
Loans and finance receivables			19,201				20,554				—				2,692				17,862
Derivative contract assets (1)			270				270				1				72				197
Derivative contract liabilities:
Railroad, utilities and energy (1)			121				121				6				96				19
Equity index put options			1,065				1,065				—				—				1,065
Notes payable and other borrowings:
Insurance and other			41,522				46,676				—				46,665				11
Railroad, utilities and energy			75,373				92,593				—				92,593				—

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

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 nine months ended September 30, 2021 and 2020 follow (in millions).

		Balance at beginning of year				Gains (losses) included in earnings				Acquisitions, dispositions and settlements				Balance at September 30
Investments in equity securities:
2021		$	8,978			$	1,713			$	1,100			$	11,791
2020			10,405				(2,235	)			(1	)			8,169
Equity index put option contract liabilities:
2021			(1,065	)			780				(1	)			(286	)
2020			(968	)			(640	)			61				(1,547	)

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

		Fair Value				Principal Valuation Techniques		Unobservable Inputs		Weighted Average
Investments in equity securities:
Preferred stock		$	11,179			Discounted cash flow		Expected duration		7 years
								Discount for transferability restrictions and subordination		355 basis points
Common stock warrants			612			Warrant pricing model		Expected duration		8 years
								Volatility		37%
Equity index put option contract liabilities			286			Option pricing model		Volatility		18%

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.

Notes to Consolidated Financial Statements (Continued)

Note 16. Fair value measurements (Continued)

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

Note 17. Common stock

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

	Class A, $5 Par Value (1,650,000 shares authorized)												Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
	Issued				Treasury				Outstanding				Issued				Treasury				Outstanding
Balances at December 31, 2020		678,523				(34,592	)			643,931				1,469,359,852				(119,316,381	)			1,350,043,471
Conversions of Class A to Class B common stock		(11,849	)			—				(11,849	)			17,773,500				—				17,773,500
Treasury stock acquired		—				(11,285	)			(11,285	)			—				(59,366,771	)			(59,366,771	)
Balances at September 30, 2021		666,674				(45,877	)			620,797				1,487,133,352				(178,683,152	)			1,308,450,200

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 1,493,097 shares outstanding as of September 30, 2021 and 1,543,960 shares outstanding as of December 31, 2020.

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

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

Note 18. Income taxes

Our consolidated effective income tax rates were 14.7% for the third quarter and 18.8% for the first nine months of 2021 compared to 19.8% for the third quarter and 30.8% for the first nine months of 2020. Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S. Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings, the magnitude of gains or losses with respect to our investments in equity securities, the amount of non-deductible goodwill impairment charges and other expenses and the underlying income tax rates applicable in the various taxing jurisdictions.

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 nine months ending September 30, 2021 and 2020 follows (in millions).

		Unrealized appreciation of investments, net				Foreign currency translation				Defined benefit pension plans				Other				Accumulated other comprehensive income
First nine months of 2021
Balance at beginning of year		$	536			$	(3,082	)		$	(1,645	)		$	(52	)		$	(4,243	)
Other comprehensive income, net			(126	)			(619	)			112				42				(591	)
Balance at end of period		$	410			$	(3,701	)		$	(1,533	)		$	(10	)		$	(4,834	)
First nine months of 2020
Balance at beginning of year		$	481			$	(4,346	)		$	(1,369	)		$	(9	)		$	(5,243	)
Other comprehensive income, net			29				(28	)			67				(15	)			53
Balance at end of period		$	510			$	(4,374	)		$	(1,302	)		$	(24	)		$	(5,190	)

Note 20. Supplemental cash flow information

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

		First Nine Months
		2021				2020
Cash paid during the period for:
Income taxes		$	4,002			$	2,715
Interest:
Insurance and other			1,040				892
Railroad, utilities and energy			2,335				2,174

Note 21. Contingencies and commitments

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

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

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 third quarter and first nine months of 2021 and 2020 (in millions). Other revenues included in consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues, which are not considered to be revenues from contracts with customers under GAAP.

		Manufacturing				McLane Company				Service and Retailing				BNSF				Berkshire Hathaway Energy				Insurance, Corporate and Other				Total
Three months ending September 30, 2021
Manufactured products:
Industrial and commercial products		$	5,600			$	—			$	43			$	—			$	—			$	—			$	5,643
Building products			5,005				—				—				—				—				—				5,005
Consumer products			4,758				—				—				—				—				—				4,758
Grocery and convenience store distribution			—				7,933				—				—				—				—				7,933
Food and beverage distribution			—				4,478				—				—				—				—				4,478
Auto sales			—				—				2,423				—				—				—				2,423
Other retail and wholesale distribution			742				—				3,913				—				—				—				4,655
Service			400				175				1,073				5,747				1,586				—				8,981
Electricity and natural gas			—				—				—				—				5,138				—				5,138
Total			16,505				12,586				7,452				5,747				6,724				—				49,014
Other revenues			951				26				1,202				14				289				19,087				21,569
		$	17,456			$	12,612			$	8,654			$	5,761			$	7,013			$	19,087			$	70,583
Nine months ending September 30, 2021
Manufactured products:
Industrial and commercial products		$	16,549			$	—			$	142			$	—			$	—			$	—			$	16,691
Building products			14,518				—				—				—				—				—				14,518
Consumer products			13,525				—				—				—				—				—				13,525
Grocery and convenience store distribution			—				23,104				—				—				—				—				23,104
Food and beverage distribution			—				12,838				—				—				—				—				12,838
Auto sales			—				—				7,485				—				—				—				7,485
Other retail and wholesale distribution			2,199				—				11,577				—				—				—				13,776
Service			1,099				509				3,060				16,875				4,219				—				25,762
Electricity and natural gas			—				—				—				—				14,048				—				14,048
Total			47,890				36,451				22,264				16,875				18,267				—				141,747
Other revenues			2,821				78				3,287				42				755				55,566				62,549
		$	50,711			$	36,529			$	25,551			$	16,917			$	19,022			$	55,566			$	204,296

Notes to Consolidated Financial Statements (Continued)

Note 22. Revenues from contracts with customers (Continued)

		Manufacturing				McLane Company				Service and Retailing				BNSF				Berkshire Hathaway Energy				Insurance, Corporate and Other				Total
Three months ending September 30, 2020
Manufactured products:
Industrial and commercial products		$	4,889			$	—			$	54			$	—			$	—			$	—			$	4,943
Building products			4,322				—				—				—				—				—				4,322
Consumer products			4,036				—				—				—				—				—				4,036
Grocery and convenience store distribution			—				7,905				—				—				—				—				7,905
Food and beverage distribution			—				3,968				—				—				—				—				3,968
Auto sales			—				—				2,195				—				—				—				2,195
Other retail and wholesale distribution			599				—				3,182				—				—				—				3,781
Service			370				144				865				5,135				1,474				—				7,988
Electricity and natural gas			—				—				—				—				4,356				—				4,356
Total			14,216				12,017				6,296				5,135				5,830				—				43,494
Other revenues			929				23				966				14				396				17,202				19,530
		$	15,145			$	12,040			$	7,262			$	5,149			$	6,226			$	17,202			$	63,024
Nine months ending September 30, 2020
Manufactured products:
Industrial and commercial products		$	15,639			$	—			$	143			$	—			$	—			$	—			$	15,782
Building products			11,682				—				—				—				—				—				11,682
Consumer products			10,373				—				—				—				—				—				10,373
Grocery and convenience store distribution			—				23,051				—				—				—				—				23,051
Food and beverage distribution			—				11,561				—				—				—				—				11,561
Auto sales			—				—				5,999				—				—				—				5,999
Other retail and wholesale distribution			1,691				—				8,735				—				—				—				10,426
Service			1,105				398				2,460				15,059				3,238				—				22,260
Electricity and natural gas			—				—				—				—				11,190				—				11,190
Total			40,490				35,010				17,337				15,059				14,428				—				122,324
Other revenues			2,686				69				2,884				42				964				52,160				58,805
		$	43,176			$	35,079			$	20,221			$	15,101			$	15,392			$	52,160			$	181,129

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 September 30, 2021 and the timing of when the performance obligations are expected to be satisfied follows (in millions).

		Less than 12 months				Greater than 12 months				Total
Electricity and natural gas		$	2,761			$	21,377			$	24,138
Other sales and service contracts			1,402				2,203				3,605

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 third quarter and first nine months of 2021 and 2020 were as follows (in millions).

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO	$	9,604			$	8,540			$	28,073			$	26,689
Berkshire Hathaway Primary Group		2,964				2,490				8,373				7,103
Berkshire Hathaway Reinsurance Group		5,159				4,883				14,868				13,464
Investment income		1,339				1,223				4,212				4,486
Total insurance		19,066				17,136				55,526				51,742
BNSF		5,790				5,176				17,000				15,195
Berkshire Hathaway Energy		7,013				6,226				19,022				15,392
Manufacturing		17,496				15,170				50,821				43,238
McLane Company		12,612				12,040				36,529				35,079
Service and retailing		8,679				7,279				25,614				20,272
		70,656				63,027				204,512				180,918
Reconciliation of segments to consolidated amount
Corporate, eliminations and other		(73	)			(3	)			(216	)			211
	$	70,583			$	63,024			$	204,296			$	181,129

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Earnings Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO	$	(289	)		$	276			$	1,360			$	3,320
Berkshire Hathaway Primary Group		(23	)			(126	)			349				(63	)
Berkshire Hathaway Reinsurance Group		(708	)			(441	)			(1,298	)			(2,033	)
Investment income		1,337				1,220				4,205				4,480
Total insurance		317				929				4,616				5,704
BNSF		2,029				1,777				5,667				4,855
Berkshire Hathaway Energy		1,375				1,122				2,797				2,074
Manufacturing		2,445				2,255				7,595				5,765
McLane Company		(8	)			96				179				205
Service and retailing		1,110				779				3,234				1,745
		7,268				6,958				24,088				20,348
Reconciliation of segments to consolidated amount
Investment and derivative gains		4,921				31,582				38,015				1,392
Interest expense, not allocated to segments		(128	)			(116	)			(386	)			(363	)
Equity method investments		377				290				775				333
Goodwill and intangible impairments		—				(25	)			—				(10,659	)
Corporate, eliminations and other		46				(759	)			241				(761	)
	$	12,484			$	37,930			$	62,733			$	10,290

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

Results of Operations

Net earnings 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).

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Insurance – underwriting	$	(784	)		$	(213	)		$	356			$	956
Insurance – investment income		1,161				1,015				3,588				3,769
Railroad		1,538				1,347				4,305				3,668
Utilities and energy		1,496				1,395				2,939				2,589
Manufacturing, service and retailing		2,706				2,346				8,329				5,833
Investment and derivative contract gains/losses		3,878				24,737				29,979				765
Other*		349				(490	)			653				(10,894	)
Net earnings attributable to Berkshire Hathaway shareholders	$	10,344			$	30,137			$	50,149			$	6,686

***	Includes goodwill and indefinite-lived asset impairment charges of $11.0 billion in the first nine months of 2020, substantially all of which was recorded in the second quarter.

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

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

Insurance underwriting produced after-tax losses of $784 million in the third quarter and earnings of $356 million in the first nine months of 2021. After-tax incurred losses from significant catastrophe events were approximately $1.7 billion in the third quarter and $2.2 billion in the first nine months of 2021, which were partly offset by reductions in incurred losses for prior accident years’ loss events. Underwriting results in 2021 also reflected earned premium reductions from the GEICO Giveback program, higher private passenger auto claims frequencies and higher losses in the life reinsurance business. After-tax earnings from insurance investment income increased 14.4% in the third quarter and decreased 4.8% in the first nine months of 2021 as compared to 2020, reflecting lower interest income and higher dividend income in both periods.

After-tax earnings of our railroad business increased 14.2% in the third quarter and 17.4% in the first nine months of 2021 compared to 2020. The increases reflected overall higher freight volumes and lower costs due to improved productivity, partly offset by higher average fuel costs. After-tax earnings of our utilities and energy business increased 7.2% in the third quarter and 13.5% in the first nine months of 2021 compared to 2020. The year-to-date increase reflected increased earnings from the utilities and natural gas pipelines businesses, including the effects of a business acquisition, and from the real estate brokerage business. Earnings from our manufacturing, service and retailing businesses increased 15.3% in the third quarter and 42.8% in the first nine months of 2021 versus 2020. Many of our businesses generated significantly higher earnings over the first half of 2021 compared to 2020, which included significant adverse effects from the pandemic. While customer demand for products remained relatively high, earnings in the third quarter of 2021 were sequentially lower than the second quarter. Several of our businesses experienced higher materials, freight and other input costs attributable to ongoing disruptions in global supply chains.

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

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

Insurance—Underwriting

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

The timing and 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 in excess of $100 million from a current year catastrophic event to be significant. The significant catastrophe events in 2021 included Hurricane Ida and floods in Europe in the third quarter, as well as Winter Storm Uri in the first quarter.

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 $125.5 billion as of September 30, 2021. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated liabilities of our U.S.-based insurance subsidiaries due to foreign currency exchange rate fluctuations.

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

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

	Third Quarter								First Nine Months
	2021				2020				2021				2020
Pre-tax underwriting earnings (loss):
GEICO	$	(289	)		$	276			$	1,360			$	3,320
Berkshire Hathaway Primary Group		(23	)			(126	)			349				(63	)
Berkshire Hathaway Reinsurance Group		(708	)			(441	)			(1,298	)			(2,033	)
Pre-tax underwriting earnings		(1,020	)			(291	)			411				1,224
Income taxes and noncontrolling interests		(236	)			(78	)			55				268
Net underwriting earnings (loss)	$	(784	)		$	(213	)		$	356			$	956
Effective income tax rate		23.0	%			26.6	%			13.6	%			21.9	%

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).

	Third Quarter																First Nine Months
	2021								2020								2021								2020
	Amount				%				Amount				%				Amount				%				Amount				%
Premiums written	$	10,097							$	8,446							$	29,333							$	26,217
Premiums earned	$	9,604				100.0			$	8,540				100.0			$	28,073				100.0			$	26,689				100.0
Losses and loss adjustment expenses		8,486				88.4				6,858				80.3				22,566				80.4				19,238				72.1
Underwriting expenses		1,407				14.6				1,406				16.5				4,147				14.8				4,131				15.5
Total losses and expenses		9,893				103.0				8,264				96.8				26,713				95.2				23,369				87.6
Pre-tax underwriting earnings (loss)	$	(289	)						$	276							$	1,360							$	3,320

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

Insurance—Underwriting (Continued)

GEICO (Continued)

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

Premiums written increased $1.7 billion (19.5%) in the third quarter and $3.1 billion (11.9%) in the first nine months of 2021 compared to 2020. The comparative increases reflected the effects of the GEICO Giveback Program, which reduced premiums written $1.5 billion in the third quarter and $2.8 billion in the first nine months of 2020. The GEICO Giveback program provided a 15% premium credit to all new and renewal voluntary auto and motorcycle policies written between April 8, 2020 and October 7, 2020, and reduced premiums written by approximately $2.9 billion over that six-month period. Voluntary auto policies-in-force increased approximately 159,000 during the first nine months of 2021.

Premiums earned increased $1.1 billion (12.5%) in the third quarter and $1.4 billion (5.2%) in the first nine months of 2021 compared to 2020. The GEICO Giveback premium credit reduced premiums earned approximately $475 million in 2021 (mostly in the first quarter) and $1.3 billion in the first nine months of 2020, including $1.0 billion in the third quarter.

Losses and loss adjustment expenses increased $1.6 billion (23.7%) in the third quarter and $3.3 billion (17.3%) in the first nine months of 2021 compared to 2020. GEICO’s ratio of losses and loss adjustment expenses to premiums earned increased 8.1 percentage points in the third quarter and 8.3 percentage points in the first nine months of 2021 compared to the same periods in 2020. The increases reflected overall increases in average claims frequencies and severities and approximately $400 million in pre-tax losses attributable to Hurricane Ida, partially offset by increased reductions of claim loss estimates for prior years’ loss events.

Claims frequencies in the first nine months of 2021 were higher for all coverages, including property damage (twelve to thirteen percent range), bodily injury (thirteen to fourteen percent range), personal injury (sixteen to seventeen percent range) and collision (twenty-one to twenty-two percent range). Average claims severities in the first nine months of 2021 were higher for property damage coverage (four to five percent range), collision coverage (thirteen to fourteen percent range) and bodily injury coverage (ten to twelve percent range). Ultimate claim loss estimates for prior years’ loss events were reduced approximately $1.2 billion in the first nine months of 2021, which produced corresponding reductions in losses and loss adjustment expenses. The effects of changes in estimates for prior years’ loss events were relatively insignificant in the first nine months of 2020.

Underwriting expenses were relatively flat in the first nine months of 2021 compared to 2020, reflecting higher technology costs, offset by lower advertising and employee-related expenses. GEICO’s expense ratio (underwriting expense to premiums earned) decreased 0.7 percentage points in the first nine months of 2021 compared to 2020, reflecting the increase in premiums earned.

Berkshire Hathaway Primary Group

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

	Third Quarter																First Nine Months
	2021								2020								2021								2020
	Amount				%				Amount				%				Amount				%				Amount				%
Premiums written	$	3,506							$	3,003							$	9,357							$	7,607
Premiums earned	$	2,964				100.0			$	2,490				100.0			$	8,373				100.0			$	7,103				100.0
Losses and loss adjustment expenses		2,240				75.6				1,976				79.4				6,044				72.2				5,369				75.6
Underwriting expenses		747				25.2				640				25.7				1,980				23.6				1,797				25.3
Total losses and expenses		2,987				100.8				2,616				105.1				8,024				95.8				7,166				100.9
Pre-tax underwriting earnings (loss)	$	(23	)						$	(126	)						$	349							$	(63	)

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Primary Group (Continued)

Premiums written increased $503 million (16.7%) in the third quarter and $1.8 billion (23.0%) in the first nine months of 2021 compared to 2020, primarily attributable to a 42% year-to-date increase from BH Specialty in professional liability, casualty and property lines of business. In addition, several of our other underwriting units experienced year-to-date premiums written increases, including MedPro Group (19%), NICO Primary (32%), GUARD (8%) and USLI (20%) in various coverages and markets, partly offset by lower volumes for workers’ compensation business.

BH Primary’s loss ratio declined 3.8 percentage points in the third quarter and 3.4 percentage points in the first nine months of 2021 versus 2020. The year-to-date decline reflected increased reductions in estimated ultimate liabilities for prior years’ loss events of $420 million in 2021 compared to $190 million in 2020. Losses and loss adjustment expenses in 2021 from significant catastrophe events were approximately $260 million in the third quarter and $420 million in the first nine months, arising primarily from Hurricane Ida in the third quarter and Winter Storm Uri in the first quarter. Incurred losses in the first nine months of 2020 included approximately $400 million attributable to the pandemic and Hurricanes Laura and Sally in the third quarter. BH Primary insurers also write significant levels of commercial and professional liability and workers’ compensation business and the related claim costs may be subject to high severity and long claim-tails. Accordingly, we could experience significant increases in claims liabilities in the future, attributable to higher-than-expected claim settlements, adverse litigation outcomes or judicial rulings and other factors not currently anticipated.

Underwriting expenses in the third quarter and first nine months of 2021 increased $107 million (16.7%) and $183 million (10.2%), respectively, compared to 2020. The expense ratio decreased 1.7 percentage points in the first nine months of 2021, reflecting 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 offer life and health reinsurance coverages through General Re Life Corporation, General Reinsurance AG and Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”). We periodically assume property and casualty risks under retroactive reinsurance contracts written through NICO. In addition, we write periodic payment annuity contracts through BHLN.

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

	Third Quarter																First Nine Months
	Premiums earned								Pre-tax underwriting earnings (loss)								Premiums earned								Pre-tax underwriting earnings (loss)
	2021				2020				2021				2020				2021				2020				2021				2020
Property/casualty	$	3,637			$	3,428			$	(247	)		$	99			$	10,385			$	8,859			$	121			$	(706	)
Life/health		1,328				1,378				(181	)			17				3,932				4,147				(522	)			63
Retroactive reinsurance		—				5				(158	)			(394	)			82				39				(620	)			(896	)
Periodic payment annuity		191				68				(94	)			(209	)			458				409				(374	)			(411	)
Variable annuity		3				4				(28	)			46				11				10				97				(83	)
	$	5,159			$	4,883			$	(708	)		$	(441	)		$	14,868			$	13,464			$	(1,298	)		$	(2,033	)