Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BA****LANCE SHEETS

(dollars in millions)

	March 31, 2023				December 31, 2022
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	23,805			$	32,260
Short-term investments in U.S. Treasury Bills		103,869				92,774
Investments in fixed maturity securities		22,566				25,128
Investments in equity securities		328,161				308,793
Equity method investments		26,403				28,050
Loans and finance receivables		23,144				23,208
Other receivables		45,674				43,490
Inventories		25,499				25,366
Property, plant and equipment		21,208				21,113
Equipment held for lease		15,674				15,584
Goodwill		50,997				51,522
Other intangible assets		30,001				29,187
Deferred charges - retroactive reinsurance		9,699				9,870
Other		19,729				19,657
		746,429				726,002
Railroad, Utilities and Energy:
Cash and cash equivalents*		2,942				3,551
Receivables		6,814				4,795
Property, plant and equipment		168,973				160,268
Goodwill		32,505				26,597
Regulatory assets		5,557				5,062
Other		33,852				22,190
		250,643				222,463
	$	997,072			$	948,465

——————

*** *Includes U.S. Treasury Bills with maturities of three months or less when purchased of $*3.6 *billion at March 31, 2023 and $*2.6 billion at December 31, 2022.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CON****SOLIDATED BALANCE SHEETS

(dollars in millions)

	March 31, 2023				December 31, 2022
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	107,957			$	107,472
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		35,063				35,415
Unearned premiums		30,359				28,657
Life, annuity and health insurance benefits		19,937				19,753
Other policyholder liabilities		11,231				11,370
Accounts payable, accruals and other liabilities		32,842				33,201
Aircraft repurchase liabilities and unearned lease revenues		7,052				6,820
Notes payable and other borrowings		41,436				46,538
		285,877				289,226
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		19,683				16,615
Regulatory liabilities		6,858				7,369
Notes payable and other borrowings		82,188				76,206
		108,729				100,190
Income taxes, principally deferred		86,206				77,368
Total liabilities		480,812				466,784
Redeemable noncontrolling interests		3,183				—
Shareholders’ equity:
Common stock		8				8
Capital in excess of par value		35,156				35,167
Accumulated other comprehensive income		(4,976	)			(5,052	)
Retained earnings		546,631				511,127
Treasury stock, at cost		(72,265	)			(67,826	)
Berkshire Hathaway shareholders’ equity		504,554				473,424
Noncontrolling interests		8,523				8,257
Total shareholders’ equity		513,077				481,681
	$	997,072			$	948,465

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEM****ENTS OF EARNINGS

(dollars in millions except per share amounts)

(Unaudited)

			First Quarter
			2023			2022
Revenues:
Insurance and Other:
Insurance premiums earned			$	19,796		$	17,488
Sales and service revenues				38,388			37,862
Leasing revenues				2,044			1,672
Interest, dividend and other investment income				3,229			1,862
				63,457			58,884
Railroad, Utilities and Energy:
Freight rail transportation revenues				6,001			5,944
Utility and energy operating revenues				14,917			4,818
Service revenues and other income				1,018			1,197
				21,936			11,959
Total revenues				85,393			70,843
Investment and derivative contract gains (losses)				34,758			(1,978	)
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses				14,221			13,332
Life, annuity and health insurance benefits				785			1,337
Insurance underwriting expenses				3,587			2,604
Cost of sales and services				30,319			29,785
Cost of leasing				1,477			1,232
Selling, general and administrative expenses				5,602			4,251
Interest expense				328			264
				56,319			52,805
Railroad, Utilities and Energy:
Freight rail transportation expenses				4,161			3,925
Utilities and energy cost of sales and other expenses				13,846			3,591
Other expenses				871			1,156
Interest expense				890			770
				19,768			9,442
Total costs and expenses				76,087			62,247
Earnings before income taxes and equity method earnings				44,064			6,618
Equity method earnings				688			339
Earnings before income taxes				44,752			6,957
Income tax expense				8,995			1,252
Net earnings				35,757			5,705
Earnings attributable to noncontrolling interests				253			125
Net earnings attributable to Berkshire Hathaway shareholders			$	35,504		$	5,580
Net earnings per average equivalent Class A share			$	24,377		$	3,784
Net earnings per average equivalent Class B share*			$	16.25		$	2.52
Average equivalent Class A shares outstanding				1,456,438			1,474,703
Average equivalent Class B shares outstanding				2,184,657,109			2,212,054,009

——————

*** 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 19.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS O****F COMPREHENSIVE INCOME

(dollars in millions)

(Unaudited)

						First Quarter
						2023				2022
Net earnings						$	35,757			$	5,705
Other comprehensive income:
Unrealized gains (losses) on investments							247				(236	)
Applicable income taxes							(53	)			51
Foreign currency translation							249				(315	)
Applicable income taxes							6				(11	)
Long duration insurance contract discount rate changes							(367	)			3,078
Applicable income taxes							76				(659	)
Defined benefit pension plans							50				26
Applicable income taxes							(6	)			(5	)
Other, net							(120	)			87
Other comprehensive income, net							82				2,016
Comprehensive income							35,839				7,721
Comprehensive income attributable to noncontrolling interests							259				122
Comprehensive income attributable to Berkshire Hathaway shareholders						$	35,580			$	7,599

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 first quarter of 2023
Balance at December 31, 2022 as previously reported		$	35,175			$	(6,591	)		$	511,602			$	(67,826	)		$	8,257			$	480,617
Adoption of ASU 2018-12			—				1,539				(475	)			—				—				1,064
Balance at December 31, 2022 as revised			35,175				(5,052	)			511,127				(67,826	)			8,257				481,681
Net earnings			—				—				35,504				—				253				35,757
Other comprehensive income, net			—				76				—				—				6				82
Acquisition of common stock			—				—				—				(4,439	)			—				(4,439	)
Transactions with noncontrolling interests and other			(11	)			—				—				—				7				(4	)
Balance at March 31, 2023		$	35,164			$	(4,976	)		$	546,631			$	(72,265	)		$	8,523			$	513,077
For the first quarter of 2022
Balance at December 31, 2021 as originally reported		$	35,600			$	(4,027	)		$	534,421			$	(59,795	)		$	8,731			$	514,930
Adoption of ASU 2018-12			—				(4,096	)			(535	)			—				—				(4,631	)
Balance at December 31, 2021 as revised			35,600				(8,123	)			533,886				(59,795	)			8,731				510,299
Net earnings			—				—				5,580				—				125				5,705
Other comprehensive income, net			—				2,019				—				—				(3	)			2,016
Acquisition of common stock			—				—				—				(3,111	)			—				(3,111	)
Transactions with noncontrolling interests and other			(6	)			—				—				—				(129	)			(135	)
Balance at March 31, 2022		$	35,594			$	(6,104	)		$	539,466			$	(62,906	)		$	8,724			$	514,774

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEM****ENTS OF CASH FLOWS

(dollars in millions)

(Unaudited)

		First Quarter
		2023				2022
Cash flows from operating activities:
Net earnings		$	35,757			$	5,705
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses			(34,758	)			1,735
Depreciation and amortization			3,051				2,703
Other			(1,293	)			(960	)
Changes in operating assets and liabilities:
Unpaid losses and loss adjustment expenses			22				558
Deferred charges - retroactive reinsurance			172				215
Unearned premiums			1,686				1,912
Receivables and originated loans			(922	)			(3,536	)
Inventories			(15	)			(1,842	)
Other assets			(987	)			(328	)
Other liabilities			(2,649	)			(165	)
Income taxes			8,629				829
Net cash flows from operating activities			8,693				6,826
Cash flows from investing activities:
Purchases of equity securities			(2,873	)			(51,119	)
Sales of equity securities			13,283				9,724
Purchases of U.S. Treasury Bills and fixed maturity securities			(45,515	)			(58,746	)
Sales of U.S. Treasury Bills and fixed maturity securities			12,982				37,795
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities			25,364				6,571
Acquisitions of businesses, net of cash acquired			(7,629	)			(34	)
Purchases of property, plant and equipment and equipment held for lease			(3,713	)			(3,090	)
Other			182				333
Net cash flows from investing activities			(7,919	)			(58,566	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses			—				6,977
Repayments of borrowings of insurance and other businesses			(4,946	)			(614	)
Proceeds from borrowings of railroad, utilities and energy businesses			—				405
Repayments of borrowings of railroad, utilities and energy businesses			(1,244	)			(395	)
Changes in short term borrowings, net			1,098				(183	)
Acquisition of treasury stock			(4,450	)			(3,180	)
Other, principally transactions with noncontrolling interests			(380	)			(367	)
Net cash flows from financing activities			(9,922	)			2,643
Effects of foreign currency exchange rate changes			47				53
Increase (decrease) in cash and cash equivalents and restricted cash			(9,101	)			(49,044	)
Cash and cash equivalents and restricted cash at beginning of year*			36,399				88,706
Cash and cash equivalents and restricted cash at end of first quarter*		$	27,298			$	39,662
*Cash and cash equivalents and restricted cash are comprised of:
Beginning of year—
Insurance and Other		$	32,260			$	85,319
Railroad, Utilities and Energy			3,551				2,865
Restricted cash included in other assets			588				522
		$	36,399			$	88,706
End of first quarter—
Insurance and Other		$	23,805			$	35,542
Railroad, Utilities and Energy			2,942				3,571
Restricted cash included in other assets			551				549
		$	27,298			$	39,662

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

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, the magnitude of gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies and asset impairment charges may cause significant variations in periodic net earnings.

To varying degrees, the consequences of the COVID-19 pandemic continue 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 and its variants. The development of geopolitical conflicts, supply chain disruptions and government actions to slow inflation in recent years have produced varying effects on our operating businesses. 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

We adopted Accounting Standards Update 2018-12 “Targeted Improvements to the Accounting for Long Duration Contracts” (“ASU 2018-12”) as of January 1, 2023, which modifies the accounting, reporting and disclosures related to long duration insurance contracts and most significantly the measurement of our long duration life, annuity and health benefit liabilities. ASU 2018-12 was applied retrospectively to contracts in-force beginning as of January 1, 2021 (the “transition date”). The Consolidated Financial Statements for 2022 and 2021 were revised to reflect the effects of the adoption of ASU 2018-12. As of the transition date, the after-tax impact of changes in cash flow assumptions were recorded in retained earnings and the after-tax effect of changes in discount rates assumptions were recorded in accumulated other comprehensive income. The effects of the adoption of ASU 2018-12 on our Consolidated Financial Statements as of January 1, 2021 and for the years ending December 31, 2022 and 2021 are included in Part II, Item 5 of this Report.

Beginning as of January 1, 2021, the cash flow assumptions used in measuring benefit liabilities are reviewed at least annually, with the effects of assumption changes recorded in earnings. Further, the discount rate assumptions used in measuring benefit liabilities are revised each quarterly reporting period based on the prevailing observable upper-medium grade (generally considered to be single A-rated credit ratings) corporate bond yields that reflect the duration characteristics and currency attributes of the liabilities, using interpolation for durations between the observable yields. Changes to benefits liabilities arising from changes in discount rate assumptions are recorded in other comprehensive income. In measuring benefit liabilities and amortizing capitalized acquisition costs under long duration insurance contracts, we generally aggregate contracts by issuance year. ASU 2018-12 also requires certain disclosures for long duration insurance liabilities. See Note 16.

Notes to Consolidated Financial Statements (Continued)

Note 2. New accounting pronouncements (Continued)

The effects from adopting ASU 2018-12 on affected line items from our Consolidated Statement of Earnings and Comprehensive Income for the quarter ended March 31, 2022 follows in millions, except per share amounts.

	First Quarter 2022
	Previously reported				Increase (decrease)				As revised
Revenues:
Insurance premiums earned	$	17,492			$	(4	)		$	17,488
Costs and expenses:
Life, annuity and health insurance benefits		1,323				14				1,337
Insurance underwriting expenses		2,767				(163	)			2,604
Earnings before income taxes		6,812				145				6,957
Income tax expense		1,227				25				1,252
Net earnings		5,585				120				5,705
Net earnings attributable to Berkshire Hathaway shareholders	$	5,460			$	120			$	5,580
Other comprehensive income:
Foreign currency translation		(316	)			1				(315	)
Long duration insurance contracts		—				2,419				2,419
Other comprehensive income, net		(404	)			2,420				2,016
Comprehensive income attributable to Berkshire Hathaway shareholders	$	5,059			$	2,540			$	7,599
Net earnings per average equivalent Class A share	$	3,702			$	82			$	3,784
Net earnings per average equivalent Class B share	$	2.47			$	0.05			$	2.52

Note 3. Significant business acquisitions

Our long-held acquisition strategy is to acquire businesses that have consistent earning power, good returns on equity and able and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates.

On January 31, 2023, we acquired an additional 41.4% interest in Pilot Travel Centers, LLC (“Pilot”) for approximately $8.2 billion. We previously owned a 38.6% interest in Pilot and accounted for that investment under the equity method. We now control Pilot for financial reporting purposes. We applied the equity method through the end of January 2023 and began consolidating Pilot’s financial statements in our Consolidated Financial Statements on February 1, 2023.

Pilot is headquartered in Knoxville, Tennessee and operates travel centers in North America (primarily under the names Pilot or Flying J) with more than 650 travel center locations across 43 U.S. states and six Canadian provinces. Pilot also has over 150 retail locations in the U.S. and Canada where it sells diesel fuel through various arrangements with third party travel centers. Among its business activities, Pilot operates large wholesale fuel and fuel marketing platforms in the U.S. and operates a water hauling and disposal business in the oil fields sector. As Pilot’s most significant business activities include involve purchasing and selling fuel (energy) on a wholesale and retail basis, and engaging in other energy-related business activities, including oil field services, we have included Pilot within the railroad, utilities and energy sections of our Consolidated Balance Sheet and Consolidated Statement of Earnings beginning February 1, 2023.

Pilot’s revenues and net earnings attributable to Berkshire shareholders included in Berkshire’s Consolidated Financial Statements for the two months ending March 31, 2023 were $9.5 billion and $83 million, respectively. Our equity method earnings from Pilot for the month of January 2023 were $105 million. In applying the acquisition method of accounting, we were required to remeasure our previously held 38.6% investment in Pilot to fair value. In the first quarter of 2023, we recognized a one-time, non-cash remeasurement gain of approximately $3.0 billion, representing the excess of the fair value of that interest over the carrying value under the equity method, as a component of investment gains (losses).

Notes to Consolidated Financial Statements (Continued)

Note 3. Significant business acquisitions (Continued)

Under the terms of an agreement, the holder of the remaining noncontrolling interest in Pilot has the option to require us to redeem for cash, all or a portion of the interest beginning in 2024. The cash consideration will be based on Pilot’s future earnings, cash and debt. We have concluded that the remaining Pilot noncontrolling interest represents a redeemable interest under GAAP and are presenting such interests between liabilities and shareholders’ equity in the Consolidated Balance Sheet. We valued the noncontrolling interest at fair value as of the acquisition date. Thereafter, we will increase or decrease the redeemable noncontrolling interest by the share of the earnings or losses attributable to the interest and will further adjust the balance, as appropriate, if the current estimated redemption value exceeds the carrying value.

The preliminary values of the Pilot identified assets acquired, liabilities assumed and redeemable noncontrolling interests are summarized as follows (in millions). Valuations of certain assets and liabilities, including property plant and equipment, other intangible assets and goodwill, as of the acquisition date have not been finalized at this time and are provisional.

	Pilot
Property, plant and equipment	$	8,136
Goodwill and other intangible assets		13,347
Other		6,934
Assets acquired	$	28,417
Notes payable	$	5,876
Other		4,789
Liabilities assumed		10,665
Noncontrolling interests, predominantly redeemable		3,370
Net assets	$	14,382

On October 19, 2022, Berkshire acquired all of the outstanding common stock of Alleghany Corporation (“Alleghany”) for approximately $11.5 billion, which included the value of certain Alleghany equity awards, pursuant to a definitive agreement and plan of merger dated as of March 20, 2022. Alleghany operates a group of property and casualty reinsurance and insurance businesses. It also owns a portfolio of non-financial businesses. A summary of the preliminary values of the Alleghany identified assets acquired and liabilities assumed as of October 19, 2022 follows (in millions). Valuations of certain assets, such as intangible assets and goodwill, and certain liabilities as of the acquisition date have not been finalized at this time and are provisional.

	Alleghany
Cash, cash equivalents and U.S. Treasury Bills	$	3,762
Investments in fixed maturity and equity securities		15,982
Loans and other receivables		5,650
Goodwill and other intangible assets		6,559
Other		3,637
Assets acquired	$	35,590
Unpaid losses and loss adjustment expenses	$	15,080
Unearned premiums		3,536
Notes payable		2,169
Other		3,300
Liabilities assumed		24,085
Net assets	$	11,505

The following table sets forth certain unaudited pro forma consolidated earnings data for the three months ended March 31, 2022 as if the Alleghany and Pilot acquisitions were consummated on the same terms at the beginning of 2022 (in millions, except per share amounts).

	March 31, 2022
Revenues	$	87,548
Net earnings attributable to Berkshire Hathaway shareholders		5,666
Net earnings per equivalent Class A common share		3,842

Notes to Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities

Investments in fixed maturity securities as of March 31, 2023 and December 31, 2022 are summarized by type below (in millions).

		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
March 31, 2023
U.S. Treasury, U.S. government corporations and agencies		$	9,588			$	8			$	(191	)		$	9,405
Foreign governments			11,184				48				(144	)			11,088
Corporate bonds			1,532				263				(4	)			1,791
Other			261				24				(3	)			282
		$	22,565			$	343			$	(342	)		$	22,566
December 31, 2022
U.S. Treasury, U.S. government corporations and agencies		$	10,039			$	12			$	(249	)		$	9,802
Foreign governments			10,454				50				(177	)			10,327
Corporate bonds			1,945				256				(6	)			2,195
Other			2,735				77				(8	)			2,804
		$	25,173			$	395			$	(440	)		$	25,128

The fair value of investments in U.S. Treasury securities as of March 31, 2023 included approximately $8.8 billion of securities that mature in 2023 and 2024. As of March 31, 2023, approximately 93% 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 March 31, 2023 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		$	14,038			$	7,426			$	780			$	139			$	182			$	22,565
Fair value			13,832				7,370				1,016				149				199				22,566

Note 5. Investments in equity securities

Investments in equity securities as of March 31, 2023 and December 31, 2022 are summarized as follows (in millions).

		Cost Basis				Net Unrealized Gains				Fair Value
March 31, 2023*
Banks, insurance and finance		$	24,023			$	41,292			$	65,315
Consumer products			40,003				144,506				184,509
Commercial, industrial and other			57,316				21,021				78,337
		$	121,342			$	206,819			$	328,161

——————

*** Approximately 77*% of the aggregate fair value was concentrated in* five *companies (American Express Company – $*25.0 *billion; Apple Inc. – $*151.0 *billion; Bank of America Corporation – $*29.5 *billion; The Coca-Cola Company – $*24.8 *billion and Chevron Corporation – $*21.6 billion).

		Cost Basis				Net Unrealized Gains				Fair Value
December 31, 2022*
Banks, insurance and finance		$	25,893			$	43,663			$	69,556
Consumer products			40,508				112,384				152,892
Commercial, industrial and other			65,209				21,136				86,345
		$	131,610			$	177,183			$	308,793

——————

*** Approximately 75*% of the aggregate fair value was concentrated in* five *companies (American Express Company – $*22.4 *billion; Apple Inc. – $*119.0 *billion; Bank of America Corporation – $*34.2 *billion; The Coca-Cola Company – $*25.4 *billion and Chevron Corporation – $*30.0 billion).

Notes to Consolidated Financial Statements (Continued)

Note 5. Investments in equity securities (Continued)

During 2022, we began to acquire common stock of Occidental Petroleum Corporation (“Occidental”). Our aggregate voting interest in Occidental exceeded 20% on August 4, 2022 and we adopted the equity method as of that date. See Note 6. We report our investments in Occidental Cumulative Perpetual Preferred Stock and Occidental common stock warrants at fair value as equity securities, as such interests are not in-substance common stock under GAAP and are not eligible for the equity method.

As of March 31, 2023, our investment in Occidental preferred stock had an aggregate liquidation value of approximately $9.5 billion. During March of 2023, Occidental issued mandatory redemption notifications at a price of 110% of the liquidation value, plus accrued and unpaid dividends for $474 million of preferred stock liquidation value due to excess distributions by Occidental to its common stockholders, as defined under the agreement. 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. Our investment in Occidental warrants allows us to purchase up to 83.86 million shares of Occidental common stock at an exercise price of $59.62 per share. The warrants are exercisable in whole or in part until one year after the redemption of the preferred stock.

As of March 31, 2023, we owned 151.6 million shares of American Express Company (“American Express”) common stock representing 20.4% 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. We have also agreed to passivity commitments as requested by the Board of Governors of the Federal Reserve System, which collectively, in our judgment, restrict our ability to exercise significant influence over the operating and financial policies of American Express. Accordingly, we do not use the equity method with respect to our investment in American Express common stock and we continue to record our investment at fair value.

Note 6. 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 are our investments in the common stock of The Kraft Heinz Company (“Kraft Heinz”) and Occidental. We own 26.5% of Kraft Heinz common stock and we own 23.5% of Occidental common stock, which excludes the potential effect of the exercise of the Occidental common stock warrants that are included in investments in equity securities.

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. Occidental is an international energy company, whose activities include oil and natural gas exploration, development and production, and chemicals manufacturing businesses. Occidental’s midstream businesses purchase, market, gather, process, transport and store various oil, natural gas, carbon dioxide and other products. Occidental’s financial information is not available in time for concurrent reporting in our Consolidated Financial Statements. Therefore, we report the equity method effects for Occidental on a one-quarter lag. Our earnings in the first quarter of 2023 included our share of Occidental’s earnings from its fourth quarter of 2022.

The common stock of Kraft Heinz and Occidental are publicly traded. The fair values and carrying values of these investments in addition to the carrying values of our other significant equity method investments are summarized as follows (in millions).

	Carrying Value								Fair Value
	March 31, 2023				December 31, 2022				March 31, 2023				December 31, 2022
Kraft Heinz	$	13,033			$	12,937			$	12,585			$	13,249
Occidental		12,927				11,484				13,217				12,242
Other		443				3,629
	$	26,403			$	28,050

Our other significant equity method investments included Pilot through January 31, 2023. Beginning February 1, 2023, we ceased accounting for Pilot under the equity method and began consolidating Pilot for financial reporting purposes. Our investment in Pilot under the equity method was $3.2 billion at December 31, 2022. Other significant equity method investments also included our 50% interest in Berkadia Commercial Mortgage LLC (“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. Berkadia’s commercial paper borrowing capacity (currently limited to $1.5 billion) 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.

The carrying values of our investments in Kraft Heinz and Berkadia approximate our share of the net equity of each of these entities. The carrying value of our investment in Occidental common stock exceeded our share of its shareholders’ equity as of December 31, 2022 by approximately $8 billion. Based upon the limited information available to us, we concluded the excess represents goodwill.

Notes to Consolidated Financial Statements (Continued)

Note 6. Equity method investments (Continued)

Our earnings and distributions received from equity method investments are summarized in the table below (in millions). As previously indicated, we are reporting the equity method effects for Occidental on a one-quarter lag. Thus, the earnings we recorded in the first quarter of 2023 related to Occidental’s earnings for the fourth quarter of 2022. Equity method earnings attributable to Pilot were $105 million for the month ending January 31, 2023 and $107 million for the first quarter of 2022.

	Equity in Earnings								Distributions Received
	First Quarter								First Quarter
	2023				2022				2023				2022
Kraft Heinz	$	222			$	206			$	130			$	130
Occidental		370				—				25				—
Other		96				133				—				2
	$	688			$	339			$	155			$	132

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

	April 1, 2023				December 31, 2022
Assets	$	90,943			$	90,513
Liabilities		41,590				41,643

	First Quarter
	2023				2022
Sales	$	6,489			$	6,045
Net earnings attributable to Kraft Heinz common shareholders		836				776

Summarized consolidated financial information of Occidental follows (in millions).

			December 31, 2022
Assets			$	72,609
Liabilities				42,524

			Quarter ending December 31, 2022
Total revenues and other income			$	8,326
Net earnings attributable to Occidental common shareholders				1,727

Note 7. Investment and derivative contract gains (losses)

Investment and derivative contract gains (losses) in the first quarter of 2023 and 2022 are summarized as follows (in millions).

		First Quarter
		2023				2022
Investment gains (losses):
Equity securities:
Change in unrealized investment gains (losses) during the period on securities held at the end of the period		$	31,317			$	(1,775	)
Investment gains on securities sold during the period			370				89
			31,687				(1,686	)
Fixed maturity securities:
Gross realized gains			124				6
Gross realized losses			(52	)			(49	)
Other			2,999				(6	)
Investment gains (losses)			34,758				(1,735	)
Derivative contract gains (losses)			—				(243	)
		$	34,758			$	(1,978	)

Notes to Consolidated Financial Statements (Continued)

Note 7. Investment and derivative contract gains (losses) (Continued)

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 $13.3 billion in the first quarter of 2023 and $9.7 billion in the first quarter of 2022. 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 and losses on equity securities sold are generally the difference between the proceeds from sales and original cost. Equity securities sold produced taxable gains of $2.2 billion in the first quarter of 2023 compared to taxable losses of $739 million in 2022.

Other investment gains in the first quarter of 2023 included approximately $3 billion from the remeasurement of our pre-existing 38.6% interest in Pilot through the application of acquisition accounting under GAAP. See Note 3. As of March 31, 2023, our exposure to losses in the future under our two outstanding equity index put option contracts is insignificant.

Note 8. Loans and finance receivables

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

	March 31, 2023				December 31, 2022
Loans and finance receivables before allowances and discounts	$	24,629			$	24,664
Allowances for credit losses		(876	)			(856	)
Unamortized acquisition discounts and points		(609	)			(600	)
	$	23,144			$	23,208

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 the first quarter of 2023 and 2022 follow (in millions).

	First Quarter
	2023				2022
Balance at beginning of year	$	856			$	765
Provision for credit losses		37				22
Charge-offs, net of recoveries		(17	)			(6	)
Balance at March 31	$	876			$	781

As of March 31, 2023, substantially all manufactured and site-built home loans were evaluated collectively for impairment. As of March 31, 2023, 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 March 31, 2023 follows (in millions).

	Origination Year
	2023				2022				2021				2020				2019				Prior				Total
Performing	$	1,845			$	4,830			$	3,549			$	2,752			$	1,956			$	8,204			$	23,136
Non-performing		2				4				11				10				7				47				81
	$	1,847			$	4,834			$	3,560			$	2,762			$	1,963			$	8,251			$	23,217

We are also a lender under commercial loan agreements. These loans had an aggregate principal value of approximately $1.4 billion at March 31, 2023 and $1.9 billion at December 31, 2022. The largest commercial loan is currently to Seritage Growth Properties, with an unpaid principal balance of $800 million at March 31, 2023. Our commercial loans are generally secured by mortgages on real estate properties or by other assets and substantially all of these loans are current as to payment status.

Notes to Consolidated Financial Statements (Continued)

Note 9. Other receivables

Other receivables are comprised of the following (in millions). Receivables of the railroad, utilities and energy businesses at March 31, 2023 included approximately $2.1 billion related to Pilot.

	March 31, 2023				December 31, 2022
Insurance and other:
Insurance premiums receivable	$	19,212			$	18,395
Reinsurance recoverables		7,191				7,106
Trade receivables		15,069				14,510
Other		4,871				4,154
Allowances for credit losses		(669	)			(675	)
	$	45,674			$	43,490
Railroad, utilities and energy:
Trade receivables	$	5,855			$	4,182
Other		1,112				754
Allowances for credit losses		(153	)			(141	)
	$	6,814			$	4,795

Provisions for credit losses in the first quarter with respect to receivables summarized above were $151 million in 2023 and $92 million in 2022. Charge-offs, net of recoveries, in the first quarter were $149 million in 2023 and $95 million in 2022.

Note 10. Inventories

Inventories of our insurance and other businesses are comprised of the following (in millions).

	March 31, 2023				December 31, 2022
Raw materials	$	6,484			$	6,381
Work in process and other		3,365				3,464
Finished manufactured goods		5,955				5,739
Goods acquired for resale		9,695				9,782
	$	25,499			$	25,366

Inventories of our railroad, utilities and energy businesses are included in other assets and were approximately $4.4 billion at March 31, 2023, of which approximately $2.2 billion was attributable to Pilot.

Note 11. Property, plant and equipment

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

		March 31, 2023				December 31, 2022
Land, buildings and improvements		$	14,533			$	14,761
Machinery and equipment			27,190				26,690
Furniture, fixtures and other			5,193				4,847
			46,916				46,298
Accumulated depreciation			(25,708	)			(25,185	)
		$	21,208			$	21,113

Notes to Consolidated Financial Statements (Continued)

Note 11. Property, plant and equipment (Continued)

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. Assets of Pilot are included in land, buildings, improvements and other within the utilities and energy section of the following table.

		March 31, 2023				December 31, 2022
Railroad:
Land, track structure and other roadway		$	67,861			$	67,350
Locomotives, freight cars and other equipment			16,003				16,031
Construction in progress			1,773				1,743
			85,637				85,124
Accumulated depreciation			(18,334	)			(17,899	)
			67,303				67,225
Utilities and energy:
Utility generation, transmission and distribution systems			93,123				92,759
Interstate natural gas pipeline assets			18,492				18,328
Independent power plants and other assets			14,610				14,650
Land, buildings, improvements and other			8,205				—
Construction in progress			6,246				5,357
			140,676				131,094
Accumulated depreciation			(39,006	)			(38,051	)
			101,670				93,043
		$	168,973			$	160,268

Depreciation expense for the first three months of 2023 and 2022 is summarized below (in millions).

		First Quarter
		2023				2022
Insurance and other		$	575			$	564
Railroad, utilities and energy			1,739				1,542
		$	2,314			$	2,106

Note 12. Equipment held for lease

Equipment held for lease includes railcars, aircraft and other equipment, including over-the-road trailers, intermodal tank containers, cranes, storage units and furniture. Equipment held for lease is summarized below (in millions).

	March 31, 2023				December 31, 2022
Railcars	$	9,662			$	9,612
Aircraft		10,928				10,667
Other		5,268				5,212
		25,858				25,491
Accumulated depreciation		(10,184	)			(9,907	)
	$	15,674			$	15,584

Depreciation expense for equipment held for lease in the first quarter was $308 million in 2023 and $294 million in 2022. Fixed and variable operating lease revenues for the first quarter of 2023 and 2022 are summarized below (in millions).

					First Quarter
					2023				2022
Fixed lease revenue					$	1,417			$	1,188
Variable lease revenue						627				484
					$	2,044			$	1,672

Notes to Consolidated Financial Statements (Continued)

Note 13. Goodwill and other intangible assets

Reconciliations of the changes in the carrying value of goodwill for the first three months of 2023 and for the year ended December 31, 2022 follow (in millions).

		March 31, 2023				December 31, 2022
Balance at beginning of year		$	78,119			$	73,875
Business acquisitions			6,112				4,657
Other, including foreign currency translation			(729	)			(413	)
Balance at end of period*		$	83,502			$	78,119

——————

*** Net of accumulated goodwill impairments of $11.0 billion as of March 31, 2023 and December 31, 2022.

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

		March 31, 2023												December 31, 2022
		Gross carrying amount				Accumulated amortization				Net carrying value				Gross carrying amount				Accumulated amortization				Net carrying value
Insurance and other:
Customer relationships		$	28,247			$	7,376			$	20,871			$	27,765			$	7,174			$	20,591
Trademarks and trade names			5,605				832				4,773				5,603				822				4,781
Patents and technology			5,010				3,832				1,178				4,943				3,748				1,195
Other			4,775				1,596				3,179				4,150				1,530				2,620
		$	43,637			$	13,636			$	30,001			$	42,461			$	13,274			$	29,187
Railroad, utilities and energy:
Customer relationships and contracts		$	6,214			$	612			$	5,602			$	1,507			$	541			$	966
Trademarks and trade names			2,566				44				2,522				217				39				178
Other			658				47				611				190				42				148
		$	9,438			$	703			$	8,735			$	1,914			$	622			$	1,292

Other intangible assets of the railroad, utilities and energy businesses are included in other assets. The net carrying value of such assets at March 31, 2023 included $7.4 billion related to Pilot. Intangible asset amortization expense in the first quarter was $429 million in 2023 and $303 million in 2022. Intangible assets with indefinite lives were $20.9 billion as of March 31, 2023 and $18.3 billion as of December 31, 2022 and primarily related to certain customer relationships and trademarks and trade names.

Notes to Consolidated Financial Statements (Continued)

Note 14. 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 15), for each of the three-month periods ending March 31, 2023 and 2022 follows (in millions).

	2023				2022
Balances at beginning of year:
Gross liabilities	$	107,472			$	86,664
Reinsurance recoverable on unpaid losses		(5,025	)			(2,960	)
Net liabilities		102,447				83,704
Incurred losses and loss adjustment expenses:
Current accident year		14,776				13,375
Prior accident years		(740	)			(251	)
Total		14,036				13,124
Paid losses and loss adjustment expenses:
Current accident year		(3,841	)			(3,908	)
Prior accident years		(9,747	)			(8,091	)
Total		(13,588	)			(11,999	)
Foreign currency effect		93				(106	)
Balances at March 31:
Net liabilities		102,988				84,723
Reinsurance recoverable on unpaid losses		4,969				2,944
Gross liabilities	$	107,957			$	87,667

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 quarter, we recorded net reductions of estimated ultimate liabilities for prior accident years of $740 million in 2023 and $251 million in 2022, 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 0.7% in 2023 and 0.3% in 2022.

We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses in the first quarter by $379 million in 2023 and $114 million in 2022. In 2023, the reductions were driven by private passenger auto claims, whereas the decreases in 2022 were primarily attributable to private passenger auto, medical professional liability and workers’ compensation claims, partly offset by increases with respect to other casualty claims. In the first quarter, estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced $361 million in 2023 and $137 million in 2022.

Notes to Consolidated Financial Statements (Continued)

Note 15. 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 and incurred losses and loss adjustment expenses to the amounts recorded in the Consolidated Statements of Earnings for each of the three-month periods ended March 31, 2023 and 2022 follow (in millions).

	2023				2022
Balances at beginning of year	$	35,415			$	37,855
Incurred losses and loss adjustment expenses:
Current year contracts		—				—
Prior years’ contracts		14				(7	)
Total		14				(7	)
Paid losses and loss adjustment expenses		(372	)			(547	)
Foreign currency effect		6				(5	)
Balances at March 31	$	35,063			$	37,296
Incurred losses and loss adjustment expenses above	$	14			$	(7	)
Deferred charge amortization and adjustments		171				215
Incurred losses and loss adjustment expenses included in the Consolidated Statements of Earnings	$	185			$	208

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 Consolidated Statements of Earnings include changes in estimated liabilities and related deferred charge asset amortization and adjustments arising from the changes in estimated timing and amount of future loss payments. Unamortized deferred charges related to retroactive reinsurance contracts were $9.7 billion at March 31, 2023 and $10.4 billion at March 31, 2022.

Note 16. Long duration insurance contracts

We write periodic payment annuity and life and health insurance contracts. A summary of the impacts of adopting ASU 2018-12 on our periodic payment annuity and life and health insurance benefits liabilities as of the January 1, 2021 transition date follows in millions.

	Periodic payment annuities				Life and health				Total
Balance at December 31, 2020, as previously reported	$	10,974			$	10,642			$	21,616
Reclassifications to other policyholder liabilities		(286	)			(929	)			(1,215	)
Balance at December 31, 2020 after reclassifications		10,688				9,713				20,401
Change in discount rate assumptions		6,553				1,447				8,000
Change in cash flow assumptions		(117	)			552				435
Balance as of January 1, 2021	$	17,124			$	11,712			$	28,836

The reclassifications to other policyholder liabilities are primarily related to certain liabilities arising under our variable annuity guarantee reinsurance contracts. These liabilities are not classified as life, annuity and health insurance benefits liabilities under ASU 2018-12. A summary of our life, annuity and health insurance benefits liabilities as of March 31, 2023 and 2022, disaggregated for our two primary product categories, periodic payment annuities and life and health insurance, follows (in millions). Other liabilities primarily consist of incurred-but-not-reported claims and claims in the course of settlement.

	March 31,
	2023				2022
Periodic payment annuities	$	11,174			$	13,867
Life and health		5,633				6,792
Other liabilities		3,130				3,524
	$	19,937			$	24,183

Notes to Consolidated Financial Statements (Continued)

Note 16. Long duration insurance contracts (Continued)

Reconciliations of our periodic payment annuity and life and health insurance benefits liabilities for the first three months of 2023 and 2022 follow (in millions). The information reflects the changes in discounted present values of expected future policy benefits and expected future net premiums. In this context, net premiums represent the portion of expected gross premiums that are required to provide for future policy benefits and variable expenses.

	Periodic payment annuities								Life and health
	2023				2022				2023				2022
Expected future policy benefits:
Balance at beginning of period	$	10,640			$	16,153			$	52,008			$	63,648
Balance at beginning of period at original discount rate		11,549				11,261				63,584				60,133
Impact of cash flow assumption changes		—				—				(1	)			486
Effect of actual from expected results		1				1				(519	)			90
Change in benefits, net		(116	)			43				(747	)			(517	)
Interest accrual		133				135				425				404
Foreign currency effect		19				(23	)			47				(167	)
Ending balance at original discount rate		11,586				11,417				62,789				60,429
Effect of changes in discount rate assumptions		(412	)			2,450				(12,169	)			(2,386	)
Expected future policy benefits at March 31	$	11,174			$	13,867			$	50,620			$	58,043
Expected future net premiums:
Balance at beginning of period									$	46,129			$	55,960
Balance at beginning of period at original discount rate										56,535				53,277
Impact of cash flow assumption changes										2				458
Effect of actual from expected results										(413	)			22
Change in premiums, net										(660	)			(357	)
Interest accrual										371				351
Foreign currency effect										47				(184	)
Ending balance at original discount rate										55,882				53,567
Effect of changes in discount rate assumptions										(10,895	)			(2,316	)
Expected future net premiums at March 31									$	44,987			$	51,251
Liability for future policy benefits at March 31	$	11,174			$	13,867			$	5,633			$	6,792
Reinsurance recoverables		—				—				(1,565	)			(1,857	)
Liability for future policy benefits at March 31, net of reinsurance recoverables	$	11,174			$	13,867			$	4,068			$	4,935

The undiscounted and discounted expected future gross premiums to be collected and undiscounted expected future benefits for periodic payment annuities and life and health insurance as of March 31, 2023 and 2022 are summarized below (in millions).

	Undiscounted expected future gross premiums								Discounted expected future gross premiums								Undiscounted expected future benefits
	2023				2022				2023				2022				2023				2022
Periodic payment annuities	$	—			$	—			$	—			$	—			$	31,244			$	30,647
Life and health		107,831				105,433				64,421				63,904				102,881				100,529

Gross premiums earned on long duration contracts are included in insurance premiums earned and interest expense associated with long duration insurance contracts is included as a component of life, annuity and health benefits expenses in our Consolidated Statements of Earnings. Gross premiums earned and interest expense for the first three months of 2023 and 2022 were as follows (in millions).

	Gross Premiums								Interest Expense
	2023				2022				2023				2022
Periodic payment annuities	$	—			$	169			$	133			$	135
Life and health		1,004				1,143				54				53

Notes to Consolidated Financial Statements (Continued)

Note 16. Long duration insurance contracts (Continued)

The weighted average current discount rates and interest accretion rates established at contract inception for the periodic payment annuities and life and health insurance are summarized below.

	March 31,
	2023				2022
Periodic payment annuities
Weighted average discount rate		5.0	%			3.6	%
Weighted average accretion rate		4.8	%			4.9	%
Weighted average duration (in years)	18				20
Life and health
Weighted average discount rate		4.9	%			3.4	%
Weighted average accretion rate		3.2	%			3.5	%
Weighted average duration (in years)	14				14

Deferred policy acquisition costs for our long duration insurance contracts were $748 million at March 31, 2023 and $631 million at March 31, 2022.

We also reinsure closed blocks of guaranteed minimum death and living benefits associated with variable annuity products, referred to as market risk benefits. Such liabilities are included in other policyholder liabilities and are measured at estimated fair value under ASU 2018-12. Such liabilities were approximately $1.2 billion as of March 31, 2023 and $1.25 billion as of December 31, 2022. During the first quarter of 2023, we reduced liability estimates by $65 million, for the effects of changes in securities markets, interest rates and other inputs used to estimate liabilities. Cash settlements during the first quarter of 2023 were insignificant.

Note 17. Notes payable and other borrowings

Notes payable and other borrowings of our insurance and other businesses are summarized below (in millions). The weighted average interest rates and maturity date ranges are based on borrowings as of March 31, 2023.

		Weighted Average Interest Rate				March 31, 2023				December 31, 2022
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2025-2047			3.5	%		$	3,733			$	6,231
Euro denominated due 2024-2041			1.1	%			6,029				7,344
Japanese Yen denominated due 2023-2060			0.7	%			7,716				7,818
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2027-2052			3.6	%			14,459				14,458
Great Britain Pound denominated due 2039-2059			2.5	%			2,122				2,078
Euro denominated due 2030-2034			1.8	%			1,349				1,332
Other subsidiary borrowings due 2023-2051			4.7	%			4,924				5,967
Subsidiary short-term borrowings			6.3	%			1,104				1,310
						$	41,436			$	46,538

Notes to Consolidated Financial Statements (Continued)

Note 17. Notes payable and other borrowings (Continued)

In the first quarter of 2023, Berkshire repaid approximately $3.9 billion of maturing senior notes. 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. In April 2023, Berkshire issued ¥164.4 billion (approximately $1.2 billion) of senior notes and repaid ¥56.3 billion of maturing senior notes. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. Berkshire also guarantees certain debt of other subsidiaries, aggregating approximately $2.7 billion at March 31, 2023. 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.

The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€6.85 billion, £1.75 billion and ¥1,029 billion par at March 31, 2023) 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 produced pre-tax losses of $26 million in the first quarter of 2023 and pre-tax gains of $716 million in the first quarter of 2022.

Notes payable and other borrowings of our railroad, utilities and energy businesses are summarized below (in millions). The weighted average interest rates and maturity date ranges are based on borrowings as of March 31, 2023.

		Weighted Average Interest Rate				March 31, 2023				December 31, 2022
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2053			4.4	%		$	13,597			$	13,996
Subsidiary and other debt due 2023-2064			4.3	%			37,553				37,639
Short-term borrowings			5.6	%			1,819				1,119
Pilot Travel Centers (“Pilot”) and subsidiaries:
Pilot borrowings due 2023-2028			6.6	%			5,878				—
Short-term borrowings			6.2	%			594				—
Burlington Northern Santa Fe (“BNSF”) and subsidiaries due 2023-2097			4.6	%			22,747				23,452
						$	82,188			$	76,206

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, including covenants which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios.

Pilot’s borrowings primarily represent syndicated loans. BNSF’s borrowings are primarily senior unsecured debentures. As of March 31, 2023, BNSF, Pilot, 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, Pilot 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 $13.1 billion at March 31, 2023, which included approximately $9.0 billion related to BHE and its subsidiaries.

Notes to Consolidated Financial Statements (Continued)

Note 18. Fair value measurements

Our financial assets and liabilities are summarized below as of March 31, 2023 and December 31, 2022, 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 or otherwise approximate the fair values.

		Carrying Value				Fair Value				Quoted Prices (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
March 31, 2023
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	9,405			$	9,405			$	9,370			$	35			$	—
Foreign governments			11,088				11,088				10,738				350				—
Corporate bonds			1,791				1,791				—				1,109				682
Other			282				282				—				282				—
Investments in equity securities			328,161				328,161				316,550				12				11,599
Investments in Kraft Heinz & Occidental common stock			25,960				25,802				25,802				—				—
Loans and finance receivables			23,144				23,736				—				1,241				22,495
Derivative contract assets (1)			504				504				132				340				32
Derivative contract liabilities (1)			287				287				11				109				167
Notes payable and other borrowings:
Insurance and other			41,436				37,534				—				37,502				32
Railroad, utilities and energy			82,188				77,743				—				77,743				—
December 31, 2022
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	9,802			$	9,802			$	9,733			$	69			$	—
Foreign governments			10,327				10,327				9,854				473				—
Corporate bonds			2,195				2,195				—				1,546				649
Other			2,804				2,804				—				2,804				—
Investments in equity securities			308,793				308,793				296,610				9				12,174
Investments in Kraft Heinz & Occidental common stock			24,421				25,491				25,491				—				—
Loans and finance receivables			23,208				23,428				—				1,513				21,915
Derivative contract assets (1)			589				589				56				474				59
Derivative contract liabilities (1)			242				242				8				122				112
Notes payable and other borrowings:
Insurance and other			46,538				41,961				—				41,061				900
Railroad, utilities and energy			76,206				67,651				—				67,651				—

——————

(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 18. 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 three months ended March 31, 2023 and 2022 follow (in millions).

	Balance at beginning of year				Gains (losses) included in earnings				Acquisitions, dispositions and settlements				Transfers out of Level 3				Balance at March 31
Investments in equity securities:
2023	$	12,169			$	(54	)		$	(521	)		$	—			$	11,594
2022		11,480				855				—				—				12,335

Quantitative information as of March 31, 2023 for the 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		$	9,602			Discounted cash flow		Expected duration		6 years
								Discounts for liquidity and subordination		372 bps
Common stock warrants			1,992			Warrant pricing model		Expected duration		6 years
								Volatility		40%

Investments in equity securities in the preceding table include our investments in certain preferred stock and common stock warrants that do not have readily determinable market values as defined under GAAP. These investments are private placements with contractual terms that restrict transfers and currently 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 liquidity and 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 19. Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the first quarter of 2023 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, 2022		651,450			(59,886	)		591,564				1,509,969,352			(207,715,276	)		1,302,254,076
Conversions of Class A to Class B common stock		(359	)		—			(359	)			538,500			—			538,500
Treasury stock acquired		—			(5,103	)		(5,103	)			—			(6,716,864	)		(6,716,864	)
Balances at March 31, 2023		651,091			(64,989	)		586,102				1,510,507,852			(214,432,140	)		1,296,075,712

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 1,450,152 shares outstanding as of March 31, 2023 and 1,459,733 shares outstanding as of December 31, 2022.

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 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 Bill 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 20. Income taxes

Our consolidated effective income tax rates were 20.1% in the first quarter of 2023 compared to 18.0% in the first quarter of 2022. 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.

Notes to Consolidated Financial Statements (Continued)

Note 21. Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for the three months ending March 31, 2023 and 2022 follows (in millions).

		Unrealized gains (losses) on investments				Foreign currency translation				Long duration insurance contracts				Defined benefit pension plans				Other				Total
First quarter of 2023
Beginning of year as previously reported		$	(187	)		$	(6,140	)		$	—			$	(552	)		$	288			$	(6,591	)
Adoption of ASU 2018-12			—				(2	)			1,541				—				—				1,539
Beginning balance as revised			(187	)			(6,142	)			1,541				(552	)			288				(5,052	)
Other comprehensive income			194				244				(291	)			44				(115	)			76
Balance at end of period		$	7			$	(5,898	)		$	1,250			$	(508	)		$	173			$	(4,976	)
First quarter of 2022
Beginning of year as previously reported		$	369			$	(4,092	)		$	—			$	(347	)		$	43			$	(4,027	)
Adoption of ASU 2018-12			—				—				(4,096	)			—				—				(4,096	)
Beginning balance as revised			369				(4,092	)			(4,096	)			(347	)			43				(8,123	)
Other comprehensive income			(186	)			(314	)			2,419				20				80				2,019
Balance at end of period		$	183			$	(4,406	)		$	(1,677	)		$	(327	)		$	123			$	(6,104	)

Note 22. Supplemental cash flow information

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

		First Quarter
		2023				2022
Cash paid during the period for:
Income taxes		$	312			$	336
Interest:
Insurance and other			491				365
Railroad, utilities and energy			799				708
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions			10,747				9

Note 23. 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 currently 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.

Notes to Consolidated Financial Statements (Continued)

Note 24. Revenues from contracts with customers

The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for the first quarter of 2023 and 2022 (in millions). Revenues from Pilot in 2023 are for the two months ending March 31, 2023. 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				Pilot				Insurance, Corporate and other				Total
Three months ending March 31, 2023
Manufactured products:
Industrial and commercial products		$	7,229			$	—			$	65			$	—			$	—			$	—			$	—			$	7,294
Building products			4,758				—				—				—				—				—				—				4,758
Consumer products			4,035				—				—				—				—				—				—				4,035
Grocery and convenience store distribution			—				7,793				—				—				—				—				—				7,793
Food and beverage distribution			—				4,762				—				—				—				—				—				4,762
Auto sales			—				—				2,565				—				—				—				—				2,565
Other retail and wholesale distribution			799				—				4,230				—				—				422				—				5,451
Service			354				284				1,326				5,985				811				21				—				8,781
Electricity, natural gas and fuel			—				—				—				—				5,291				9,015				—				14,306
Total			17,175				12,839				8,186				5,985				6,102				9,458				—				59,745
Other revenues			1,090				42				1,716				16				337				38				22,409				25,648
		$	18,265			$	12,881			$	9,902			$	6,001			$	6,439			$	9,496			$	22,409			$	85,393
Three months ending March 31, 2022
Manufactured products:
Industrial and commercial products		$	5,932			$	—			$	49			$	—			$	—			$	—			$	—			$	5,981
Building products			5,419				—				—				—				—				—				—				5,419
Consumer products			5,093				—				—				—				—				—				—				5,093
Grocery and convenience store distribution			—				7,706				—				—				—				—				—				7,706
Food and beverage distribution			—				4,562				—				—				—				—				—				4,562
Auto sales			—				—				2,527				—				—				—				—				2,527
Other retail and wholesale distribution			722				—				4,175				—				—				—				—				4,897
Service			264				214				1,006				5,931				1,112				—				—				8,527
Electricity and natural gas			—				—				—				—				4,714				—				—				4,714
Total			17,430				12,482				7,757				5,931				5,826				—				—				49,426
Other revenues			955				32				1,334				13				189				—				18,894				21,417
		$	18,385			$	12,514			$	9,091			$	5,944			$	6,015			$	—			$	18,894			$	70,843

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 March 31, 2023 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, natural gas and fuel		$	3,331			$	20,146			$	23,477
Other sales and service contracts			3,346				5,134				8,480

Notes to Consolidated Financial Statements (Continued)

Note 25. 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. We acquired control of Pilot Travel Centers (“Pilot”) on January 31, 2023. Pilot’s revenues, costs and earnings are included in our Consolidated Financial Statements and is considered a reportable segment beginning February 1, 2023. In this presentation, the revenues and pre-tax earnings of the Pilot segment are for the two months ending March 31, 2023. Previously, our earnings from Pilot were determined under the equity method and are included in earnings from equity method investments. Revenues and earnings before income taxes by segment for the first quarter of 2023 and 2022 were as follows (in millions).

					First Quarter
					2023				2022
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO					$	9,626			$	9,554
Berkshire Hathaway Primary Group						3,961				3,118
Berkshire Hathaway Reinsurance Group						6,209				4,816
Investment income						2,392				1,364
Total insurance						22,188				18,852
BNSF						6,019				5,968
Berkshire Hathaway Energy (“BHE”)						6,451				6,020
Pilot Travel Centers (“Pilot”)						9,508				—
Manufacturing						18,289				18,421
McLane						13,059				12,515
Service and retailing						9,931				9,115
						85,445				70,891
Reconciliation of segments to consolidated amount
Corporate, eliminations and other						(52	)			(48	)
					$	85,393			$	70,843

					First Quarter
					2023				2022
Earnings Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO					$	703			$	(178	)
Berkshire Hathaway Primary Group						268				92
Berkshire Hathaway Reinsurance Group						231				301
Investment income						2,385				1,361
Total insurance						3,587				1,576
BNSF						1,649				1,809
BHE						223				713
Pilot						136				—
Manufacturing						2,611				2,824
McLane						113				82
Service and retailing						1,221				1,135
						9,540				8,139
Reconciliation of segments to consolidated amount
Investment and derivative gains (losses)						34,758				(1,978	)
Interest expense, not allocated to segments						(114	)			(104	)
Equity method investments						688				339
Corporate, eliminations and other						(120	)			561
					$	44,752			$	6,957

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).

					First Quarter
					2023				2022
Insurance – underwriting					$	911			$	167
Insurance – investment income						1,969				1,170
BNSF						1,247				1,371
Berkshire Hathaway Energy (“BHE”)						416				775
Pilot Travel Centers (“Pilot”)						83				—
Manufacturing, service and retailing						2,982				3,025
Non-controlled businesses***						568				282
Investment and derivative contract gains (losses)						27,439				(1,580	)
Other						(111	)			370
Net earnings attributable to Berkshire Hathaway shareholders					$	35,504			$	5,580

——————

** Includes certain businesses in which Berkshire had between a 20% and 50% ownership interest.*

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 25 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

To varying degrees the consequences of the COVID-19 pandemic continue to affect our operating businesses. Government and private sector actions were taken beginning in 2020 intended to control the spread and mitigate the adverse economic effects of the virus and its variants. The development of global geopolitical conflicts, supply chain disruptions and government actions to slow inflation in recent years has produced varying economic effects on our operating businesses. We cannot reliably predict the future economic effects of these events on our businesses.

Insurance underwriting generated after-tax earnings of $911 million in the first quarter of 2023 and $167 million in the first quarter of 2022, which was revised from the previously reported amount of $47 million as a result of the adoption of ASU 2018-12 on January 1, 2023. See Note 2 to the accompanying Consolidated Financial Statements. After-tax earnings from insurance investment income increased $799 million in the first quarter of 2023 compared to 2022, mostly attributable to increases in short-term interest rates.

After-tax earnings of BNSF decreased 9.0% in the first quarter of 2023 compared to 2022. The comparative decrease was primarily attributable to lower overall freight volumes and higher fuel and other operating costs. After-tax earnings of BHE decreased 46.3% in the first quarter of 2023 compared to 2022. The decrease reflected lower earnings from the U.S. regulated utilities, other energy businesses and real estate brokerage businesses.

As disclosed in Note 3 to the accompanying Consolidated Financial Statements, we increased our ownership in Pilot from 38.6% to 80% on January 31, 2023 and we are consolidating Pilot’s results beginning February 1, 2023. In 2022 and through January 31, 2023, earnings from Pilot on our 38.6% interest were determined under the equity method and are included in non-controlled businesses in the preceding table.

After-tax earnings from our manufacturing, service and retailing businesses decreased 1.4% in the first quarter of 2023 versus 2022. Earnings in the first quarter of 2023 were mixed among our various businesses. While results for certain industrial products manufacturers and services businesses improved versus 2022, the results of the building and consumer products businesses generally deteriorated.

Investment and derivative contract gains (losses) in the first quarters of 2023 and 2022 predominantly derived from our investments in equity securities and included significant net unrealized gains and losses from market price changes. We believe that investment gains and losses on investments in equity securities, whether realized from dispositions or unrealized from changes in market prices, are generally meaningless in understanding our reported quarterly or annual results or evaluating the economic performance of our operating businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. Investment and derivative contract gains (losses) also included an after-tax non-cash remeasurement gain of $2.4 billion in the first quarter of 2023 related to our previously held 38.6% interest in Pilot through the application of the acquisition accounting method.

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

Results of Operations (Continued)

Other earnings included after-tax foreign exchange rate losses of $17 million in the first quarter of 2023 and after-tax gains of $522 million in the first quarter of 2022 related to the non-U.S. Dollar denominated debt issued by Berkshire and its U.S.-based finance subsidiary, Berkshire Hathaway Finance Corporation (“BHFC”).

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. We currently consider pre-tax incurred losses exceeding $150 million from a current year catastrophic event to be significant. Significant catastrophes in the first quarter were Cyclone Gabrielle and floods in New Zealand in 2023 and floods in Australia in 2022.

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 $143 billion as of March 31, 2023. 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.

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 (“BH Primary”) and Berkshire Hathaway Reinsurance Group (“BHRG”). Berkshire acquired Alleghany Corporation (“Alleghany”) on October 19, 2022. Through its subsidiaries, Alleghany operates property and casualty insurance and reinsurance businesses, which are included in the BH Primary and BHRG underwriting results.

We strive to produce pre-tax underwriting earnings (premiums earned less insurance losses/benefits incurred and underwriting expenses) over the long term in all business categories, except for BHRG’s retroactive reinsurance and periodic payment annuity contracts. Time-value-of-money is an important element in establishing prices for these contracts. We normally receive all premiums at the contract inception date, which are immediately available for investment. Ultimate claim payments can extend for decades and are expected to exceed premiums, producing underwriting losses over the claim settlement periods, primarily through deferred charge asset amortization and discounted liability accretion charges.

Underwriting results of our insurance businesses are summarized below (dollars in millions). BHRG’s pre-tax underwriting earnings for the first quarter of 2022 were $301 million, an increase from the previously reported amount of $156 million due to the impact of the retrospective adoption of ASU 2018-12 with respect to our long duration insurance contracts.

					First Quarter
					2023				2022
Pre-tax underwriting earnings (loss):
GEICO					$	703			$	(178	)
Berkshire Hathaway Primary Group						268				92
Berkshire Hathaway Reinsurance Group						231				301
Pre-tax underwriting earnings						1,202				215
Income taxes and noncontrolling interests						291				48
Net underwriting earnings					$	911			$	167
Effective income tax rate						24.3	%			22.8	%

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

Insurance—Underwriting (Continued)

GEICO

GEICO primarily 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).

									First Quarter
									2023								2022
									Amount				%				Amount				%
Premiums written									$	10,060							$	10,265
Premiums earned									$	9,626				100.0			$	9,554				100.0
Losses and loss adjustment expenses										7,992				83.0				8,544				89.4
Underwriting expenses										931				9.7				1,188				12.5
Total losses and expenses										8,923				92.7				9,732				101.9
Pre-tax underwriting earnings (loss)									$	703							$	(178	)

GEICO’s pre-tax underwriting earnings in the first quarter of 2023 reflected higher average premiums per auto policy, a reduction in advertising costs, as well as favorable prior accident year development. Premiums written in the first quarter of 2023 decreased $205 million (2.0%) compared to the first quarter of 2022. Premiums earned increased $72 million (0.8%) as average premiums per auto policy increased 15.2% due to rate increases, offset by a decrease in policies-in-force of 2.4 million (13.0%) since March 31, 2022. GEICO significantly reduced advertising over that period, which contributed to the reduction in policies-in-force.

Losses and loss adjustment expenses in the first quarter of 2023 decreased $552 million (6.5%) compared to the first quarter of 2022. GEICO’s ratio of losses and loss adjustment expenses to premiums earned in the first quarter of 2023 was 83.0%, a decrease of 6.4 percentage points compared to the first quarter of 2022, which reflected the impact of higher average premiums per auto policy, favorable reserve development for prior accident years, the reduction in policies-in-force, and lower claims frequencies. Somewhat offsetting the favorable impact of these items were increases in claims severities. GEICO’s reductions in the ultimate claim loss estimates for prior years’ loss events were $338 million in the first quarter of 2023 and $92 million in the first quarter of 2022. The reduction in loss estimates for prior years’ events in 2023 reflected decreased estimates across several coverages.

Claims frequencies in the first quarter of 2023 were lower for property damage (five to six percent range) and collision (six to seven percent range), while claims frequencies increased for bodily injury (four to five percent range) and personal injury (three to four percent range). Average claims severities in the first quarter of 2023 were higher for property damage coverage (twenty-one to twenty-two percent range), collision coverage (seven to eight percent range) and bodily injury coverage (eight to ten percent range).

Underwriting expenses in the first quarter of 2023 were $931 million, a decrease of $257 million (21.6%) compared to 2022. GEICO’s expense ratio (underwriting expenses to premiums earned) in the first quarter of 2023 was 9.7% compared to 12.5% in 2022. These decreases were driven by the reduction in advertising expenses.

Berkshire Hathaway Primary Group

The Berkshire Hathaway Primary Group consists of several independently managed businesses that provide a variety of primarily 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”), Berkshire Hathaway Direct Insurance Company (“BH Direct”) and U.S. Liability Insurance Company (“USLI”). This group also includes Alleghany’s RSUI Group Inc. and CapSpecialty, Inc. (“Alleghany Insurance”), beginning October 19, 2022.