Item 1. Financial Statements

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Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BA****LANCE SHEETS

(dollars in millions)


	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	44,611	$	32,260
Short-term investments in U.S. Treasury Bills		97,322		92,774
Investments in fixed maturity securities		22,353		25,128
Investments in equity securities		353,409		308,793
Equity method investments		27,493		28,050
Loans and finance receivables		23,530		23,208
Other receivables		45,590		43,490
Inventories		25,295		25,366
Property, plant and equipment		21,413		21,113
Equipment held for lease		16,028		15,584
Goodwill		50,982		51,522
Other intangible assets		29,819		29,187
Deferred charges - retroactive reinsurance		9,454		9,870
Other		19,917		19,657
		787,216		726,002
Railroad, Utilities and Energy:
Cash and cash equivalents*		5,444		3,551
Receivables		6,067		4,795
Property, plant and equipment		171,747		160,268
Goodwill		34,871		26,597
Regulatory assets		5,452		5,062
Other		30,776		22,190
		254,357		222,463
	$	1,041,573	$	948,465

——————

*** *Includes U.S. Treasury Bills with maturities of three months or less when purchased of $*24.5 *billion at June 30, 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)


	June 30, 2023			December 31, 2022
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	109,030		$	107,472
Unpaid losses and loss adjustment expenses - retroactive reinsurance contracts		34,421			35,415
Unearned premiums		31,173			28,657
Life, annuity and health insurance benefits		19,635			19,753
Other policyholder liabilities		10,868			11,370
Accounts payable, accruals and other liabilities		31,999			33,201
Aircraft repurchase liabilities and unearned lease revenues		7,375			6,820
Notes payable and other borrowings		41,389			46,538
		285,890			289,226
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		20,234			16,615
Regulatory liabilities		6,719			7,369
Notes payable and other borrowings		83,958			76,206
		110,911			100,190
Income taxes, principally deferred		93,011			77,368
Total liabilities		489,812			466,784
Redeemable noncontrolling interests		3,210			—
Shareholders’ equity:
Common stock		8			8
Capital in excess of par value		35,140			35,167
Accumulated other comprehensive income		(4,240	)		(5,052	)
Retained earnings		582,543			511,127
Treasury stock, at cost		(73,568	)		(67,826	)
Berkshire Hathaway shareholders’ equity		539,883			473,424
Noncontrolling interests		8,668			8,257
Total shareholders’ equity		548,551			481,681
	$	1,041,573		$	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)


	Second Quarter					First Six Months
	2023		2022			2023		2022
Revenues:
Insurance and Other:
Insurance premiums earned	$	20,561	$	18,081		$	40,357	$	35,569
Sales and service revenues		39,126		40,220			77,514		78,082
Leasing revenues		2,079		1,887			4,123		3,559
Interest, dividend and other investment income		3,846		2,861			7,075		4,723
		65,612		63,049			129,069		121,933
Railroad, Utilities and Energy:
Freight rail transportation revenues		5,808		6,612			11,809		12,556
Utility and energy operating revenues		19,593		4,935			34,510		9,753
Service revenues and other income		1,490		1,605			2,508		2,802
		26,891		13,152			48,827		25,111
Total revenues		92,503		76,201			177,896		147,044

Investment and derivative contract gains (losses)		33,061		(66,919	)		67,819		(68,897	)

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		14,089		13,620			28,310		26,952
Life, annuity and health insurance benefits		1,128		1,186			1,913		2,523
Insurance underwriting expenses		3,729		2,377			7,316		4,981
Cost of sales and services		30,621		31,633			60,940		61,418
Cost of leasing		1,457		1,498			2,934		2,730
Selling, general and administrative expenses		5,005		3,762			10,607		8,013
Interest expense		314		302			642		566
		56,343		54,378			112,662		107,183
Railroad, Utilities and Energy:
Freight rail transportation expenses		4,014		4,260			8,175		8,185
Utilities and energy cost of sales and other expenses		18,159		3,844			32,005		7,435
Other expenses		1,189		1,527			2,060		2,683
Interest expense		935		785			1,825		1,555
		24,297		10,416			44,065		19,858
Total costs and expenses		80,640		64,794			156,727		127,041
Earnings (loss) before income taxes and equity method earnings		44,924		(55,512	)		88,988		(48,894	)
Equity method earnings		511		204			1,199		543
Earnings (loss) before income taxes		45,435		(55,308	)		90,187		(48,351	)
Income tax expense (benefit)		9,236		(12,066	)		18,231		(10,814	)
Net earnings (loss)		36,199		(43,242	)		71,956		(37,537	)
Earnings attributable to noncontrolling interests		287		379			540		504
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	35,912	$	(43,621	)	$	71,416	$	(38,041	)
Net earnings (loss) per average equivalent Class A share	$	24,775	$	(29,663	)	$	49,152	$	(25,832	)
Net earnings (loss) per average equivalent Class B share*	$	16.52	$	(19.78	)	$	32.77	$	(17.22	)
Average equivalent Class A shares outstanding		1,449,542		1,470,577			1,452,971		1,472,628
Average equivalent Class B shares outstanding		2,174,313,670		2,205,865,262			2,179,456,816		2,208,942,539

——————

*** 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)


	Second Quarter						First Six Months
	2023			2022			2023			2022
Net earnings (loss)	$	36,199		$	(43,242	)	$	71,956		$	(37,537	)
Other comprehensive income:
Unrealized gains (losses) on investments		(41	)		(211	)		206			(447	)
Applicable income taxes		21			44			(32	)		95
Foreign currency translation		383			(1,750	)		632			(2,065	)
Applicable income taxes		(21	)		63			(15	)		52
Long-duration insurance contract discount rate changes		487			2,734			120			5,812
Applicable income taxes		(125	)		(587	)		(49	)		(1,246	)
Defined benefit pension plans		2			15			52			41
Applicable income taxes		(6	)		(4	)		(12	)		(9	)
Other, net		57			68			(63	)		155
Other comprehensive income, net		757			372			839			2,388
Comprehensive income		36,956			(42,870	)		72,795			(35,149	)
Comprehensive income attributable to noncontrolling interests		308			350			567			472
Comprehensive income attributable to Berkshire Hathaway shareholders	$	36,648		$	(43,220	)	$	72,228		$	(35,621	)

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 second quarter and first six months 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
Net earnings		—			—			35,912			—			287			36,199
Other comprehensive income, net		—			736			—			—			21			757
Acquisition of common stock		—			—			—			(1,303	)		—			(1,303	)
Transactions with noncontrolling interests and other		(16	)		—			—			—			(163	)		(179	)
Balance at June 30, 2023	$	35,148		$	(4,240	)	$	582,543		$	(73,568	)	$	8,668		$	548,551

For the second quarter and first six months 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
Net earnings (loss)		—			—			(43,621	)		—			379			(43,242	)
Other comprehensive income, net		—			401			—			—			(29	)		372
Acquisition of common stock		—			—			—			(1,028	)		—			(1,028	)
Transactions with noncontrolling interests and other		(382	)		—			—			—			(650	)		(1,032	)
Balance at June 30, 2022	$	35,212		$	(5,703	)	$	495,845		$	(63,934	)	$	8,424		$	469,844

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEM****ENTS OF CASH FLOWS

(dollars in millions)

(Unaudited)


	First Six Months
	2023			2022
Cash flows from operating activities:
Net earnings (loss)	$	71,956		$	(37,537	)
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses		(67,819	)		68,589
Depreciation and amortization		6,147			5,413
Other		(3,126	)		(2,592	)
Changes in operating assets and liabilities:
Unpaid losses and loss adjustment expenses		275			1,505
Deferred charges - retroactive reinsurance		416			426
Unearned premiums		2,492			2,384
Receivables and originated loans		(1,194	)		(6,455	)
Inventories		505			(4,080	)
Other assets		(980	)		(620	)
Other liabilities		(2,721	)		1,247
Income taxes		15,176			(12,923	)
Net cash flows from operating activities		21,127			15,357
Cash flows from investing activities:
Purchases of equity securities		(7,442	)		(57,269	)
Sales of equity securities		25,833			12,044
Purchases of U.S. Treasury Bills and fixed maturity securities		(99,060	)		(100,355	)
Sales of U.S. Treasury Bills and fixed maturity securities		39,991			54,637
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities		59,815			23,681
Acquisitions of businesses, net of cash acquired		(8,516	)		(103	)
Purchases of property, plant and equipment and equipment held for lease		(8,398	)		(6,833	)
Other		513			25
Net cash flows from investing activities		2,736			(74,173	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		1,225			6,972
Repayments of borrowings of insurance and other businesses		(5,388	)		(1,440	)
Proceeds from borrowings of railroad, utilities and energy businesses		2,788			3,189
Repayments of borrowings of railroad, utilities and energy businesses		(2,187	)		(1,374	)
Changes in short-term borrowings, net		582			(85	)
Acquisition of treasury stock		(5,850	)		(4,191	)
Other, principally transactions with noncontrolling interests		(803	)		(1,464	)
Net cash flows from financing activities		(9,633	)		1,607
Effects of foreign currency exchange rate changes		24			(273	)
Increase (decrease) in cash and cash equivalents and restricted cash		14,254			(57,482	)
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 second quarter*	$	50,653		$	31,224
*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 second quarter—
Insurance and Other	$	44,611		$	26,534
Railroad, Utilities and Energy		5,444			4,074
Restricted cash included in other assets		598			616
	$	50,653		$	31,224

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 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 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 several 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, our operating businesses have been impacted by government and private sector actions to mitigate the adverse economic effects of the COVID-19 virus and its variants as well as by the development of geopolitical conflicts, supply chain disruptions and government actions to slow inflation. 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, including 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”). 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 rate assumptions were recorded in accumulated other comprehensive income. Our Consolidated Financial Statements for the years ending December 31, 2022 and 2021 and as of the January 1, 2021 transition date were revised for the effects of adopting ASU 2018-12. These effects were included in Part II, Item 5 to our Form 10-Q for the period ending March 31, 2023.

Beginning as of January 1, 2021, the cash flow assumptions used to measure benefit liabilities are reviewed at least annually, with the effects of assumption changes recorded in earnings. The discount rate assumptions used to measure benefit liabilities are revised each quarterly reporting period with the effects of changes reported in other comprehensive income. Discount rates are based on the prevailing upper-medium grade corporate bond yields (generally single A-rated credit ratings) that reflect the duration characteristics and currency attributes of the liabilities. In measuring benefit liabilities and amortizing capitalized acquisition costs under long-duration insurance contracts, we generally aggregate contracts by issuance year. See Note 16 for disclosures related to our long-duration 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

Notes to Consolidated Financial Statements (Continued)

Note 2. New accounting pronouncements (Continued)

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.

The effects of adopting ASU 2018-12 on our Consolidated Statements of Earnings and Comprehensive Income for the second quarter and first six months of 2022 follows in millions, except per share amounts.


	Second Quarter									First Six Months
	Previously reported			Increase (decrease)			As revised			Previously reported			Increase (decrease)			As revised
Revenues:
Insurance premiums earned	$	18,087		$	(6	)	$	18,081		$	35,579		$	(10	)	$	35,569
Costs and expenses:
Life, annuity and health insurance benefits		1,282			(96	)		1,186			2,605			(82	)		2,523
Insurance underwriting expenses		2,461			(84	)		2,377			5,228			(247	)		4,981
Earnings (loss) before income taxes		(55,482	)		174			(55,308	)		(48,670	)		319			(48,351	)
Income tax expense (benefit)		(12,106	)		40			(12,066	)		(10,879	)		65			(10,814	)
Net earnings (loss)		(43,376	)		134			(43,242	)		(37,791	)		254			(37,537	)
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(43,755	)	$	134		$	(43,621	)	$	(38,295	)	$	254		$	(38,041	)
Other comprehensive income:
Foreign currency translation		(1,751	)		1			(1,750	)		(2,067	)		2			(2,065	)
Long-duration insurance contracts		—			2,147			2,147			—			4,566			4,566
Other comprehensive income, net		(1,776	)		2,148			372			(2,180	)		4,568			2,388
Comprehensive income attributable to Berkshire Hathaway shareholders	$	(45,502	)	$	2,282		$	(43,220	)	$	(40,443	)	$	4,822		$	(35,621	)
Net earnings (loss) per average equivalent Class A share	$	(29,754	)	$	91		$	(29,663	)	$	(26,005	)	$	173		$	(25,832	)
Net earnings (loss) per average equivalent Class B share	$	(19.84	)	$	0.06		$	(19.78	)	$	(17.34	)	$	0.12		$	(17.22	)

In March 2023, the FASB issued Accounting Standards Update 2023-02, “Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). ASU 2023-02 permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Currently, the proportional amortization method is limited to certain affordable housing tax credit investments. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, and is applied either on a retrospective basis beginning as of the earliest period presented or a modified retrospective basis in the period of adoption. We are evaluating the effects of this standard on our Consolidated Financial Statements.

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 possess a controlling interest in 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 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.

Notes to Consolidated Financial Statements (Continued)

Note 3. Significant business acquisitions (Continued)

Pilot’s revenues and net earnings attributable to Berkshire shareholders included in Berkshire’s Consolidated Financial Statements for the five months ending June 30, 2023 were $24.3 billion and $197 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).

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 Pilot’s assets acquired, liabilities assumed and redeemable noncontrolling interests as of January 31, 2023 are summarized as follows (in millions). The 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 and are provisional.


	Pilot
Property, plant and equipment	$	8,082
Goodwill and other intangible assets		13,309
Other assets		6,994
Assets acquired	$	28,385
Notes payable	$	5,876
Other liabilities		4,774
Liabilities assumed		10,650
Noncontrolling interests, predominantly redeemable		3,370
Net assets	$	14,365

On October 19, 2022, Berkshire acquired all of the outstanding common stock of Alleghany Corporation (“Alleghany”) for $11.5 billion. Alleghany operates a group of property and casualty reinsurance and insurance businesses. It also owns a portfolio of non-financial businesses. Goodwill arising from Berkshire’s acquisition is not expected to be deductible for income tax purposes. A summary of the values of the Alleghany assets acquired and liabilities assumed as of October 19, 2022 follows (in millions).


	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		3,900
Other intangible assets		2,659
Other assets		3,637
Assets acquired	$	35,590
Unpaid losses and loss adjustment expenses	$	15,080
Unearned premiums		3,536
Notes payable		2,169
Other liabilities		3,300
Liabilities assumed		24,085
Net assets	$	11,505

Certain unaudited pro forma revenue and consolidated earnings (loss) data for the six months ended June 30, 2022 as if the Alleghany and Pilot acquisitions were consummated on the same terms at the beginning of 2022 follows (in millions, except per share amounts).


	June 30, 2022
Revenues	$	188,855
Net earnings (loss) attributable to Berkshire Hathaway shareholders		(38,169	)
Net earnings (loss) per equivalent Class A common share		(25,919	)

Notes to Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities

Investments in fixed maturity securities as of June 30, 2023 and December 31, 2022 are summarized by type below (in millions).


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
June 30, 2023
U.S. Treasury, U.S. government corporations and agencies	$	9,242	$	2	$	(192	)	$	9,052
Foreign governments		11,571		70		(160	)		11,481
Corporate bonds		1,333		228		(7	)		1,554
Other		250		20		(4	)		266
	$	22,396	$	320	$	(363	)	$	22,353
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

As of June 30, 2023, the fair value of investments in U.S. Treasury securities that mature in 2023 and 2024 was approximately $8.3 billion. As of June 30, 2023, approximately 94% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies. The amortized cost and estimated fair value of fixed maturity securities at June 30, 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	$	15,632	$	5,748	$	708	$	136	$	172	$	22,396
Fair value		15,452		5,654		916		145		186		22,353

Note 5. Investments in equity securities

Investments in equity securities as of June 30, 2023 and December 31, 2022 are summarized as follows (in millions).


	Cost Basis		Net Unrealized Gains		Fair Value
June 30, 2023*
Banks, insurance and finance	$	23,547	$	43,056	$	66,603
Consumer products		36,550		169,760		206,310
Commercial, industrial and other		55,560		24,936		80,496
	$	115,657	$	237,752	$	353,409

——————

*** Approximately 78*% of the aggregate fair value was concentrated in* five *companies (American Express Company – $*26.4 *billion; Apple Inc. – $*177.6 *billion; Bank of America Corporation – $*29.6 *billion; The Coca-Cola Company – $*24.1 *billion and Chevron Corporation – $*19.4 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 in our Consolidated Balance Sheets, as such interests are not in-substance common stock under GAAP and are not eligible for the equity method.

The Occidental 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 value, plus any accumulated and unpaid dividends. As of June 30, 2023, our investment in Occidental preferred stock had an aggregate liquidation value of approximately $8.8 billion. During the first six months of 2023, Occidental issued mandatory redemption notifications at a price of 110% of the liquidation value, plus accrued and unpaid dividends for $1.2 billion of the aggregate liquidation value. The mandatory redemptions were due to excess distributions by Occidental to its common stockholders (as defined under the terms of Occidental preferred stock certificate of designations).

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 date the preferred stock is fully redeemed.

On June 30, 2023, we owned 151.6 million shares of American Express Company (“American Express”) common stock representing 20.6% 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. As of June 30, 2023, we owned 26.5% of the outstanding Kraft Heinz common stock and 25.1% of the outstanding Occidental common stock, which excludes the potential effect of the exercise of the Occidental common stock warrants.

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 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.

The common stock of Kraft Heinz and Occidental are publicly traded. The fair values and our carrying values of these investments in addition to the carrying values of our other significant equity method investments are summarized as follows (in millions). We evaluated our investments in Kraft Heinz and Occidental for other-than-temporary impairment as of June 30, 2023, and based on the prevailing facts and circumstances, concluded the recognition of an impairment charge in earnings was not required.


	Carrying Value				Fair Value
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Kraft Heinz	$	13,199	$	12,937	$	11,553	$	13,249
Occidental		13,861		11,484		13,179		12,242
Other		433		3,629
	$	27,493	$	28,050

Notes to Consolidated Financial Statements (Continued)

Note 6. Equity method investments (Continued)

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 March 31, 2023 by approximately $9 billion. Based upon the limited information available to us, we concluded the excess represents goodwill.

Our earnings and distributions received from equity method investments are summarized in the following table (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 2023 related to Occidental’s earnings for the fourth quarter of 2022 and first quarter of 2023. Equity method earnings attributable to Pilot were $105 million for the month ending January 31, 2023, $95 million for the second quarter of 2022 and $202 million for the first six months of 2022.


	Equity in Earnings								Distributions Received
	Second Quarter				First Six Months				Second Quarter				First Six Months
	2023		2022		2023		2022		2023		2022		2023		2022
Kraft Heinz	$	265	$	71	$	487	$	277	$	130	$	130	$	260	$	260
Occidental		234		—		604		—		36		—		61		—
Other		12		133		108		266		21		88		21		90
	$	511	$	204	$	1,199	$	543	$	187	$	218	$	342	$	350

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


	July 1, 2023		December 31, 2022
Assets	$	90,956	$	90,513
Liabilities		40,942		41,643


	Second Quarter				First Six Months
	2023		2022		2023		2022
Sales	$	6,721	$	6,554	$	13,210	$	12,599
Net earnings attributable to Kraft Heinz common shareholders		1,000		265		1,836		1,041

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


	March 31, 2023		December 31, 2022
Assets	$	71,600	$	72,609
Liabilities		42,041		42,524


	Quarter ending March 31, 2023		Six months ending March 31, 2023
Total revenues and other income	$	7,258	$	15,584
Net earnings attributable to Occidental common shareholders		983		2,710

Notes to Consolidated Financial Statements (Continued)

Note 7. Investment and derivative contract gains (losses)

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


	Second Quarter						First Six Months
	2023			2022			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	$	33,046		$	(66,860	)	$	63,763		$	(68,548	)
Investment gains on securities sold during the period		31			32			1,001			34
		33,077			(66,828	)		64,764			(68,514	)
Fixed maturity securities:
Gross realized gains		8			6			132			12
Gross realized losses		(25	)		(27	)		(77	)		(76	)
Other		1			(5	)		3,000			(11	)
Investment gains (losses)		33,061			(66,854	)		67,819			(68,589	)
Derivative contract gains (losses)		—			(65	)		—			(308	)
	$	33,061		$	(66,919	)	$	67,819		$	(68,897	)

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 $25.8 billion in the first six months of 2023 and $12.0 billion in the first six months 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 $2.4 billion in the second quarter and $4.6 billion in the first six months of 2023 compared to taxable gains of $76 million in the second quarter of 2022 and taxable losses of $663 million in the first six months of 2022. Other investment gains in the first six months 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.

Note 8. Loans and finance receivables

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


	June 30, 2023			December 31, 2022
Loans and finance receivables before allowances and discounts	$	25,064		$	24,664
Allowances for credit losses		(912	)		(856	)
Unamortized acquisition discounts and points		(622	)		(600	)
	$	23,530		$	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 six months of 2023 and 2022 follow (in millions).


	First Six Months
	2023			2022
Balance at beginning of year	$	856		$	765
Provision for credit losses		90			50
Charge-offs, net of recoveries		(34	)		(12	)
Balance at June 30	$	912		$	803

Notes to Consolidated Financial Statements (Continued)

Note 8. Loans and finance receivables (Continued)

As of June 30, 2023, substantially all manufactured and site-built home loans were evaluated collectively for impairment. As of June 30, 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 June 30, 2023 follows (in millions).


	Origination Year
	2023		2022		2021		2020		2019		Prior		Total
Performing	$	3,273	$	4,568	$	3,459	$	2,694	$	1,907	$	7,933	$	23,834
Non-performing		7		5		10		10		6		44		82
	$	3,280	$	4,573	$	3,469	$	2,704	$	1,913	$	7,977	$	23,916

We are also a lender under commercial loan agreements, which had an aggregate principal value of approximately $1.1 billion at June 30, 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 $550 million at June 30, 2023. Our commercial loans are generally secured by real estate properties or by other assets.

Note 9. Other receivables

Other receivables are comprised of the following (in millions). Receivables of the railroad, utilities and energy businesses at June 30, 2023 included approximately $1.6 billion related to Pilot.


	June 30, 2023			December 31, 2022
Insurance and other:
Insurance premiums receivable	$	19,700		$	18,395
Reinsurance recoverables		7,186			7,106
Trade receivables		15,160			14,510
Other		4,204			4,154
Allowances for credit losses		(660	)		(675	)
	$	45,590		$	43,490
Railroad, utilities and energy:
Trade receivables	$	5,228		$	4,182
Other		998			754
Allowances for credit losses		(159	)		(141	)
	$	6,067		$	4,795

Provisions for credit losses in the first six months with respect to these receivables were $278 million in 2023 and $211 million in 2022. Charge-offs, net of recoveries, in the first six months were $280 million in 2023 and $189 million in 2022.

Note 10. Inventories

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


	June 30, 2023		December 31, 2022
Raw materials	$	6,395	$	6,381
Work in process and other		3,532		3,464
Finished manufactured goods		5,545		5,739
Goods acquired for resale		9,823		9,782
	$	25,295	$	25,366

Inventories of our railroad, utilities and energy businesses are included in other assets and were approximately $4.3 billion at June 30, 2023, of which approximately $1.9 billion was attributable to Pilot.

Notes to Consolidated Financial Statements (Continued)

Note 11. Property, plant and equipment

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


	June 30, 2023			December 31, 2022
Land, buildings and improvements	$	14,695		$	14,761
Machinery and equipment		27,464			26,690
Furniture, fixtures and other		5,297			4,847
		47,456			46,298
Accumulated depreciation		(26,043	)		(25,185	)
	$	21,413		$	21,113

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.


	June 30, 2023			December 31, 2022
Railroad:
Land, track structure and other roadway	$	68,885		$	67,350
Locomotives, freight cars and other equipment		16,051			16,031
Construction in progress		2,009			1,743
		86,945			85,124
Accumulated depreciation		(18,750	)		(17,899	)
		68,195			67,225
Utilities and energy:
Utility generation, transmission and distribution systems		94,351			92,759
Interstate natural gas pipeline assets		18,605			18,328
Independent power plants and other assets		14,680			14,650
Land, buildings, improvements and other		8,300			—
Construction in progress		7,610			5,357
		143,546			131,094
Accumulated depreciation		(39,994	)		(38,051	)
		103,552			93,043
	$	171,747		$	160,268

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


	First Six Months
	2023		2022
Insurance and other	$	1,158	$	1,127
Railroad, utilities and energy		3,494		3,091
	$	4,652	$	4,218

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).


	June 30, 2023			December 31, 2022
Railcars	$	9,747		$	9,612
Aircraft		11,438			10,667
Other		5,347			5,212
		26,532			25,491
Accumulated depreciation		(10,504	)		(9,907	)
	$	16,028		$	15,584

Notes to Consolidated Financial Statements (Continued)

Note 12. Equipment held for lease (Continued)

Depreciation expense for equipment held for lease in the first six months was $623 million in 2023 and $593 million in 2022. Fixed and variable operating lease revenues for the second quarter and first six months of 2023 and 2022 are summarized below (in millions).


	Second Quarter				First Six Months
	2023		2022		2023		2022
Fixed lease revenue	$	1,478	$	1,264	$	2,895	$	2,452
Variable lease revenue		601		623		1,228		1,107
	$	2,079	$	1,887	$	4,123	$	3,559

Note 13. Goodwill and other intangible assets

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


	June 30, 2023			December 31, 2022
Balance at beginning of year	$	78,119		$	73,875
Business acquisitions		8,413			4,657
Other, including acquisition period remeasurements and foreign currency translation		(679	)		(413	)
Balance at end of period*	$	85,853		$	78,119

——————

*** Net of accumulated goodwill impairm**ents of $11.0 billion as of June 30, 2023 and December 31, 2022.

Other intangible assets are summarized below (in millions). Other intangible assets of the railroad, utilities and energy businesses are included in other assets. The net carrying value of such assets at June 30, 2023 included $6.6 billion related to Pilot.


	June 30, 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	$	28,276	$	7,558	$	20,718	$	27,765	$	7,174	$	20,591
Trademarks and trade names		5,626		838		4,788		5,603		822		4,781
Patents and technology		5,060		3,901		1,159		4,943		3,748		1,195
Other		4,810		1,656		3,154		4,150		1,530		2,620
	$	43,772	$	13,953	$	29,819	$	42,461	$	13,274	$	29,187
Railroad, utilities and energy:
Customer relationships and contracts	$	5,334	$	695	$	4,639	$	1,507	$	541	$	966
Trademarks and trade names		2,228		51		2,177		217		39		178
Other		1,093		62		1,031		190		42		148
	$	8,655	$	808	$	7,847	$	1,914	$	622	$	1,292

Intangible asset amortization expense in the first six months was $872 million in 2023 and $602 million in 2022. Intangible assets with indefinite lives were $20.5 billion as of June 30, 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

A reconciliation of the changes in unpaid losses and loss adjustment expenses (“claim liabilities”), excluding liabilities under retroactive reinsurance contracts (see Note 15), for each of the six-month periods ending June 30, 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		29,827			27,427
Prior accident years		(1,948	)		(887	)
Total		27,879			26,540
Paid losses and loss adjustment expenses:
Current accident year		(9,968	)		(10,085	)
Prior accident years		(16,664	)		(13,820	)
Total		(26,632	)		(23,905	)
Foreign currency effect		267			(568	)
Balances at June 30:
Net liabilities		103,961			85,771
Reinsurance recoverable on unpaid losses		5,069			2,789
Gross liabilities	$	109,030		$	88,560

Our 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. Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries.

In the first six months, we recorded net reductions of estimated ultimate liabilities for prior accident years of $1.9 billion in 2023 and $887 million in 2022, which produced corresponding reductions in incurred losses and loss adjustment expenses. These reductions, as percentages of the net liabilities at the beginning of each year, were 1.9% in 2023 and 1.1% in 2022.

We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses in the first six months by $1.1 billion in 2023 and $313 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 six months, estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced $883 million in 2023 and $574 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. 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 six-month periods ended June 30, 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		15			(14	)
Total		15			(14	)
Paid losses and loss adjustment expenses		(1,033	)		(1,008	)
Foreign currency effect		24			(157	)
Balances at June 30	$	34,421		$	36,676
Incurred losses and loss adjustment expenses above	$	15		$	(14	)
Deferred charge amortization and adjustments		416			426
Incurred losses and loss adjustment expenses included in the Consolidated Statements of Earnings	$	431		$	412

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. Claims payments may commence immediately after the contract date or, when applicable, after a contractual retention amount has been reached. 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 $9.5 billion at June 30, 2023 and $9.9 billion at December 31, 2022.

Note 16. Long-duration insurance contracts

We write periodic payment annuity and life and health insurance contracts, which are considered long-duration insurance contracts under GAAP. A summary of our life, annuity and health insurance benefits liabilities as of June 30, 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.


	June 30,
	2023		2022
Periodic payment annuities	$	10,820	$	11,826
Life and health		5,523		5,810
Other liabilities		3,292		3,316
	$	19,635	$	20,952

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 six 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		—			—			10			318
Effect of actual from expected results		2			3			(411	)		248
Change in benefits, net		(230	)		85			(1,346	)		(1,285	)
Interest accrual		266			268			852			807
Foreign currency effect		83			(109	)		100			(1,645	)
Ending balance at original discount rate		11,670			11,508			62,789			58,576
Effect of changes in discount rate assumptions		(850	)		318			(12,741	)		(8,191	)
Expected future policy benefits at June 30	$	10,820		$	11,826		$	50,048		$	50,385

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								18			324
Effect of actual from expected results								(251	)		90
Change in premiums, net								(1,222	)		(988	)
Interest accrual								745			701
Foreign currency effect								83			(1,550	)
Ending balance at original discount rate								55,908			51,854
Effect of changes in discount rate assumptions								(11,383	)		(7,279	)
Expected future net premiums at June 30							$	44,525		$	44,575

Liability for future policy benefits at June 30	$	10,820		$	11,826		$	5,523		$	5,810
Reinsurance recoverables		—			—			(1,549	)		(1,650	)
Liability for future policy benefits at June 30, net of reinsurance recoverables	$	10,820		$	11,826		$	3,974		$	4,160

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 June 30, 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	$	—	$	—	$	—	$	—	$	31,232	$	31,084
Life and health		108,089		107,647		65,599		64,832		103,012		102,305

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 six months of 2023 and 2022 were as follows (in millions).


	Gross Premiums				Interest Expense
	2023		2022		2023		2022
Periodic payment annuities	$	—	$	337	$	266	$	268
Life and health		1,644		1,793		107		106

Notes to Consolidated Financial Statements (Continued)

Note 16. Long-duration insurance contracts (Continued)

The weighted average discount rates, interest accretion rates and the average contract durations as of June 30, 2023 and 2022 for periodic payment annuities and life and health insurance are summarized below.


	June 30,
	2023			2022
Periodic payment annuities
Weighted average discount rate		5.3	%		4.7	%
Weighted average accretion rate		4.8	%		4.9	%
Weighted average duration	18 years			18 years
Life and health
Weighted average discount rate		5.0	%		4.5	%
Weighted average accretion rate		3.3	%		3.3	%
Weighted average duration	14 years			14 years

We also reinsure closed blocks of guaranteed minimum death and living benefits associated with variable annuity products, referred to as market risk benefits. These liabilities are included in other policyholder liabilities and are measured at estimated fair value under ASU 2018-12. Such liabilities were approximately $1.0 billion as of June 30, 2023 and $1.25 billion as of December 31, 2022. During the first six months of 2023, we reduced liability estimates by $194 million, for the effects of changes in securities markets, interest rates and other inputs used to estimate liabilities. Cash settlements during the first six months of 2023 were relatively 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 June 30, 2023.


	Weighted Average Interest Rate			June 30, 2023		December 31, 2022
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2025-2047		3.5	%	$	3,735	$	6,231
Euro denominated due 2024-2041		1.1	%		6,069		7,344
Japanese Yen denominated due 2024-2060		0.7	%		7,850		7,818
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2027-2052		3.6	%		14,460		14,458
Great Britain Pound denominated due 2039-2059		2.5	%		2,186		2,078
Euro denominated due 2030-2034		1.8	%		1,358		1,332
Other subsidiary borrowings due 2023-2051		4.6	%		4,908		5,967
Subsidiary short-term borrowings		6.6	%		823		1,310
				$	41,389	$	46,538

Notes to Consolidated Financial Statements (Continued)

Note 17. Notes payable and other borrowings (Continued)

In the first six months of 2023, Berkshire repaid approximately $4.3 billion of maturing senior notes. In April 2023, Berkshire issued ¥164.4 billion (approximately $1.2 billion) of 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. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. Berkshire also guarantees certain debt of other subsidiaries, aggregating approximately $2.7 billion at June 30, 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 ¥1,137 billion par at June 30, 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 gains of $555 million in the second quarter and $529 million in the first six months of 2023 as compared to pre-tax gains of $1.4 billion in the second quarter and $2.1 billion in the first six months 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 June 30, 2023.


	Weighted Average Interest Rate			June 30, 2023		December 31, 2022
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2053		4.4	%	$	13,599	$	13,996
Subsidiary and other debt due 2023-2064		4.3	%		38,021		37,639
Short-term borrowings		5.5	%		2,243		1,119
Pilot Travel Centers (“Pilot”) and subsidiaries due 2023-2028		7.0	%		5,789		—
Burlington Northern Santa Fe (“BNSF”) and subsidiaries due 2023-2097		4.6	%		24,306		23,452
				$	83,958	$	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. In May 2023, a BHE subsidiary issued $1.2 billion of 5.5% first mortgage bonds due in 2054. During the first six months of 2023, BHE and its subsidiaries repaid approximately $1.4 billion of term debt.

Pilot’s borrowings primarily represent secured syndicated loans. BNSF’s borrowings are primarily senior unsecured debentures. In June 2023, BNSF issued $1.6 billion of 5.2% debentures due in 2054. During the first six months of 2023, BNSF repaid approximately $700 million of term debt. As of June 30, 2023, BHE, BNSF and Pilot and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BHE, BNSF, 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 $12.0 billion at June 30, 2023, which included approximately $8.6 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 June 30, 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)
June 30, 2023
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	9,052	$	9,052	$	9,017	$	35	$	—
Foreign governments		11,481		11,481		11,170		311		—
Corporate bonds		1,554		1,554		—		908		646
Other		266		266		—		266		—
Investments in equity securities		353,409		353,409		342,596		11		10,802
Investments in Kraft Heinz & Occidental common stock		27,060		24,732		24,732		—		—
Loans and finance receivables		23,530		24,020		—		1,097		22,923
Derivative contract assets (1)		355		355		74		256		25
Derivative contract liabilities (1)		309		309		48		73		188
Notes payable and other borrowings:
Insurance and other		41,389		36,100		—		36,071		29
Railroad, utilities and energy		83,958		77,040		—		77,040		—

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 six months ended June 30, 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 June 30
Investments in equity securities:
2023	$	12,169	$	(86	)	$	(1,286	)	$	—	$	10,797
2022		11,480		455			—			—		11,935

Quantitative information as of June 30, 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	$	8,994	Discounted cash flow	Expected duration	6 years
				Discounts for liquidity and subordination	372 bps
Common stock warrants		1,803	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 six months 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		(9,871	)		—			(9,871	)		14,806,500		—			14,806,500
Treasury stock acquired		—			(6,145	)		(6,145	)		—		(9,071,308	)		(9,071,308	)
Balances at June 30, 2023		641,579			(66,031	)		575,548			1,524,775,852		(216,786,584	)		1,307,989,268

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 1,447,541 shares outstanding as of June 30, 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 20.3% in the second quarter and 20.2% in the first six months of 2023 compared to 21.8% in the second quarter and 22.4% in the first six months 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, and enacted changes thereto.

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 six months ending June 30, 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 six months 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		174			592			71			41			(66	)		812
Balance at end of period	$	(13	)	$	(5,550	)	$	1,612		$	(511	)	$	222		$	(4,240	)

First six months 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		(352	)		(1,969	)		4,566			27			148			2,420
Balance at end of period	$	17		$	(6,061	)	$	470		$	(320	)	$	191		$	(5,703	)

Note 22. Supplemental cash flow information

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


	First Six Months
	2023		2022
Cash paid during the period for:
Income taxes	$	2,962	$	1,951
Interest:
Insurance and other		725		567
Railroad, utilities and energy		1,857		1,564
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions		10,815		21

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. Generally, 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.

PacifiCorp, a wholly owned subsidiary of Berkshire’s 92% owned subsidiary, Berkshire Hathaway Energy Company (“BHE”), operates as a regulated electric utility in Oregon and other Western states. In September 2020, a severe weather event resulting in high winds, low humidity and warm temperatures contributed to several major wildfires (the “2020 Wildfires”), which resulted in real and personal property and natural resource damage, personal injuries and loss of life and widespread power outages in Oregon and Northern California. The wildfires spread across certain parts of PacifiCorp’s service territory and surrounding areas across multiple counties in Oregon and California, including Siskiyou County, California; Jackson County, Oregon; Douglas County, Oregon; Marion County, Oregon; Lincoln County, Oregon; and Klamath County, Oregon, burning over 500,000 acres in aggregate. Third-party reports for these wildfires indicate over 2,000 structures destroyed, including residences; several structures damaged; multiple individuals injured; and several fatalities.

Notes to Consolidated Financial Statements (Continued)

Note 23. Contingencies and commitments (Continued)

Investigations into the cause and origin of each wildfire are complex and ongoing and being conducted by various entities, including the U.S. Forest Service, the California Public Utilities Commission, the Oregon Department of Forestry, the Oregon Department of Justice, PacifiCorp and various experts engaged by PacifiCorp.

Numerous lawsuits on behalf of plaintiffs related to the 2020 Wildfires have been filed in Oregon and California, including a class action complaint against PacifiCorp that was filed in 2020, captioned Jeanyne James et al. v. PacifiCorp et al., in Multnomah County Circuit Court, Oregon (the “James case”). Amounts sought in the lawsuits, complaints and demands filed in Oregon total over $7 billion, excluding any doubling or trebling of damages included in the complaints. Generally, the complaints filed in California do not specify damages sought and are not included in this amount. Final determinations of liability will only be made following the completion of comprehensive investigations, litigation and similar processes.

Several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to those made in the aforementioned lawsuits. Additionally, certain governmental agencies have informed PacifiCorp that they are contemplating filing actions in connection with certain of the Oregon 2020 Wildfires.

In June 2023, a jury issued a verdict for the 17 named plaintiffs in the James case. The plaintiffs seek damages for economic losses, non-economic losses, including mental suffering, emotional distress, personal injury and loss of life, punitive damages, other damages and attorneys’ fees. PacifiCorp intends to vigorously appeal the jury’s findings and damage awards, including whether the case can proceed as a class action. The appeals process and further actions could take several years.

Based on the facts and circumstances available to us as of the date of this filing, which includes the status of the verdict in the James case with respect to the 17 named plaintiffs, other litigation and recent settlements, PacifiCorp has accrued cumulative estimated pre-tax probable losses associated with the 2020 Wildfires of $1,018 million through June 30, 2023, or $608 million net of probable insurance recoveries. PacifiCorp’s cumulative accrual includes estimates of probable losses for fire suppression costs, real and personal property damages, natural resource damages for certain areas and non-economic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is reasonably able to estimate at this time. For certain aspects of the 2020 Wildfires for which loss is considered probable, information necessary to reasonably estimate the potential losses, such as those related to certain areas of natural resource damages, is not currently available.

It is reasonably possible PacifiCorp will incur significant additional losses beyond the amounts currently accrued; however, we are currently unable to reasonably estimate the range of possible additional losses that could be incurred due to the number of properties and parties involved, including claimants in the class to the James case, the variation in those types of properties and lack of available details and the ultimate outcome of legal actions.

On July 10, 2023, BHE announced that it had executed an agreement to acquire an additional 50% interest in Cove Point LNG, LP, which would increase its interest to 75%. The transaction is valued at $3.3 billion and is subject to applicable regulatory approvals.

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 second quarter and first six months of 2023 and 2022 (in millions). Revenues from Pilot in 2023 are for the five months ending June 30, 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 June 30, 2023
Manufactured products:
Industrial and commercial products	$	7,221	$	—	$	54	$	—	$	—	$	—	$	—	$	7,275
Building products		5,178		—		—		—		—		—		—		5,178
Consumer products		4,343		—		—		—		—		—		—		4,343
Grocery and convenience store distribution		—		7,535		—		—		—		—		—		7,535
Food and beverage distribution		—		4,902		—		—		—		—		—		4,902
Auto sales		—		—		2,789		—		—		—		—		2,789
Other retail and wholesale distribution		814		—		4,138		—		—		681		—		5,633
Service		347		213		1,390		5,791		1,217		88		—		9,046
Electricity, natural gas and fuel		—		—		—		—		4,779		13,903		—		18,682
Total		17,903		12,650		8,371		5,791		5,996		14,672		—		65,383
Other revenues		1,171		47		1,738		17		354		61		23,732		27,120
	$	19,074	$	12,697	$	10,109	$	5,808	$	6,350	$	14,733	$	23,732	$	92,503

Six months ending June 30, 2023
Manufactured products:
Industrial and commercial products	$	14,450	$	—	$	119	$	—	$	—	$	—	$	—	$	14,569
Building products		9,936		—		—		—		—		—		—		9,936
Consumer products		8,378		—		—		—		—		—		—		8,378
Grocery and convenience store distribution		—		15,328		—		—		—		—		—		15,328
Food and beverage distribution		—		9,664		—		—		—		—		—		9,664
Auto sales		—		—		5,354		—		—		—		—		5,354
Other retail and wholesale distribution		1,613		—		8,368		—		—		1,103		—		11,084
Service		701		497		2,716		11,776		2,028		109		—		17,827
Electricity, natural gas and fuel		—		—		—		—		10,070		22,918		—		32,988
Total		35,078		25,489		16,557		11,776		12,098		24,130		—		125,128
Other revenues		2,261		89		3,454		33		691		99		46,141		52,768
	$	37,339	$	25,578	$	20,011	$	11,809	$	12,789	$	24,229	$	46,141	$	177,896

Notes to Consolidated Financial Statements (Continued)

Note 24. Revenues from contracts with customers (Continued)


	Manufacturing		McLane		Service and Retailing		BNSF		Berkshire Hathaway Energy		Pilot		Insurance, Corporate and other		Total
Three months ending June 30, 2022
Manufactured products:
Industrial and commercial products	$	6,142	$	—	$	48	$	—	$	—	$	—	$	—	$	6,190
Building products		5,970		—		—		—		—		—		—		5,970
Consumer products		5,509		—		—		—		—		—		—		5,509
Grocery and convenience store distribution		—		7,979		—		—		—		—		—		7,979
Food and beverage distribution		—		5,002		—		—		—		—		—		5,002
Auto sales		—		—		2,675		—		—		—		—		2,675
Other retail and wholesale distribution		818		—		4,265		—		—		—		—		5,083
Service		302		248		1,078		6,596		1,561		—		—		9,785
Electricity and natural gas		—		—		—		—		4,740		—		—		4,740
Total		18,741		13,229		8,066		6,596		6,301		—		—		52,933
Other revenues		995		33		1,527		16		239		—		20,458		23,268
	$	19,736	$	13,262	$	9,593	$	6,612	$	6,540	$	—	$	20,458	$	76,201

Six months ending June 30, 2022
Manufactured products:
Industrial and commercial products	$	12,074	$	—	$	97	$	—	$	—	$	—	$	—	$	12,171
Building products		11,389		—		—		—		—		—		—		11,389
Consumer products		10,602		—		—		—		—		—		—		10,602
Grocery and convenience store distribution		—		15,685		—		—		—		—		—		15,685
Food and beverage distribution		—		9,564		—		—		—		—		—		9,564
Auto sales		—		—		5,202		—		—		—		—		5,202
Other retail and wholesale distribution		1,540		—		8,440		—		—		—		—		9,980
Service		566		462		2,084		12,527		2,673		—		—		18,312
Electricity and natural gas		—		—		—		—		9,454		—		—		9,454
Total		36,171		25,711		15,823		12,527		12,127		—		—		102,359
Other revenues		1,950		65		2,861		29		428		—		39,352		44,685
	$	38,121	$	25,776	$	18,684	$	12,556	$	12,555	$	—	$	39,352	$	147,044

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of June 30, 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	$	3,390	$	20,764	$	24,154
Other sales and service contracts		3,377		5,258		8,635

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 Pilot 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 five months ending June 30, 2023. Previously, our earnings from Pilot were determined under the equity method and are included in earnings from equity method investments. Revenues and earnings (loss) before income taxes by segment for the second quarter and first six months of 2023 and 2022 were as follows (in millions).


	Second Quarter					First Six Months
	2023			2022		2023			2022
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO	$	9,714		$	9,807	$	19,340		$	19,361
Berkshire Hathaway Primary Group		4,233			3,313		8,194			6,431
Berkshire Hathaway Reinsurance Group		6,614			4,961		12,823			9,777
Investment income		2,918			2,284		5,310			3,648
Total insurance		23,479			20,365		45,667			39,217
BNSF		5,828			6,640		11,847			12,608
Berkshire Hathaway Energy (“BHE”)		6,362			6,545		12,813			12,565
Pilot Travel Centers (“Pilot”)		14,754			—		24,262			—
Manufacturing		19,102			19,772		37,391			38,193
McLane		12,883			13,262		25,942			25,777
Service and retailing		10,141			9,617		20,072			18,732
		92,549			76,201		177,994			147,092
Reconciliation of segments to consolidated amount
Corporate, eliminations and other		(46	)		—		(98	)		(48	)
	$	92,503		$	76,201	$	177,896		$	147,044


	Second Quarter						First Six Months
	2023			2022			2023			2022
Earnings (Loss) Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO	$	514		$	(487	)	$	1,217		$	(665	)
Berkshire Hathaway Primary Group		272			242			540			334
Berkshire Hathaway Reinsurance Group		827			1,141			1,058			1,442
Investment income		2,912			2,283			5,297			3,644
Total insurance		4,525			3,179			8,112			4,755
BNSF		1,615			2,151			3,264			3,960
BHE		624			591			847			1,304
Pilot		186			—			322			—
Manufacturing		3,103			3,028			5,714			5,852
McLane		129			76			242			158
Service and retailing		1,262			1,199			2,483			2,334
		11,444			10,224			20,984			18,363
Reconciliation of segments to consolidated amount
Investment and derivative gains (losses)		33,061			(66,919	)		67,819			(68,897	)
Interest expense, not allocated to segments		(103	)		(100	)		(217	)		(204	)
Equity method investments		511			204			1,199			543
Corporate, eliminations and other		522			1,283			402			1,844
	$	45,435		$	(55,308	)	$	90,187		$	(48,351	)

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

Results of Operations

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


	Second Quarter					First Six Months
	2023		2022			2023		2022
Insurance – underwriting	$	1,247	$	715		$	2,158	$	882
Insurance – investment income		2,369		1,906			4,338		3,076
BNSF		1,264		1,664			2,511		3,035
Berkshire Hathaway Energy (“BHE”)		785		789			1,201		1,564
Pilot Travel Centers (“Pilot”)		114		—			197		—
Manufacturing, service and retailing		3,389		3,249			6,371		6,274
Non-controlled businesses***		535		182			1,103		464
Investment and derivative contract gains (losses)		25,869		(53,038	)		53,308		(54,618	)
Other		340		912			229		1,282
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	35,912	$	(43,621	)	$	71,416	$	(38,041	)

——————

** 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, our operating businesses have been impacted by government and private sector actions taken to mitigate the adverse economic effects of the COVID-19 virus and its variants as well as by the development of global geopolitical conflicts, supply chain disruptions and government actions to slow inflation. We cannot reliably predict the future economic effects of these events on our businesses.

Insurance underwriting generated earnings of $1.25 billion in the second quarter and $2.16 billion in the first six months of 2023 versus $715 million in the second quarter and $882 million in the first six months of 2022. Earnings in 2022 reflect increases of $134 million in the second quarter and $254 million in the first six months from the previously reported amounts attributable to the adoption of ASU 2018-12 on January 1, 2023. Earnings from insurance investment income increased $463 million in the second quarter and $1.3 billion in the first six months of 2023 compared to 2022. The increases were primarily due to higher short-term interest rates, partly offset by lower dividend income.

Earnings of BNSF declined 24.0% in the second quarter and 17.3% in the first six months of 2023 compared to 2022. The decreases were primarily attributable to lower overall freight volumes and higher non-fuel operating costs, offset by lower fuel costs. After-tax earnings of BHE were essentially unchanged in the second quarter and declined 23.2% in the first six months of 2023 compared to 2022. The earnings decline in the first six months 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 earnings from non-controlled businesses in the preceding table.

Earnings from our manufacturing, service and retailing businesses increased 4.3% in the second quarter and 1.5% in the first six months of 2023 versus 2022. While earnings for certain industrial products manufacturers and services businesses improved versus 2022, earnings of several of our building products, consumer products and retailing businesses deteriorated.

Investment and derivative contract gains (losses) in each period 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 gains of $465 million in the second quarter and $448 million in the first six months of 2023 and $1.1 billion in the second quarter and $1.6 billion in the first six months of 2022. These gains 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 the economic 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 catastrophe events in the first six months of 2023 were a cyclone and floods in New Zealand and floods in Australia in 2022. Each of these events occurred in the first quarter of the year.

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 June 30, 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 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. Alleghany operates a property and casualty insurance business through its subsidiaries, RSUI Group Inc. and CapSpecialty, Inc. (“RSUI and CapSpecialty” or “Alleghany Insurance”), and a reinsurance business through Transatlantic Reinsurance Company and affiliates (“TransRe Group”). Underwriting results of Alleghany Insurance are included in BH Primary and underwriting results of TransRe Group are included in BHRG.

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 businesses. Time-value-of-money is an important element in establishing prices for policies written by these businesses. 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 second quarter and first six months of 2022 increased $174 million and $319 million, respectively, from pre-tax earnings previously reported due to the adoption of ASU 2018-12.


	Second Quarter						First Six Months
	2023			2022			2023			2022
Pre-tax underwriting earnings (loss):
GEICO	$	514		$	(487	)	$	1,217		$	(665	)
Berkshire Hathaway Primary Group		272			242			540			334
Berkshire Hathaway Reinsurance Group		827			1,141			1,058			1,442
Pre-tax underwriting earnings		1,613			896			2,815			1,111
Income taxes and noncontrolling interests		366			181			657			229
Net underwriting earnings	$	1,247		$	715		$	2,158		$	882
Effective income tax rate		22.6	%		20.1	%		23.4	%		20.6	%

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).


	Second Quarter									First Six Months
	2023				2022					2023				2022
	Amount		%		Amount			%		Amount		%		Amount			%
Premiums written	$	9,449			$	9,416				$	19,509			$	19,681
Premiums earned	$	9,714		100.0	$	9,807			100.0	$	19,340		100.0	$	19,361			100.0
Losses and loss adjustment expenses		8,192		84.3		9,105			92.8		16,184		83.7		17,649			91.2
Underwriting expenses		1,008		10.4		1,189			12.2		1,939		10.0		2,377			12.2
Total losses and expenses		9,200		94.7		10,294			105.0		18,123		93.7		20,026			103.4
Pre-tax underwriting earnings (loss)	$	514			$	(487	)			$	1,217			$	(665	)

GEICO’s pre-tax underwriting earnings in the first six months of 2023 reflected higher average premiums per auto policy, a reduction in advertising costs, as well as reductions in prior accident years’ claims estimates. Premiums written and earned were substantially unchanged in the second quarter and first six months of 2023 compared to 2022. Premiums in 2023 reflected rate increases during the past 12 months that produced higher average premiums per auto policy (16.3%), as well as a 2.7 million decrease (14.4%) in policies-in-force over that period. GEICO significantly reduced advertising in 2022 and 2023, which contributed to the reduction in policies-in-force.

Losses and loss adjustment expenses declined $913 million (10.0%) in the second quarter and $1.5 billion (8.3%) in the first six months of 2023 compared to 2022. GEICO’s loss ratio (losses and loss adjustment expenses to premiums earned) was 84.3% in the second quarter and 83.7% in the first six months of 2023, decreases of 8.5 percentage points and 7.5 percentage points, respectively, compared to the same periods in 2022. These decreases reflected the impact of higher average premiums per auto policy, additional reductions in prior accident years’ claims estimates, the reduction in policies-in-force and lower claims frequencies, partially offset by increases in average claims severities.

Losses and loss adjustment expenses in the first six months of 2023 included reductions in the ultimate loss estimates for prior accident years’ claims of $888 million compared to $207 million in 2022. The reduction in 2023 reflected decreased estimates across several coverages, while the reductions in 2022 were primarily attributable to bodily and personal injury coverages, partially offset by increases for collision and property damage coverages.

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

Underwriting expenses declined $181 million (15.2%) in the second quarter and $438 million (18.4%) in the first six months of 2023 compared to 2022. GEICO’s expense ratio (underwriting expense to premiums earned) was 10.4% in the second quarter and 10.0% in the first six months of 2023, decreases of 1.8 percentage points and 2.2 percentage points, respectively, compared to the same periods 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 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 Insurance beginning October 19, 2022.

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