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

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

Insurance—Underwriting

Berkshire Hathaway Reinsurance Group

Property/casualty

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

Second QuarterFirst Six Months
2024202320242023
Amount%Amount%Amount%Amount%
Premiums written$5,547$5,866$12,002$12,134
Premiums earned$5,608100.0$5,325100.0$11,043100.0$10,474100.0
Losses and loss adjustment expenses3,12455.72,79352.56,11755.46,18059.0
Underwriting expenses1,46226.11,40826.42,89626.22,78026.5
Total losses and expenses4,58681.84,20178.99,01381.68,96085.5
Pre-tax underwriting earnings$1,022$1,124$2,030$1,514

Premiums written declined 5.4% in the second quarter and 1.1% in the first six months of 2024 compared to 2023, primarily due to reductions of property volumes. We generally do not retrocede the risks we assume. Our periodic underwriting earnings may be subject to considerable volatility from the timing and magnitude of significant catastrophe loss events. Premiums earned increased 5.3% in the second quarter and 5.4% in the first six months of 2024 compared to 2023.

Losses and loss adjustment expenses increased $331 million (11.9%) in the second quarter and decreased $63 million (1.0%) in the first six months of 2024 versus 2023. The loss ratio increased 3.2 percentage points in the second quarter and declined 3.6 percentage points in the first six months of 2024 compared to 2023. We experienced no significant catastrophe loss events in the first six months of 2024. Catastrophe losses were approximately $130 million in the second quarter and $530 million in the first six months of 2023. Reductions in liabilities for losses and loss adjustment expenses attributable to prior accident years were $734 million in the first six months of 2024 compared to $883 million in 2023.

Underwriting expenses increased $54 million (3.8%) in the second quarter and $116 million (4.2%) in the first six months of 2024 compared to 2023. Underwriting expenses included pre-tax foreign currency exchange gains from the remeasurement of certain non-U.S. Dollar denominated liabilities of $25 million in the second quarter and $51 million in the first six months of 2024 compared to losses of $118 million in the second quarter and $192 million in the first six months of 2023. Before the foreign currency exchange gains and losses, underwriting expenses increased $197 million in the second quarter and $359 million in the first six months of 2024 compared to 2023, primarily due to the increases in premiums earned and changes in property business mix.

Life/health

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

Second QuarterFirst Six Months
2024202320242023
Amount%Amount%Amount%Amount%
Premiums written$1,226$1,292$2,457$2,353
Premiums earned$1,220100.0$1,289100.0$2,449100.0$2,349100.0
Life and health benefits84269.01,02079.11,67568.41,69872.3
Underwriting expenses30525.022217.359324.246719.9
Total benefits and expenses1,14794.01,24296.42,26892.62,16592.2
Pre-tax underwriting earnings$73$47$181$184

Premiums earned declined $69 million (5.4%) in the second quarter and increased $100 million (4.3%) in the first six months of 2024 compared to 2023. The year-to-date increase was primarily due to the commutation of several U.S. life contracts in the first quarter of 2023, which reduced premiums earned by $161 million and life benefits and underwriting expenses by $302 million in 2023. Premiums earned in each period of 2024 also reflected lower non-U.S. life business compared to 2023. Pre-tax underwriting earnings increased $26 million in the second quarter and were relatively unchanged in the first six months of 2024 compared to 2023. Earnings included gains from life contract commutations in the first six months of $50 million in 2024 and $137 million in 2023.

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

Insurance—Underwriting

Berkshire Hathaway Reinsurance Group

Retroactive reinsurance

Pre-tax underwriting losses from retroactive reinsurance derive from deferred charge amortization, changes in the estimated timing and amounts of future claim payments and foreign currency exchange gains and losses attributable to non-U.S. Dollar denominated contracts. Pre-tax underwriting losses before foreign currency effects were $135 million in the second quarter and $327 million in the first six months of 2024 compared to $245 million in the second quarter and $434 million in the first six months of 2023. The declines in underwriting losses were primarily due to net reductions in estimated ultimate liabilities of $119 million in the second quarter of 2024.

Unpaid losses assumed under retroactive reinsurance contracts were $33.5 billion at June 30, 2024, a decline of $1.2 billion since December 31, 2023. Unamortized deferred charges on retroactive reinsurance contracts were $9.1 billion at June 30, 2024, a decline of $431 million since December 31, 2023. Deferred charge amortization is included in underwriting earnings over the expected remaining claims settlement periods.

Periodic payment annuity

Periodic payment annuity business is price and demand-sensitive and the supply of available business is affected by the timing of underlying legal claim settlements. In 2023 and through the first six months of 2024, prices for new business were at unacceptable levels and we wrote no new business in either period.

Pre-tax underwriting losses from periodic payment annuity contracts in each period were attributable to the accretion of time-value discounted liabilities, which included liabilities for contracts without life contingencies, and to foreign currency exchange gains and losses on non-U.S. Dollar denominated contracts. Pre-tax underwriting losses before foreign currency exchange effects in the first six months were $299 million in 2024 and $292 million in 2023. Discounted periodic payment annuity liabilities were $14.4 billion at June 30, 2024 and included liabilities of $4.0 billion for contracts without life contingencies, as well as the effects of the quarterly discount rate changes on contracts with life-contingent liabilities recorded in accumulated other comprehensive income.

Variable annuity

The runoff of our variable annuity guarantee reinsurance contracts produced pre-tax earnings of $11 million in the second quarter and $105 million in the first six months of 2024 and $130 million in the second quarter and $193 million in the first six months of 2023. Earnings are affected by changes in securities markets, interest rates and foreign currency exchange rates. These contracts have been in run-off for many years.

Insurance—Investment Income

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

Second QuarterFirst Six MonthsPercentage Change
2024202320242023Second QuarterFirst Six Months
Dividend income$1,469$1,522$2,690$2,766(3.5)%(2.7)%
Interest and other investment income2,5991,3904,5302,53187.079.0
Pre-tax net investment income4,0682,9127,2205,29739.736.3
Income taxes and noncontrolling interests7485431,302959
Net investment income$3,320$2,369$5,918$4,338
Effective income tax rate18.4%18.6%18.0%18.1%

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

Insurance—Investment Income

Dividend income declined $53 million (3.5%) in the second quarter and $76 million (2.7%) in the first six months of 2024 compared to 2023. The reductions reflected the impact of changes in our equity security holdings, partially offset by higher dividend rates on certain of our holdings. Dividend income also varies from period to period due to the frequency and timing of dividends from certain investees.

Interest and other investment income increased $1.2 billion (87.0%) in the second quarter and $2.0 billion (79.0%) in the first six months of 2024 over 2023. The increases were attributable to an increase in short-term investments in U.S. Treasury Bills and higher interest rates. We continue to believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments.

Invested assets of our insurance businesses derive from shareholder capital and net liabilities assumed under insurance and reinsurance contracts or “float.” The major components of float are unpaid losses and loss adjustment expenses, liabilities under retroactive reinsurance contracts, life, annuity and health benefit liabilities, unearned premiums and other liabilities due to policyholders, which are reduced by insurance premiums receivable, reinsurance receivables, deferred charges on retroactive reinsurance contracts and deferred policy acquisition costs. The effects of discount rate changes recorded in accumulated other comprehensive income for long-duration insurance contracts are excluded from float, as such amounts are not included in underwriting earnings. Float was approximately $169 billion at June 30, 2024 and December 31, 2023.

A summary of cash and investments held in our insurance businesses as of June 30, 2024 and December 31, 2023 follows (in millions).

June 30, 2024December 31, 2023
Cash, cash equivalents and U.S. Treasury Bills$224,239$121,845
Equity securities276,139345,653
Fixed maturity securities16,64323,617
Other1,0471,188
$518,068$492,303

Fixed maturity securities as of June 30, 2024 were as follows (in millions).

Amortized CostUnrealized Gains (Losses)Carrying Value
U.S. Treasury, U.S. government corporations and agencies$4,670$(10)$4,660
Foreign governments10,414(11)10,403
Corporate and other1,3612191,580
$16,445$198$16,643

U.S. government obligations are rated AA+ or Aaa by the major rating agencies. Approximately 95% of our foreign government obligations were rated AA or higher by at least one of the major rating agencies. Foreign government securities include obligations issued or unconditionally guaranteed by national or provincial government entities.

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

BNSF

Burlington Northern Santa Fe, LLC (“BNSF”) operates one of the largest railroad systems in North America, with over 32,500 route miles of track in 28 states. BNSF also operates in three Canadian provinces. BNSF classifies its major business groups by type of product shipped including consumer products, industrial products, agricultural products and coal. A summary of BNSF’s earnings follows (dollars in millions).

Second QuarterFirst Six Months
2024202320242023
Railroad operating revenues$5,717$5,704$11,361$11,592
Railroad operating expenses:
Compensation and benefits1,3181,3782,7252,691
Fuel8228331,6761,797
Purchased services4944899861,000
Depreciation and amortization6656501,3251,295
Equipment rents, materials and other5985401,1061,133
Total3,8973,8907,8187,916
Railroad operating earnings1,8201,8143,5433,676
Interest expense(267)(256)(532)(513)
Other revenues (expenses), net6957130101
Pre-tax earnings1,6221,6153,1413,264
Income taxes395351771753
Net earnings$1,227$1,264$2,370$2,511
Effective income tax rate24.4%21.7%24.5%23.1%

A summary of BNSF’s railroad freight volumes by business group (cars/units in thousands) follows.

Cars/UnitsPercentage Change
Second QuarterFirst Six MonthsSecondFirst Six
2024202320242023QuarterMonths
Consumer products1,3301,1572,6022,22315.0%17.0%
Industrial products401407789796(1.5)(0.9)
Agricultural products30827861957810.87.1
Coal256360549729(28.9)(24.7)
2,2952,2024,5594,3264.25.4

Railroad operating revenues were relatively unchanged in the second quarter and decreased 2.0% in the first six months of 2024 compared to 2023. Average revenue per car/unit declined 3.7% in the second quarter and 6.8% in the first six months of 2024 compared to 2023, resulting from lower fuel surcharge revenue and business mix changes. Car/unit volumes increased 4.2% in the second quarter and 5.4% in the first six months of 2024 compared to 2023. Pre-tax earnings increased 0.4% in the second quarter and decreased 3.8% in the first six months of 2024 compared to 2023. Operating earnings in the second quarter and first six months of 2024 were negatively affected by litigation accruals and otherwise benefited from improved productivity and lower operating costs.

Operating revenues from consumer products were $2.1 billion in the second quarter and $4.1 billion in the first six months of 2024, increases of 12.0% and 8.8%, respectively, from 2023. The revenue increases were attributable to higher volumes of 15.0% in the second quarter and 17.0% in the first six months of 2024 compared to 2023, partially offset by lower average revenue per car/unit. The volume increases were primarily due to higher intermodal shipments from West Coast imports and volumes from a new intermodal customer.

Operating revenues from industrial products were $1.4 billion in the second quarter and $2.8 billion in the first six months of 2024, decreases of 0.4% and 0.9%, respectively, from 2023. The second quarter revenue decline was attributable to reduced volumes of 1.5%, partially offset by higher average revenue per car/unit. The revenue decline in the first six months was primarily due to slightly lower revenue per car/unit and a 0.9% reduction in volumes. The volume declines in each period were primarily due to lower aggregates, taconite, minerals and waste shipments, partially offset by higher volumes in petroleum products and plastics.

Operating revenues from agricultural products were $1.4 billion in the second quarter and $2.9 billion in the first six months of 2024, increases of 10.1% and 3.1%, respectively, compared to 2023. The revenue increases were attributable to higher volumes of 10.8% in the second quarter and 7.1% in the first six months of 2024 compared to 2023, partially offset by lower average revenue per car/unit. The volume increases were primarily due to higher grain exports, renewable fuels and fertilizer shipments, partially offset by lower domestic grain volumes.

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

BNSF

Operating revenues from coal were $608 million in the second quarter and $1.4 billion in the first six months of 2024, declines of 35.0% and 30.1%, respectively, from 2023. The revenue declines were attributable to reduced volumes of 28.9% in the second quarter and 24.7% in the first six months of 2024 compared to 2023 and lower average revenue per car/unit. The volume decreases were primarily attributable to lower natural gas prices, which displaces coal as a fuel used by utilities.

Railroad operating expenses were $3.9 billion in the second quarter and $7.8 billion in the first six months of 2024, a slight increase (0.2%) and a decrease of $98 million (1.2%), respectively, compared to 2023. Compensation and benefits expenses decreased $60 million (4.4%) in the second quarter and increased $34 million (1.3%) in the first six months of 2024 compared to 2023. The decrease in the second quarter was primarily due to increased employee productivity, partially offset by wage inflation. The increase in the first six months of 2024 was primarily due to the increases in volumes and wage inflation, partially offset by increased employee productivity. Fuel expenses declined $11 million (1.3%) in the second quarter and $121 million (6.7%) in the first six months of 2024 compared to 2023, reflecting lower average fuel prices, partially offset by higher volumes. Equipment rents, materials and other expenses increased $58 million (10.7%) in the second quarter and decreased $27 million (2.4%) in the first six months of 2024 compared to 2023. Other expenses in the second quarter and first six months of 2024 included litigation costs related to the recent judgment in the ongoing legal case with the Swinomish Tribe, which BNSF has appealed. Otherwise, equipment rents, materials and other expenses in the 2024 periods declined compared to 2023, primarily due to cost reductions across various spend categories and lower property taxes.

BHE

We currently own 92% of Berkshire Hathaway Energy Company (“BHE”), which operates a global energy business. BHE’s domestic regulated utility interests include PacifiCorp, MidAmerican Energy Company (“MEC”) and NV Energy. BHE’s natural gas pipelines consist of five domestic regulated interstate natural gas pipeline systems and a 75% interest in a liquefied natural gas export, import and storage facility. Other energy businesses include subsidiaries that operate two regulated electricity distribution businesses in Great Britain (“Northern Powergrid”), a regulated electricity transmission-only business in Alberta, Canada, a diversified portfolio of mostly renewable independent power projects and investments and an unregulated retail energy services company. BHE also operates a residential real estate brokerage business and a large network of real estate brokerage franchises in the United States.

The rates our regulated businesses charge customers for energy and services are largely based on the costs of business operations, including income taxes and a return on capital, and are subject to regulatory approval. To the extent such costs are not allowed in the approved rates, operating results will be adversely affected. A summary of BHE’s net earnings follows (dollars in millions).

Second QuarterFirst Six Months
2024202320242023
Revenues:
Energy operating revenue$5,115$4,933$10,360$10,404
Real estate operating revenue1,2891,2962,1552,171
Other income88133254238
Total revenue6,4926,36212,76912,813
Costs and expenses:
Energy cost of sales1,5271,5663,1973,521
Energy operating expenses2,7742,3575,2185,147
Real estate operating costs and expenses1,2401,2502,3262,170
Interest expense6255651,2701,128
Total costs and expenses6,1665,73812,01111,966
Pre-tax earnings326624758847
Income tax benefit*(434)(379)(827)(742)
Net earnings after income taxes7601,0031,5851,589
Noncontrolling interests of BHE subsidiaries3913075244
Net earnings attributable to BHE7218731,5101,345
Noncontrolling interests and preferred stock dividends6688138144
Net earnings attributable to Berkshire Hathaway shareholders$655$785$1,372$1,201
Effective income tax rate(133.1)%(60.7)%(109.1)%(87.6)%

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** Includes significant production tax credits from wind-powered electricity generation.*

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

BHE

The discussion of BHE’s operating results that follows is based on after-tax earnings, reflecting how the energy businesses are managed and evaluated. A summary of net earnings attributable to BHE (“net earnings”) follows (dollars in millions).

Second QuarterFirst Six MonthsPercentage Change
2024202320242023Second QuarterFirst Six Months
U.S. utilities$267$430$643$593(37.9)%8.4%
Natural gas pipelines23418773355625.131.8
Other energy businesses379389661572(2.6)15.6
Real estate brokerage4334(116)—26.5—
Corporate interest and other(202)(167)(411)(376)21.09.3
$721$873$1,510$1,345(17.4)12.3

Our U.S. utilities operate independently in several states, including Oregon, Utah, Wyoming and other Western states (PacifiCorp), Iowa and Illinois (MEC) and Nevada (NV Energy). Net earnings declined $163 million in the second quarter and increased $50 million in the first six months of 2024 compared to 2023. Pre-tax loss accruals, net of expected insurance recoveries, for the Wildfires were $251 million in the second quarter and first six months of 2024 and $408 million in the first six months of 2023, recorded primarily in the first quarter. See Note 23 to the accompanying Consolidated Financial Statements for additional information on the Wildfires.

In addition, net earnings of U.S. utilities in the second quarter and first six months of 2024 reflected comparative increases in other income, electric utility margin (operating revenue less cost of sales) and income tax benefits from higher recognized wind production tax credits, partially offset by higher interest expense and increases in other energy operating expenses. Interest expense increased $84 million in the second quarter and $186 million in the first six months of 2024 over 2023, largely due to increased borrowings, including $4.4 billion of subsidiary term debt issued in January 2024 with a weighted average interest rate of 5.5%. The increases in other energy operating expenses were primarily due to higher vegetation management and other wildfire mitigation costs, legal and insurance expenses and general and plant maintenance costs.

The U.S. utilities’ electric utility margin was $1.9 billion in the second quarter and $3.6 billion in the first six months of 2024, increases of $79 million (4.4%) and $102 million (2.9%) compared to 2023. The increases reflected higher retail customer rates in certain territories and higher retail customer volumes, partially offset by higher energy costs and lower wholesale volumes and rates. Retail customer volumes increased 3.2% overall (up 5.4% at NV Energy, 3.3% at PacifiCorp and 0.7% at MEC) in the first six months of 2024 compared to the same period in 2023, primarily due to increases in customer usage and in the average number of customers, partially offset by an overall unfavorable impact of weather.

Net earnings of natural gas pipelines increased $47 million in the second quarter and $177 million in the first six months of 2024 compared to 2023. The increases in earnings reflected reductions in earnings attributable to noncontrolling interests due to the acquisition of an additional 50% ownership interest in the Cove Point facility on September 1, 2023, as well as increased margin on gas sales and higher transportation revenue.

Net earnings of other energy businesses declined $10 million in the second quarter and increased $89 million in the first six months of 2024 compared to 2023. The increase in earnings for the first six months of 2024 reflected higher earnings at Northern Powergrid and the non-regulated retail services business, partially offset by lower earnings at the renewable energy business. The increase at Northern Powergrid was attributable to higher distribution revenue due to higher tariffs from inflation adjustments and lower income tax expense attributable to expenses recognized in 2023 for the U.K. Energy Profits Levy and a group relief tax claim benefit recognized in 2024, partially offset by unfavorable results at the natural gas exploration business and higher other operating expenses. Earnings from the renewable energy business decreased in the first six months of 2024 versus 2023, mainly due to lower earnings from wind tax equity investments in 2024 and debt extinguishment gains recognized in 2023.

Net earnings of real estate brokerage increased $9 million in the second quarter and declined $116 million in the first six months of 2024 compared to 2023. The decline for the first six months of 2024 was primarily attributable to expense accruals by HomeServices in connection with the ongoing real estate industry litigation matters. In April 2024, HomeServices agreed to terms with the plaintiffs to settle all claims asserted against HomeServices and certain of its affiliates as part of a proposed nationwide class settlement. See Note 23 to the accompanying Consolidated Financial Statements for additional information.

Net losses from corporate interest and other increased $35 million in the second quarter and first six months of 2024 compared to 2023, mainly due to lower other income and higher technology and administrative costs.

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

Pilot Travel Centers, LLC (“Pilot”)

Pilot operates travel centers, primarily under the names Pilot or Flying J, and fuel-only retail locations. Pilot also operates large wholesale fuel and fuel marketing platforms in the U.S. A substantial portion of Pilot’s revenues and earnings derive from marketing fuel on a wholesale and retail basis and from other energy-related activities.

Through January 31, 2023, we owned a 38.6% interest in Pilot, which we accounted for under the equity method. Our 38.6% proportionate share of Pilot’s net earnings for the month ending January 31, 2023 are included in equity method earnings in the accompanying Consolidated Statements of Earnings.

On January 31, 2023, we acquired an additional 41.4% interest in Pilot and owned an 80% controlling financial interest as of that date. Thus, we began consolidating Pilot’s results of operations in our Consolidated Statements of Earnings on February 1, 2023. On January 16, 2024, we acquired the remaining 20% noncontrolling interest and we now own 100% of Pilot.

Pilot’s earnings for the second quarter and the first six months ending June 30, 2024 and 2023, as well as the five months ending June 30, 2023, are summarized below (dollars in millions). Revenues, costs and expenses for the first month of 2023 were not included in our Consolidated Financial Statements.

First SixFive Months EndingFirst Six
Second QuarterMonthsJune 30,Months
20242023202420232023
Revenues$12,999$14,754$25,502$24,262$29,282
Cost of sales11,89313,60023,45022,40527,099
Operating expenses8248551,6061,3511,564
Interest expense83113177184208
Pre-tax earnings199186269322$411
Income taxes and noncontrolling interests287231125
Net earnings attributable to Berkshire Hathaway shareholders$171$114$238$197

Revenues declined $1.8 billion (11.9%) in the second quarter and $3.8 billion (12.9%) in the first six months of 2024 compared to the same periods in 2023. The declines were attributable to lower average fuel prices and a decline in volumes from wholesale fuel and fuel marketing businesses. Pre-tax earnings increased 7.0% in the second quarter and declined 34.5% in the first six months of 2024 compared to the same periods in 2023. Pilot’s gross margin declined 2.2% in the second quarter of 2024 compared to 2023, which was more than offset by lower operating and interest expenses. The gross margin declined 4.1% in the first six months of 2024 compared to 2023 and operating expenses increased 2.7%, including higher store expenses and depreciation and amortization expenses, partially offset by lower interest expense. The year-to-date increase in store expenses was primarily attributable to increases in labor, marketing and maintenance costs. In March 2024, Pilot borrowed $5.7 billion from certain Berkshire insurance subsidiaries and repaid its third party borrowings. The interest on the intercompany borrowings is included in interest expense in the earnings summary above and in insurance investment income on page 34.

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

Manufacturing, Service and Retailing

A summary of revenues and earnings of our manufacturing, service and retailing businesses follows (dollars in millions).

Second QuarterFirst Six MonthsPercentage Change
SecondFirst Six
2024202320242023QuarterMonths
Revenues
Manufacturing$19,840$19,102$38,369$37,3913.9%2.6%
Service and retailing22,40523,02444,58346,014(2.7)(3.1)
$42,245$42,126$82,952$83,405
Pre-tax earnings
Manufacturing$3,129$3,103$6,043$5,7140.8%5.8%
Service and retailing1,1111,3912,1842,725(20.1)(19.9)
4,2404,4948,2278,439
Income taxes and noncontrolling interests1,0311,1051,9972,068
Net earnings*$3,209$3,389$6,230$6,371
Effective income tax rate23.7%23.9%23.6%23.8%
Pre-tax earnings as a percentage of revenues10.0%10.7%9.9%10.1%

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** Excludes certain acquisition accounting expenses, which primarily related to the amortization of identifiable intangible assets recorded in connection with certain of our business acquisitions. The after-tax acquisition accounting expenses excluded from earnings were $137 million in the second quarter and $262 million in the first six months of 2024 and $174 million in the second quarter and $352 million in the first six months of 2023. These expenses are included in “Other” in the summary of earnings on page 29 and in the “Other” earnings section on page 45.*

Manufacturing

Our manufacturing group consists of a variety of industrial, building and consumer products businesses. A summary of revenues and pre-tax earnings of these operations follows (dollars in millions).

Second QuarterFirst Six Months
2024202320242023
Revenues
Industrial products$9,273$8,876$18,156$17,739
Building products6,8976,69312,98612,703
Consumer products3,6703,5337,2276,949
$19,840$19,102$38,369$37,391
Pre-tax earnings
Industrial products$1,664$1,520$3,221$2,961
Building products1,0831,2272,0852,122
Consumer products382356737631
$3,129$3,103$6,043$5,714
Pre-tax earnings as a percentage of revenues
Industrial products17.9%17.1%17.7%16.7%
Building products15.718.316.116.7
Consumer products10.410.110.29.1

Industrial products

The industrial products group includes metal products for aerospace, power and general industrial markets (Precision Castparts Corp. (“PCC”)), specialty chemicals (The Lubrizol Corporation (“Lubrizol”)), metal cutting tools/systems (IMC International Metalworking Companies (“IMC”)) and Marmon, which consists of more than 100 autonomous manufacturing and service businesses, internally aggregated into twelve groups. The industrial products group also includes equipment and systems for the livestock and agricultural industries (CTB International), pipeline flow improvement technology and products (LiquidPower Specialty Products) and a structural steel fabrication products business (W&W|AFCO Steel).

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

Manufacturing, Service and Retailing

Revenues of the industrial products group increased $397 million (4.5%) in the second quarter and $417 million (2.4%) in the first six months of 2024 compared to 2023. Pre-tax earnings increased $144 million (9.5%) in the second quarter and $260 million (8.8%) in the first six months of 2024 compared to 2023. Pre-tax earnings as a percentage of revenues for the first six months of 2024 increased 1.0 percentage points compared to the first six months of 2023.

PCC’s revenues were $2.7 billion in the second quarter and $5.2 billion in the first six months of 2024, increases of 15.0% and 12.6%, respectively, compared to 2023. The revenue increases were primarily attributable to higher demand for aerospace products, and to a lesser degree, power generation products. Long-term industry forecasts continue to show growth and strong demand for air travel and aerospace products. PCC’s pre-tax earnings increased 27.5% in the second quarter and 22.4% in the first six months of 2024 compared to 2023. The earnings increases were primarily attributable to sales increases and improving manufacturing and operating efficiencies. Continued growth in revenues and earnings will be predicated on the ability to successfully increase production levels to match the expected growth in aerospace product demand.

Lubrizol’s revenues were $1.7 billion in the second quarter of 2024, an increase of 4.4% over 2023, attributable to higher volumes, partially offset by lower selling prices and unfavorable product mix. Revenues in the first six months of 2024 decreased 0.7% to $3.3 billion compared to 2023, as lower selling prices and unfavorable product mix were partially offset by higher volumes. Sales volumes in the second quarter and first six months of 2024 increased 11% and 6%, respectively, compared to 2023, attributable to stronger demand and customer inventory restocking following the customer destocking in 2023. Lubrizol’s pre-tax earnings increased 53.2% in the second quarter and 48.8% in the first six months of 2024 due to lower raw material costs, higher volumes and lower operating expenses, partially offset by the impact of lower selling prices and unfavorable product mix.

Marmon’s revenues were $3.2 billion in the second quarter and $6.2 billion in the first six months of 2024, decreases of 1.5% and 3.5%, respectively, compared to 2023. The Transportation Products group experienced significant revenue declines due to reduced volumes, following very strong demand in recent years. The Metal Services and Retail Solutions groups also experienced lower revenues due to reduced customer demand. Conversely, higher copper prices and increased volumes increased revenues for the Electrical group, and the Rail & Leasing group generated higher revenues due to higher average lease renewal rates and increased railcar repair prices and volumes.

Marmon’s pre-tax earnings decreased 8.8% in the second quarter and 7.8% in the first six months of 2024 compared to 2023. The declines reflected lower earnings from the Transportation Products, Metals Services and Retail Solutions groups due to the revenue declines, lower earnings from the Crane Services group and lower financial and other income, partially offset by higher earnings in the Rail & Leasing and Water Technologies groups.

IMC’s revenues were $1.0 billion in the second quarter and $2.0 billion in the first six months of 2024, decreases of 2.8% and 1.2%, respectively, compared to 2023. Revenues in the first six months of 2024 reflected lower organic sales and unfavorable foreign currency translation from a stronger U.S. Dollar, partially offset by business acquisitions and higher interest income. IMC’s pre-tax earnings declined 8.7% in the second quarter and 6.3% in the first six months of 2024 compared to 2023, reflecting lower gross margins and higher selling and marketing expenses, partially offset by higher interest and other income. IMC operates globally and a large portion of its products are manufactured in Israel. IMC’s operations in Israel have not been significantly impacted to-date by the conflicts in the region.

Building products

The building products group includes manufactured and site-built home construction and related lending and financial services (Clayton Homes), flooring (Shaw), insulation, roofing and engineered products (Johns Manville), bricks and masonry products (Acme Brick Company), paint and coatings (Benjamin Moore) and residential and commercial construction and engineering products and systems (MiTek).

Revenues of the building products group increased $204 million (3.0%) in the second quarter and $283 million (2.2%) in the first six months of 2024 compared to 2023. Pre-tax earnings decreased $144 million (11.7%) in the second quarter and $37 million (1.7%) in the first six months of 2024 compared to 2023.

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

Manufacturing, Service and Retailing

Clayton Homes’ revenues increased 8.7% to $3.1 billion in the second quarter and 8.9% to $5.9 billion in the first six months of 2024 compared to 2023. Revenues from home sales increased $293 million (7.1%) in the first six months of 2024, reflecting higher new home unit sales of 11.5%, partially offset by lower average selling prices. Also, financial services revenues increased 14.6% in the first six months of 2024 compared to 2023, primarily due to increased interest income from higher average loan balances and a slight increase in average interest rates. Loan balances, net of allowances for credit losses, were approximately $25.4 billion as of June 30, 2024, an increase of 12.9% since June 30, 2023. Clayton Homes funds a portion of its loan portfolio balances with borrowings from Berkshire finance subsidiaries.

Clayton Homes’ pre-tax earnings declined $55 million (10.0%) in the second quarter and $10 million (1.0%) in the first six months of 2024 compared to 2023, primarily attributable to lower earnings from manufacturing in each period, partially offset by increased earnings from financial services in the first six months. The declines in earnings from manufacturing reflected lower gross margin rates due to the increased cost of building Zero Energy Ready homes (such incremental costs are partially offset by income tax credits) and higher operating expenses. The increase in financial services earnings was primarily attributable to increased net interest income, partially offset by increased expected loan loss provisions and insurance claims. Interest expense on borrowings from Berkshire affiliates is reflected in Clayton Homes’ earnings, and the corresponding interest income is included in other earnings on page 45. In the third quarter of 2024, borrowings from Berkshire affiliates were increased to better match the current installment loan balances. Earnings from financial services will be reduced in the future by the incremental interest expense from such borrowings.

Our other building products businesses generated revenues of approximately $3.8 billion in the second quarter and $7.1 billion in the first six months of 2024, decreases of $46 million (1.2%) in the second quarter and $195 million (2.7%) in the first six months of 2024 versus 2023. Sales volumes in the 2024 periods increased at Johns Manville and declined at our other businesses in the group, while average selling prices were lower at Johns Manville and slightly higher at our other businesses.

Pre-tax earnings of our other building products businesses declined $88 million (13.1%) in the second quarter and $28 million (2.4%) in the first six months of 2024 compared to 2023. Earnings as a percentage of revenues in the first six months of 2024 were 15.9%, essentially unchanged compared to 2023. Earnings in 2024 were negatively impacted by increased restructuring and legal costs, which were partially offset by higher average gross margin rates from lower input costs and improved manufacturing efficiencies.

Consumer products

The consumer products group includes recreational vehicles (Forest River), several apparel and footwear operations (Fruit of the Loom, Garan, Fechheimer, H.H. Brown Shoe Group and Brooks Sports), high-performance batteries (Duracell) and a global toy company (Jazwares). This group also includes custom picture framing products (Larson-Juhl) and jewelry products (Richline).

Consumer products group revenues increased $137 million (3.9%) in the second quarter and $278 million (4.0%) in the first six months of 2024 compared to 2023. The increases were primarily attributable to higher revenues from Forest River, Jazwares and Brooks Sports, partially offset by lower revenues from Fruit of the Loom and Richline. Forest River revenues increased 7.8% in the first six months of 2024, reflecting a 9.4% increase in unit sales, which included the impact of business acquisitions over the past year. Average selling prices for recreational vehicles declined in 2024 and increased for bus and commercial vehicles, attributable to changes in product mix and price competition. Jazwares and Brooks Sports revenues increased 20.3% and 12.3%, respectively, in the first six months of 2024 over 2023, primarily attributable to higher volumes.

Consumer products group pre-tax earnings increased $26 million (7.3%) in the second quarter and $106 million (16.8%) in the first six months of 2024 versus 2023. Earnings from Forest River declined 3.6% in the second quarter and increased 6.1% in the first six months of 2024 compared to 2023. Forest River’s earnings in the second quarter of 2024 were negatively affected by lower gross margin rates, primarily attributable to changes in sales mix and higher materials and chassis costs. Apparel and footwear earnings increased 40.8% in the first six months of 2024 from 2023, primarily due to Brooks Sports, the impact of lower product and supply chain costs and the effects of restructuring activities at certain of our apparel businesses in 2023. Apparel business earnings were negatively impacted in 2023 by low sales volumes and rising raw materials, freight, labor and other operating costs.

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

Manufacturing, Service and Retailing

Service and retailing

A summary of revenues and pre-tax earnings of our service and retailing businesses follows (dollars in millions).

Second QuarterFirst Six Months
2024202320242023
Revenues
Service$5,211$5,181$10,362$10,500
Retailing4,7364,9609,2889,572
McLane12,45812,88324,93325,942
$22,405$23,024$44,583$46,014
Pre-tax earnings
Service$633$824$1,224$1,661
Retailing336438653822
McLane142129307242
$1,111$1,391$2,184$2,725
Pre-tax earnings as a percentage of revenues
Service12.1%15.9%11.8%15.8%
Retailing7.18.87.08.6
McLane1.11.01.20.9

Service

Our service group consists of several businesses, the largest of which are NetJets and FlightSafety (aviation services), which offer shared ownership programs for general aviation aircraft and high technology training services and products to operators of aircraft, TTI, a distributor of electronics components and IPS, a provider of facilities construction management services. Our other service businesses franchise and service a network of quick service restaurants (Dairy Queen), lease transportation equipment (XTRA) and furniture (CORT), provide third party logistics services that primarily serve the petroleum and chemical industries (Charter Brokerage), distribute electronic news, multimedia and regulatory filings (Business Wire) and operate a television station in Miami, Florida (WPLG).

Service group revenues increased $30 million (0.6%) in the second quarter and declined $138 million (1.3%) in the first six months of 2024 compared to 2023. The decline in the first six months of 2024 was primarily attributable to lower revenues from TTI and the leasing businesses, partially offset by higher revenues from the aviation services businesses and IPS. TTI revenues declined 10.6% in the second quarter and 13.1% in the first six months of 2024 compared to 2023. Sales at TTI declined in the first six months of 2024 across most regions, markets and product lines, attributable to excess inventory levels within supply chains, which contributed to lower customer demand. These conditions are generally expected to continue over the remainder of 2024. Revenues from aviation services increased 10.4% in the second quarter and 9.5% in the first six months of 2024 versus 2023, primarily due to increases in the number of aircraft in shared aircraft ownership programs and an increase in flight hours across NetJets’ various programs, higher training hours at FlightSafety, as well as higher average rates. Additionally, IPS revenues increased 14.5% in the second quarter and 13.1% in the first six months of 2024 compared to 2023.

Service group pre-tax earnings declined $191 million (23.2%) in the second quarter and $437 million (26.3%) in the first six months of 2024 compared to 2023. Pre-tax earnings as a percentage of revenues fell 4.0 percentage points in the first six months of 2024 compared to 2023. Earnings from TTI declined 50.8% in the second quarter and 50.0% in the first six months of 2024 compared to 2023. The earnings declines reflected the impact of lower sales and price competition, which contributed to reduced gross margin rates, as well as higher operating expenses. Earnings from aviation services declined 8.0% in the second quarter and 9.1% in the first six months of 2024 versus 2023, primarily attributable to increased maintenance, personnel and fuel costs, as well as higher depreciation expense.

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

Manufacturing, Service and Retailing

Retailing

Our largest retailing business is Berkshire Hathaway Automotive, Inc. (“BHA”), representing 69% of our combined retailing revenues in the first six months of 2024. BHA consists of over 80 auto dealerships that sell new and pre-owned automobiles and offer repair services and related products. BHA also offers vehicle service contracts and operates two insurance businesses. Our retailing businesses also include four home furnishings retailing businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture and Jordan’s), which sell furniture, appliances, flooring and electronics. The home furnishings group represented 17% of the combined retailing group revenues in the first six months of 2024.

Other retailing businesses include three jewelry retailers (Borsheims, Helzberg and Ben Bridge). Other businesses also offer confectionery products (See’s Candy), high-quality kitchen tools (Pampered Chef), party supplies, school supplies and toys and novelties (Oriental Trading Company) and motorcycle accessories (Louis).

Retailing group revenues declined 4.5% in the second quarter to $4.7 billion and 3.0% to $9.3 billion in the first six months of 2024 compared to 2023. BHA vehicle sales revenues decreased 1.7% in the first six months of 2024 versus 2023, reflecting lower pre-owned and wholesale sales, partially offset by higher new vehicle sales. New vehicle unit sales in the first six months of 2024 increased 8.4%, which was partially offset by lower average selling prices compared to 2023. The declines in new vehicle selling prices were attributable to increased price competition and product mix changes. Revenues from BHA’s parts/service/repair operations declined slightly in the first six months of 2024 versus 2023. Home furnishing revenues in the first six months of 2024 declined 8.5% versus 2023, primarily attributable to lower customer traffic and sales volumes and increasing price competition. Also, aggregate revenues of our other retailers declined 6.8% in the first six months of 2024 compared to 2023.

Retailing group pre-tax earnings declined $102 million (23.3%) in the second quarter and $169 million (20.6%) in the first six months of 2024 compared to 2023. BHA’s pre-tax earnings declined 8.2% in the second quarter and 9.8% in the first six months of 2024 compared to 2023, primarily due to lower vehicle gross profit margins, partially offset by higher investment income from finance/service contract operations and lower operating expenses. Aggregate pre-tax earnings for the remainder of our retailing group declined $79 million (48.6%) in the second quarter and $116 million (42.3%) in the first six months of 2024 compared to 2023. Nearly all of our other retailers generated lower earnings in 2024 compared to 2023, reflecting challenging business conditions that contributed to reduced sales and increased operating expenses.

McLane Company

McLane operates a wholesale distribution business that provides grocery and non-food consumer products to retailers and convenience stores (“retail”) and to restaurants (“restaurant”). McLane also operates wholesale distributors of distilled spirits, wine and beer (“beverage”). The retail and restaurant distribution businesses generate high sales and very low profit margins and operate in a highly competitive environment.

Revenues declined 3.3% in the second quarter and 3.9% in the first six months of 2024 compared to 2023, primarily attributable to lower unit volumes. The revenue reductions were primarily in the restaurant business, which experienced a comparative 8.3% sales decline in the first six months of 2024 compared to 2023. Pre-tax earnings increased $13 million (10.1%) in the second quarter and $65 million (26.9%) in the first six months of 2024 compared to 2023. The increases in earnings reflected increases in the overall gross margin rate and lower year-to-date operating expenses, which more than offset the impact of lower sales.

Non-Controlled Businesses

After-tax earnings of our non-controlled businesses in 2024 and 2023 included our proportionate share of earnings of Kraft Heinz, Occidental Petroleum and Berkadia. Earnings in 2023 also included our 38.6% share of Pilot’s earnings in January, after which Pilot became a consolidated subsidiary. After-tax equity earnings in non-controlled businesses declined $315 million in the second quarter and $478 million in the first six months of 2024 versus 2023. The declines in 2024 reflected lower earnings from Kraft Heinz and Occidental and the inclusion of Pilot in January 2023.

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

Investment Gains (Losses)

A summary of investment gains (losses) recorded in earnings follows (dollars in millions).

Second QuarterFirst Six Months
2024202320242023
Investment gains (losses)$23,857$33,061$25,733$67,819
Income taxes and noncontrolling interests5,1077,1925,50314,511
Net earnings$18,750$25,869$20,230$53,308
Effective income tax rate21.3%21.7%21.3%21.3%

Investment gains (losses) include unrealized gains and losses arising from changes in market prices of investments in equity securities, which significantly increases the volatility of our periodic net earnings due to the magnitude of our equity securities portfolio and the inherent volatility of equity securities prices. Unrealized gains and losses recorded in earnings also include the effects of changes in foreign currency exchange rates on investments in equity securities of non-U.S. issuers held by our U.S.-based subsidiaries.

Pre-tax investment gains and losses included net unrealized gains of $17.3 billion in the second quarter and $29.7 billion in the first six months of 2024 and $33.0 billion in the second quarter and $63.8 billion in the first six months of 2023 on securities we held at the end of the applicable period. In addition, we recognized gains of $6.6 billion in the second quarter and losses of $3.9 billion in the first six months of 2024 attributable to changes in market prices on equity securities we sold during the applicable period. In the second quarter and first six months of 2023, we recognized gains on securities we sold during each period of $31 million and $1.0 billion, respectively.

Taxable gains and losses on equity securities sold generally represent the difference between sales proceeds and the original cost of the securities sold. Sales of equity securities produced taxable gains of $59.6 billion in the second quarter and $73.7 billion in the first six months of 2024 compared to $2.4 billion in the second quarter and $4.6 billion in the first six months of 2023. Pre-tax investment gains in the first six months of 2023 also included a non-cash gain of approximately $3.0 billion related to the remeasurement of our pre-existing interest in Pilot to fair value through the application of acquisition accounting upon attaining control of Pilot for financial reporting purposes.

We believe that investment gains and losses, whether realized from sales or unrealized from changes in market prices, are often meaningless in terms of understanding our reported consolidated earnings or evaluating our periodic economic performance. We also continue to believe the investment gains and losses recorded in earnings in any given period has little analytical or predictive value.

Other

A summary of after-tax other earnings (losses) follows (in millions).

Second QuarterFirst Six Months
2024202320242023
Acquisition accounting expenses$(137)$(200)$(262)$(402)
Corporate interest expense, before foreign currency effects(67)(54)(122)(118)
Foreign currency exchange rate gains on Berkshire and BHFC non-U.S. Dollar senior notes4464651,043448
Other earnings291129547301
$533$340$1,206$229

After-tax acquisition accounting expenses include charges arising from the application of the acquisition method in connection with certain of Berkshire’s past business acquisitions. These charges arise primarily from the amortization of intangible assets recorded in connection with those business acquisitions.

Foreign currency exchange rate gains pertain to Berkshire’s and BHFC’s Japanese Yen, Euro and Great Britain Pound denominated debt. Changes in foreign currency exchange rates produce unrealized gains and losses from the periodic revaluation of these liabilities into U.S. Dollars. The gains and losses recorded in any given period can be significant due to the magnitude of the borrowings and the inherent volatility in foreign currency exchange rates. Other earnings consist primarily of Berkshire parent company investment income, corporate expenses, intercompany interest income on loans to operating subsidiaries when the related interest expense is included in earnings of the operating subsidiaries, and unallocated income taxes. Other earnings increased in 2024 primarily due to increased interest income.

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

Financial Condition

Our Consolidated Balance Sheet continues to reflect significant liquidity and a very strong capital base. Berkshire’s shareholders’ equity at June 30, 2024 was $601.7 billion, an increase of $40.4 billion since December 31, 2023. Net earnings attributable to Berkshire shareholders were $43.1 billion for the first six months of 2024 and included after-tax investment gains of approximately $20.2 billion. Investment gains and losses from changes in the market prices of our investments in equity securities will produce significant volatility in our earnings.

Berkshire’s common stock repurchase program, as amended, permits Berkshire to repurchase its Class A and Class B shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer. We are not committed to purchase a minimum or subject to maximum repurchase amounts. We will not repurchase our stock if it reduces our consolidated cash, cash equivalents and U.S. Treasury Bills holdings to below $30 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire. Berkshire paid $2.9 billion in the first six months of 2024 to repurchase its common stock.

At June 30, 2024, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of $271.5 billion, which included $237.6 billion in U.S. Treasury Bills. Investments in equity and fixed maturity securities (excluding our investments in Kraft Heinz and Occidental common stock) were $301.7 billion. A significant portion of our consolidated cash and investments are held in our regulated insurance subsidiaries. During the first six months of 2024, we paid $4.3 billion to acquire equity securities and we received $97.1 billion from sales of equity securities, which contributed to the increase in investments in U.S. Treasury Bills over that period. On January 16, 2024, we acquired the remaining 20% noncontrolling ownership interest in Pilot for $2.6 billion.

Our consolidated borrowings at June 30, 2024 were $123.6 billion, of which over 95% were issued by the Berkshire parent company and BHFC, or by BNSF and BHE and its subsidiaries. Berkshire parent company debt outstanding at June 30, 2024 was $18.1 billion, a decrease of $710 million from December 31, 2023. In April 2024, Berkshire issued an aggregate ¥263.3 billion (approximately $1.7 billion) of senior notes. In the first six months of 2024, senior note maturities were $1.1 billion and we recorded reductions on borrowings of $1.3 billion from changes in foreign currency exchange rates on Berkshire parent company non-U.S. Dollar denominated debt.

Senior note borrowings of BHFC, a wholly-owned financing subsidiary, were approximately $18.0 billion at June 30, 2024, relatively unchanged from December 31, 2023. BHFC’s borrowings are used to fund a portion of loans originated and acquired by Clayton Homes and equipment held for lease by our railcar leasing business. Berkshire guarantees BHFC’s senior notes for the full and timely payment of principal and interest.

BNSF’s outstanding debt was $24.2 billion as of June 30, 2024, an increase of $750 million from December 31, 2023. In June 2024, BNSF issued $1.3 billion of 5.5% debentures due in 2055. BHE’s aggregate borrowings increased $1.1 billion in the first six months of 2024 to approximately $57.5 billion at June 30. In the first six months of 2024, BHE subsidiaries issued $5.4 billion of term debt with a weighted average interest rate of 5.4% and maturity dates ranging from 2029 to 2055 and BHE and its subsidiaries repaid term debt and short-term borrowings aggregating approximately $4.0 billion. Pilot prepaid third-party borrowings of $5.7 billion in the first quarter of 2024. Berkshire does not guarantee the repayment of debt issued by BNSF, BHE or any of their subsidiaries or affiliates.

In the first six months of 2024, our diverse group of businesses generated net operating cash flows of $24.2 billion. Operating cash flows over the remainder of 2024 will be reduced by significant income tax payments derived from taxable gains on disposals of equity securities. The gross proceeds from these sales were included in cash flows from investing activities. Our consolidated capital expenditures for property, plant and equipment and equipment held for lease were $8.9 billion in the first six months of 2024, which included capital expenditures by BNSF and BHE of $5.9 billion. BNSF and BHE maintain very large investments in capital assets (property, plant and equipment) and regularly make significant capital expenditures in the normal course of business. Forecasted capital expenditures for BHE and BNSF over the remainder of 2024 are approximately $7.4 billion.

Contractual Obligations

We are party to other contracts associated with ongoing business activities, which will result in cash payments to counterparties in future periods. Certain obligations are included in our Consolidated Balance Sheets, such as borrowings, operating lease liabilities and shared aircraft repurchase liabilities.

We are also obligated to pay claims arising from property and casualty contracts issued by our insurance subsidiaries, including amounts from retroactive reinsurance. However, the timing and amount of the payments under insurance and reinsurance contracts are contingent upon the outcome of future events. Actual payments will likely vary, perhaps materially, from any forecasted payments, as well as from the liabilities recorded in our Consolidated Balance Sheet. We anticipate that these payments will be funded by operating cash flows.

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

Contractual Obligations

Other obligations pertaining to the acquisition of goods or services in the future, such as certain purchase obligations, are not currently reflected in the Consolidated Financial Statements and will be recognized in future periods as the goods are delivered or services are provided. Except as otherwise disclosed in this Quarterly Report, our contractual obligations as of June 30, 2024 were, in the aggregate, not materially different from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Berkshire’s Annual Report on Form 10-K for the year ended December 31, 2023.

Critical Accounting Estimates

Certain accounting policies require us to make estimates and judgments in determining the amounts reflected in our Consolidated Financial Statements. Such estimates and judgments necessarily involve varying and possibly significant degrees of uncertainty. Accordingly, certain amounts currently recorded in our Consolidated Financial Statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. Reference is made to “Critical Accounting Estimates” discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Berkshire’s Annual Report on Form 10-K for the year ended December 31, 2023.

Our Consolidated Balance Sheet as of June 30, 2024 included estimated liabilities for unpaid losses and loss adjustment expenses from property and casualty insurance and reinsurance contracts of $146.3 billion. Due to the inherent uncertainties in the processes of establishing these liabilities, the actual ultimate claim amounts will likely differ from the currently recorded amounts. A very small percentage change in estimates of this magnitude can result in a material effect on periodic earnings. The effects from changes in these estimates are recorded as a component of insurance losses and loss adjustment expenses in the period of the change.

Our Consolidated Balance Sheet as of June 30, 2024 included goodwill of acquired businesses of $84.4 billion and indefinite-lived intangible assets of $18.9 billion. In connection with the annual goodwill impairment review in the fourth quarter of 2023, the estimated fair values of nine reporting units did not exceed our carrying values by at least 20%. Our estimated aggregate fair value of these units at that time was approximately $58.5 billion, which exceeded our aggregate carrying value of approximately $54.9 billion. Goodwill of these reporting units totaled approximately $17.3 billion. Three of these reporting units that were acquired in late 2022 and early 2023, which in the aggregate, had estimated fair values of $21.5 billion, or 1.5% greater than the carrying value, and aggregate goodwill of approximately $8.5 billion.

Goodwill and indefinite-lived intangible asset impairment reviews include determining the estimated fair values of our reporting units and of the indefinite-lived intangible assets. Several methods may be used to estimate fair values and significant judgments are required in making such estimates. Due to the inherent subjectivity and uncertainty in forecasting future cash flows and earnings over long periods of time, actual results may differ materially from the forecasts.

As of June 30, 2024, we concluded it was more likely than not that goodwill and other indefinite-lived intangible assets recorded in our Consolidated Balance Sheet were not impaired. However, the fair value estimates of the reporting units and assets are subject to change based on changes in market and economic conditions and events affecting our businesses, which we cannot reliably predict. It is reasonably possible that adverse changes in such conditions or events could result in the recognition of impairment losses in our Consolidated Financial Statements.

Information concerning accounting pronouncements to be adopted in the future is included in Note 2 to the accompanying Consolidated Financial Statements.

Forward-Looking Statements

Investors are cautioned that certain statements contained in this document as well as some statements in periodic press releases and some oral statements of Berkshire officials during presentations about Berkshire or its subsidiaries are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible future Berkshire actions, which may be provided by management, are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about Berkshire and its subsidiaries, economic and market factors and the industries in which we do business, among other things. These statements are not guarantees of future performance and we have no specific intention to update these statements.

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

Forward-Looking Statements

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in market prices of our investments in equity securities; the occurrence of one or more catastrophic events, such as an earthquake, hurricane, geopolitical conflict, act of terrorism or cyber-attack that causes losses insured by our insurance subsidiaries and/or losses to our business operations; the frequency and severity of epidemics, pandemics or other outbreaks, and other events that negatively affect our operating results and restrict our access to borrowed funds through the capital markets at reasonable rates; changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries; changes in federal income tax laws; and changes in general economic and market factors that affect the prices of securities or the industries in which we do business.

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