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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).

Third QuarterFirst Nine Months
2024202320242023
Amount%Amount%Amount%Amount%
Premiums written$5,446$5,441$17,448$17,575
Premiums earned$5,453100.0$5,739100.0$16,496100.0$16,213100.0
Losses and loss adjustment expenses3,28260.22,91850.89,39957.09,09856.1
Underwriting expenses2,01036.81,33323.34,90629.74,11325.4
Total losses and expenses5,29297.04,25174.114,30586.713,21181.5
Pre-tax underwriting earnings$161$1,488$2,191$3,002

Premiums written were relatively unchanged in the third quarter and first nine months of 2024 compared to 2023. Premiums written in the first nine months of 2024 reflected net reductions in property volumes, substantially offset by generally higher rates, new business and increased participations in certain casualty lines. Premiums earned decreased 5.0% in the third quarter and 1.7% in the first nine months of 2024 compared to 2023. 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.

Losses and loss adjustment expenses increased $364 million (12.5%) in the third quarter and $301 million (3.3%) in the first nine months of 2024 versus 2023. The loss ratio increased 9.4 percentage points in the third quarter and 0.9 percentage points in the first nine months of 2024 compared to 2023. In 2024, losses from significant catastrophe events (Hurricane Helene) were approximately $380 million. Losses from significant catastrophe events were approximately $550 million in the first nine months of 2023. Reductions in liabilities for losses and loss adjustment expenses attributable to prior accident years were $1.2 billion in the first nine months of 2024, mostly attributable to lower than expected property losses, compared to $1.5 billion in 2023 attributable to both property and casualty losses.

Underwriting expenses increased $677 million (50.8%) in the third quarter and $793 million (19.3%) in the first nine months of 2024 compared to 2023. In September of 2024, NICO recorded a pre-tax charge in underwriting expenses of $490 million in connection with a settlement agreement reached concerning certain non-insurance affiliates that filed voluntary petitions under Chapter 11 of the bankruptcy code in the United States Bankruptcy Court for the District of New Jersey in 2023. See Note 23 to the accompanying Consolidated Financial Statements. Underwriting expenses also included pre-tax foreign currency exchange losses from the remeasurement of certain non-U.S. Dollar denominated liabilities of $171 million in the third quarter and $120 million in the first nine months of 2024 compared to gains of $114 million in the third quarter and losses of $78 million in the first nine months of 2023. Before these items, underwriting expenses decreased $98 million in the third quarter and increased $261 million in the first nine months of 2024 compared to 2023.

Life/health

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

Third QuarterFirst Nine Months
2024202320242023
Amount%Amount%Amount%Amount%
Premiums written$1,246$1,332$3,703$3,685
Premiums earned$1,218100.0$1,328100.0$3,667100.0$3,677100.0
Life and health benefits81767.11,03477.92,49268.02,73274.3
Underwriting expenses30324.924418.389624.471119.3
Total benefits and expenses1,12092.01,27896.23,38892.43,44393.6
Pre-tax underwriting earnings$98$50$279$234

Premiums earned in the first nine months of 2023 included a reduction of $161 million attributable to the commutations of several U.S. life contracts in the first quarter. Otherwise, premiums earned declined $110 million (8.3%) in the third quarter and $171 million (4.5%) in the first nine months compared to 2023, primarily attributable to reductions in non-U.S. life business.

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

Insurance—Underwriting

Berkshire Hathaway Reinsurance Group

Life/health

Pre-tax underwriting earnings increased $48 million in the third quarter and $45 million in the first nine months of 2024 compared to 2023. Earnings included gains of $50 million from life contract commutations in the first nine months of 2024 and $139 million in the first nine months of 2023. Otherwise, underwriting earnings in the first nine months of 2024 increased $134 million over 2023, reflecting increased earnings from U.S life business, partly offset by increased losses on long-term care business.

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. Changes in foreign currency exchange rates produced pre-tax losses of $75 million in the first nine months of 2024 and pre-tax gains of $38 million in the corresponding 2023 period. Pre-tax underwriting losses before foreign currency effects were $498 million in the first nine months of 2024 compared to $622 million in 2023. The decline was primarily attributable to net reductions in estimated ultimate claim liabilities for contracts written in prior years.

Unpaid losses assumed under retroactive reinsurance contracts declined $1.6 billion in the first nine months of 2024 to $33.1 billion at September 30, 2024, primarily due to loss payments. Deferred charges on retroactive reinsurance contracts declined $610 million in the first nine months of 2024 to $8.9 billion at September 30, primarily due to periodic amortization. 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 nine 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, including liabilities for contracts without life contingencies, and to foreign currency exchange gains and losses on non-U.S. Dollar denominated contracts. Changes in foreign currency exchange rates produced pre-tax losses of $96 million in the first nine months of 2024 compared to $27 million in 2023. Pre-tax underwriting losses before foreign currency effects in the first nine months were $447 million in 2024 and $439 million in 2023. Discounted periodic payment annuity liabilities were $15.1 billion at September 30, 2024, including 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

Our variable annuity guarantee reinsurance contracts produced pre-tax losses of $75 million in the third quarter and earnings of $30 million in the first nine months of 2024. Pre-tax earnings were $116 million in the third quarter and $309 million in the first nine 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).

Third QuarterFirst Nine MonthsPercentage Change
2024202320242023Third QuarterFirst Nine Months
Dividend income$1,092$1,223$3,782$3,989(10.7)%(5.2)%
Interest and other investment income3,5021,7108,0324,241104.889.4
Pre-tax net investment income4,5942,93311,8148,23056.643.5
Income taxes9304632,2321,422
Net investment income$3,664$2,470$9,582$6,808
Effective income tax rate20.2%15.8%18.9%17.3%

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

Insurance—Investment Income

Dividend income declined $131 million (10.7%) in the third quarter and $207 million (5.2%) in the first nine 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 $1.8 billion in the third quarter and $3.8 billion in the first nine months of 2024 over 2023. The increases were attributable to increased short-term investments, including U.S. Treasury Bills. 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 approximated $174 billion at September 30, 2024 and $169 billion at December 31, 2023.

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

September 30, 2024December 31, 2023
Cash, cash equivalents and U.S. Treasury Bills$271,835$121,845
Equity securities263,690345,653
Fixed maturity securities15,83123,617
Other1,0321,188
$552,388$492,303

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

Amortized CostUnrealized Gains (Losses)Carrying Value
U.S. Treasury, U.S. government corporations and agencies$4,329$34$4,363
Foreign governments9,838499,887
Corporate and other1,3252561,581
$15,492$339$15,831

U.S. government obligations are rated AA+ or Aaa by the major rating agencies. Approximately 94% 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).

Third QuarterFirst Nine Months
2024202320242023
Railroad operating revenues$5,881$5,719$17,242$17,311
Railroad operating expenses:
Compensation and benefits1,4041,3924,1294,083
Fuel7998632,4752,660
Purchased services5015031,4871,503
Depreciation and amortization6476551,9721,950
Equipment rents, materials and other4774971,5831,630
Total3,8283,91011,64611,826
Railroad operating earnings2,0531,8095,5965,485
Interest expense(275)(269)(807)(782)
Other revenues (expenses), net6868198169
Pre-tax earnings1,8461,6084,9874,872
Income taxes4633871,2341,140
Net earnings$1,383$1,221$3,753$3,732
Effective income tax rate25.1%24.1%24.7%23.4%

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

Cars/UnitsPercentage Change
Third QuarterFirst Nine MonthsThirdFirst Nine
2024202320242023QuarterMonths
Consumer products1,4421,2364,0443,45916.7%16.9%
Industrial products4084161,1971,212(1.9)(1.2)
Agricultural products30826892784614.99.6
Coal3293768781,105(12.5)(20.5)
2,4872,2967,0466,6228.36.4

Railroad operating revenues increased 2.8% in the third quarter and decreased slightly in the first nine months of 2024 compared to 2023. Average revenue per car/unit declined 5.2% in the third quarter and 6.3% in the first nine months of 2024 compared to 2023, resulting from lower fuel surcharge revenue and business mix changes. Car/unit volumes increased 8.3% in the third quarter and 6.4% in the first nine months of 2024 compared to 2023. Pre-tax earnings increased 14.8% in the third quarter and 2.4% in the first nine months of 2024 compared to 2023. Railroad operating earnings in the first nine months of 2024 increased as a result of volume growth, improved productivity, and lower operating costs, partially offset by increased litigation accruals.

Operating revenues from consumer products were $2.1 billion in the third quarter and $6.2 billion in the first nine months of 2024, increases of 7.0% and 8.2%, respectively, from 2023. The revenue increases were attributable to higher volumes of 16.7% in the third quarter and 16.9% in the first nine 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 third quarter and $4.2 billion in the first nine months of 2024, decreases of 1.6% and 1.1%, respectively, from 2023. The revenue declines were attributable to lower volumes of 1.9% and 1.2% in the third quarter and the first nine months of 2024, respectively, compared to 2023, partially offset by slightly higher average revenue per car/unit. The volume decreases were primarily attributable to lower aggregates, taconite, minerals, and waste shipments, partially offset by higher volumes in petroleum products.

Operating revenues from agricultural products were $1.4 billion in the third quarter and $4.2 billion in the first nine months of 2024, increases of 14.1% and 6.5%, respectively, compared to 2023. The revenue increases were attributable to higher volumes of 14.9% in the third quarter and 9.6% in the first nine months of 2024 compared to 2023, partially offset by lower average revenue per car/unit. The volume increase during the third quarter was primarily due to higher volumes of grain shipments. The volume increase during the first nine months was primarily due to higher grain, renewable fuels, and fertilizer shipments.

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

BNSF

Operating revenues from coal were $795 million in the third quarter and $2.2 billion in the first nine months of 2024, declines of 14.7% and 25.2%, respectively, from 2023. The revenue declines were attributable to reduced volumes of 12.5% in the third quarter and 20.5% in the first nine 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 displaced coal as a fuel used by utilities.

Railroad operating expenses were $3.8 billion in the third quarter and $11.6 billion in the first nine months of 2024, decreases of $82 million (2.1%) and $180 million (1.5%), respectively, compared to 2023. Fuel expenses declined $64 million (7.4%) in the third quarter and $185 million (7.0%) in the first nine months of 2024 compared to 2023, which was primarily due to lower average fuel prices, partially offset by higher volumes. Equipment rents, materials and other expenses decreased $20 million (4.0%) in the third quarter and $47 million (2.9%) in the first nine months of 2024 compared to 2023. Expenses in the third quarter declined primarily due to cost reductions across various spend categories and lower property taxes, partially offset by higher casualty costs. Expenses in the first nine months of 2024 declined due to cost reductions across various spend categories and lower property taxes, partially offset by litigation costs related to the judgment in the ongoing legal case with the Swinomish Tribe, which BNSF has appealed. There were no significant changes in compensation and benefits, purchased services, or depreciation and amortization expense as increases from higher volumes and inflation were more than offset by lower costs and improved productivity.

BHE

Berkshire Hathaway Energy Company (“BHE”) 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 (“Cove Point”). 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 HomeServices of America (“HomeServices”), a residential real estate brokerage business and a large network of real estate brokerage franchises in the United States.

The rates BHE’s 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).

Third QuarterFirst Nine Months
2024202320242023
Revenues:
Energy operating revenue$6,026$5,958$16,386$16,362
Real estate operating revenue1,1791,2123,3343,383
Other income130111384349
Total revenue7,3357,28120,10420,094
Costs and expenses:
Energy cost of sales1,9022,0095,0995,530
Energy operating expenses2,5513,6717,7698,818
Real estate operating costs and expenses1,1511,1813,4773,351
Interest expense6305671,9001,695
Total costs and expenses6,2347,42818,24519,394
Pre-tax earnings (loss)1,101(147)1,859700
Income tax benefit*(708)(783)(1,535)(1,525)
Net earnings after income taxes1,8096363,3942,225
Noncontrolling interests of BHE subsidiaries3177106321
Net earnings attributable to BHE1,7785593,2881,904
Noncontrolling interests and preferred stock dividends14961287205
Net earnings attributable to Berkshire Hathaway shareholders$1,629$498$3,001$1,699
Effective income tax rate(64.3)%**(82.6)%(217.9)%

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

*** Not meaningful.*

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).

Third QuarterFirst Nine MonthsPercentage Change
2024202320242023Third QuarterFirst Nine Months
U.S. utilities$926$(53)$1,569$540**190.6%
Natural gas pipelines19417592773110.9%26.8
Other energy businesses3582961,01986820.917.4
Real estate brokerage2025(96)25(20.0)**
Corporate interest and other280116(131)(260)141.4(49.6)
$1,778$559$3,288$1,904218.172.7

——————

*** Not meaningful.*

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 increased $979 million in the third quarter and $1,029 million in the first nine months of 2024 compared to 2023. Pre-tax loss accruals, net of expected insurance recoveries, for the Wildfires were $251 million in the first nine months of 2024. Wildfire loss accruals were $1.3 billion in the third quarter and $1.7 billion in the first nine months of 2023. 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 third quarter and first nine 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 increases in other energy operating expenses and higher interest expense. Interest expense increased $81 million in the third quarter and $267 million in the first nine 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, insurance expenses and general and plant maintenance costs.

The U.S. utilities’ electric utility margin was $2.4 billion in the third quarter and $6.0 billion in the first nine months of 2024, increases of $50 million (2.1%) and $152 million (2.6%) 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 3.6% overall (up 6.6% at NV Energy, 3.2% at PacifiCorp and 0.6% at MEC) in the first nine 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 $19 million in the third quarter and $196 million in the first nine 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 higher transportation revenue and increased margin on gas sales.

Net earnings of other energy businesses increased $62 million in the third quarter and $151 million in the first nine months of 2024 compared to 2023. The increases reflected higher earnings at Northern Powergrid and the non-regulated retail services business, partially offset by lower earnings at the renewable energy business. The increases at Northern Powergrid were attributable to higher distribution revenue due to higher tariffs from inflation adjustments and lower income tax expense attributable to charges recognized in 2023 for the U.K. Energy Profits Levy and a group relief tax 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 mainly due to unfavorable pricing and generation at certain projects, lower earnings from wind tax equity investments in the first nine months of 2024 and debt extinguishment gains recognized in the second quarter of 2023.

Net earnings of real estate brokerage decreased $5 million in the third quarter and $121 million in the first nine months of 2024 compared to 2023. The decline for the first nine months of 2024 was primarily attributable to expense accruals 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 earnings from corporate interest and other increased $164 million in the third quarter and net losses decreased $129 million in the first nine months of 2024 compared to 2023, mainly due to higher federal income tax credits recognized in 2024.

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 was 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 third quarter and the first nine months ending September 30, 2024 and 2023, as well as the eight months ending September 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 NineEight Months EndingFirst Nine
Third QuarterMonthsSeptember 30,Months
20242023202420232023
Revenues$10,630$13,166$36,132$37,428$42,448
Cost of sales9,45311,98032,90334,38539,079
Selling, general and administrative expenses8947822,5002,1332,346
Interest expense66113243297321
Pre-tax earnings217291486613$702
Income taxes and noncontrolling interests1910850233
Net earnings attributable to Berkshire Hathaway shareholders$198$183$436$380

Revenues declined $2.5 billion (19.3%) in the third quarter and $6.3 billion (14.9%) in the first nine months of 2024 compared to the same periods in 2023. The declines were primarily attributable to lower average fuel prices and a decline in volumes from wholesale fuel and fuel marketing businesses.

Pre-tax earnings declined 25.4% in the third quarter and 30.8% in the first nine months of 2024 compared to the same periods in 2023. Pilot’s gross sales margins increased 1.0% in the third quarter and declined 2.3% in the first nine months of 2024 versus 2023. Selling, general and administrative expenses increased 14.3% in the third quarter and 6.6% in the first nine months of 2024, reflecting increased labor, marketing and maintenance costs, as well as higher depreciation and amortization expenses. Interest expense declined 41.6% in the third quarter and 24.3% in the first nine months of 2024 compared to 2023, attributable to reduced borrowings and lower rates. In March 2024, Pilot borrowed $5.7 billion from certain Berkshire insurance subsidiaries and repaid its third party borrowings. Pilot subsequently repaid approximately $600 million of these borrowings through September 30, 2024. The interest on the intercompany borrowings is included in interest expense in the earnings summary above and in insurance investment income on page 36.

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).

Third QuarterFirst Nine MonthsPercentage Change
ThirdFirst Nine
2024202320242023QuarterMonths
Revenues
Manufacturing$19,675$19,174$58,044$56,5652.6%2.6%
Service and retailing22,56523,42367,14869,437(3.7)(3.3)
$42,240$42,597$125,192$126,002
Pre-tax earnings
Manufacturing$3,135$3,077$9,178$8,7911.9%4.4%
Service and retailing1,0221,3023,2064,027(21.5)(20.4)
4,1574,37912,38412,818
Income taxes and noncontrolling interests1,0131,0383,0103,106
Net earnings*$3,144$3,341$9,374$9,712
Effective income tax rate23.6%22.9%23.6%23.5%
Pre-tax earnings as a percentage of revenues9.8%10.3%9.9%10.2%

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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 $127 million in the third quarter and $389 million in the first nine months of 2024 and $173 million in the third quarter and $525 million in the first nine months of 2023. These expenses are included in “Other” in the summary of earnings on page 31 and in the “Other” earnings section on page 47.*

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).

Third QuarterFirst Nine Months
2024202320242023
Revenues
Industrial products$8,956$8,667$27,112$26,406
Building products6,9066,73919,89219,442
Consumer products3,8133,76811,04010,717
$19,675$19,174$58,044$56,565
Pre-tax earnings
Industrial products$1,489$1,427$4,710$4,388
Building products1,0701,1673,1543,289
Consumer products5764831,3141,114
$3,135$3,077$9,178$8,791
Pre-tax earnings as a percentage of revenues
Industrial products16.6%16.5%17.4%16.6%
Building products15.517.315.916.9
Consumer products15.112.811.910.4

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 $289 million (3.3%) in the third quarter and $706 million (2.7%) in the first nine months of 2024 compared to 2023. Pre-tax earnings increased $62 million (4.3%) in the third quarter and $322 million (7.3%) in the first nine months of 2024 compared to 2023. Pre-tax earnings as a percentage of revenues for the first nine months of 2024 increased 0.8 percentage points compared to the first nine months of 2023.

PCC’s revenues were $2.6 billion in the third quarter and $7.7 billion in the first nine months of 2024, increases of 11.9% and 12.4%, 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 considerable demand for air travel and aerospace products. PCC’s pre-tax earnings increased 25.1% in the third quarter and 23.4% in the first nine months of 2024 compared to 2023. The earnings increases were primarily attributable to sales increases and generally improved manufacturing and operating efficiencies. Continued growth in revenues and earnings will be predicated on our ability to successfully increase production levels to match the expected growth in aerospace products, as well as from improvements in industry supply chains and labor relations, which are currently constraining commercial aircraft production at original equipment manufacturers.

Lubrizol’s revenues were $1.6 billion in the third quarter of 2024, an increase of 2.8% over 2023, attributable to higher volumes and favorable product mix, partially offset by lower selling prices. Revenues in the first nine months of 2024 were $4.9 billion, relatively unchanged compared to 2023, as higher volumes were essentially offset by lower selling prices and unfavorable product mix. Sales volumes in the third quarter and first nine months of 2024 each increased 5% compared to 2023, reflecting higher volumes in both the additives and advance materials businesses. Lubrizol’s pre-tax earnings increased 36.2% in the third quarter and 44.7% in the first nine months of 2024, primarily attributable to lower raw material costs, higher sales volumes and lower manufacturing costs, partially offset by the impact of lower selling prices and higher selling, general and administrative expenses.

Marmon’s revenues were $3.1 billion in the third quarter and $9.3 billion in the first nine months of 2024, relatively unchanged from the third quarter of 2023 and a decrease of 2.6% compared to the first nine months of 2023. The Transportation Products group experienced comparative revenue declines of nearly 20% due to reduced volumes, following very strong demand in 2023. The Metal Services and Retail Solutions groups also experienced lower revenues in each period due to reduced customer demand. Conversely, Electrical group revenues increased in each period due to higher copper prices and increased volumes. The Rail & Leasing group generated higher revenues in each period due to higher average lease renewal rates and increased railcar repair prices and volumes.

Marmon’s pre-tax earnings declined 13.0% in the third quarter and 9.4% in the first nine 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, as well as lower earnings from the Crane Services and Electrical groups and lower financial and other income. These declines were partially offset by higher earnings in the Rail & Leasing, Water Technologies and Foodservice Technologies groups, although the Rail & Leasing group earnings in the third quarter of 2024 were negatively impacted by higher railcar re-certification maintenance costs.

IMC’s revenues were approximately $1.0 billion in the third quarter and $3.0 billion in the first nine months of 2024, decreases of 1.4% and 1.3%, respectively, compared to the same periods in 2023. Revenues in the first nine 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. The declines in organic sales were attributable to weaker general economic conditions and ongoing geopolitical conflicts. IMC’s pre-tax earnings declined 13.0% in the third quarter and 8.2% in the first nine months of 2024 compared to 2023, primarily attributable to lower gross sales margins and higher selling, general and administrative expenses. 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 $167 million (2.5%) in the third quarter and $450 million (2.3%) in the first nine months of 2024 compared to 2023. Pre-tax earnings decreased $97 million (8.3%) in the third quarter and $135 million (4.1%) in the first nine 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 $3.2 billion in the third quarter and 8.8% to $9.1 billion in the first nine months of 2024 compared to 2023. Revenues from home sales increased $446 million (6.9%) in the first nine months of 2024, reflecting higher new home unit sales of 11.8%, partially offset by changes in sales mix and lower average selling prices. Also, financial services revenues increased 15.2% in the first nine months of 2024 compared to 2023, primarily due to increased interest income from higher average loan balances. Loan balances, net of allowances for credit losses, were approximately $26.4 billion as of September 30, 2024, an increase of 14.2% since September 30, 2023. Loan portfolio balances are largely funded by borrowings from Berkshire finance affiliates.

Clayton Homes’ pre-tax earnings declined $86 million (15.6%) in the third quarter and $95 million (6.3%) in the first nine months of 2024 compared to 2023, primarily attributable to lower earnings from financial services in each period, as well as comparatively lower earnings from manufacturing in the first nine months. The earnings declines from financial services reflected increased losses from insurance claims, attributable to weather events, increased expected loan loss provisions and higher interest expense on borrowings from Berkshire finance affiliates. Interest expense on such borrowings increased $83 million (61.9%) in the third quarter and $107 million (27.1%) in the first nine months of 2024 versus 2023 as borrowings increased $5.4 billion in the third quarter to better match the increase in loan receivable balances in recent years. The corresponding interest income is included in the “Other” earnings section on page 47. The year-to-date decline 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.

Our other building products businesses generated revenues of approximately $3.7 billion in the third quarter and $10.8 billion in the first nine months of 2024, declines of $93 million (2.5%) in the third quarter and $288 million (2.6%) in the first nine months of 2024 versus 2023. Sales volumes in 2024 increased at Johns Manville and declined at the other businesses in the group, while average selling prices were lower at Johns Manville and MiTek and slightly higher at our other businesses.

Pre-tax earnings of our other building products businesses declined $11 million (1.7%) in the third quarter and $39 million (2.2%) in the first nine months of 2024 compared to 2023. Earnings as a percentage of revenues in the first nine months of 2024 were 16.1%, essentially unchanged compared to 2023. Earnings in 2024 were negatively impacted by increased restructuring and legal costs and weaker housing markets, which were partially offset by higher average gross margin rates from lower raw material costs and improved manufacturing efficiencies in certain of the businesses.

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 were $3.8 billion in the third quarter and $11.0 billion in the first nine months of 2024, increases of 1.2% and 3.0%, respectively, compared to the same periods in 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, Garan and Richline. Forest River revenues increased 6.5% in the first nine months of 2024, reflecting a 9.1% 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, primarily attributable to changes in product mix. Jazwares and Brooks Sports revenues increased 11.6% and 8.9%, respectively, in the first nine months of 2024 over 2023.

Consumer products group pre-tax earnings increased $93 million (19.3%) in the third quarter and $200 million (18.0%) in the first nine months of 2024 versus 2023. The increases were primarily attributable to higher earnings from our apparel and footwear businesses and Duracell and a 3.9% increase in year-to-date earnings from Forest River. Apparel and footwear earnings increased 41.0% in the first nine months of 2024 from 2023, primarily due to gross margin rate increases and increased gains on asset sales, as well as from the favorable effects of past restructuring and cost management efforts. The earnings increases from Duracell were attributable to reductions in selling, general and administrative expenses and higher gross margins.

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).

Third QuarterFirst Nine Months
2024202320242023
Revenues
Service$5,130$5,100$15,492$15,600
Retailing4,7124,84614,00014,418
McLane12,72313,47737,65639,419
$22,565$23,423$67,148$69,437
Pre-tax earnings
Service$569$772$1,793$2,433
Retailing3084149611,236
McLane145116452358
$1,022$1,302$3,206$4,027
Pre-tax earnings as a percentage of revenues
Service11.1%15.1%11.6%15.6%
Retailing6.58.56.98.6
McLane1.10.91.20.9

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 third quarter and declined $108 million (0.7%) in the first nine months of 2024 compared to 2023, reflecting lower revenues from TTI and XTRA and higher revenues from the aviation services businesses and IPS. TTI revenues declined 10.0% in the third quarter and 12.1% in the first nine months of 2024 compared to 2023, attributable to lower sales volumes and pricing pressures. Sales at TTI in 2024 declined across most regions, markets and product lines, attributable to excess inventory levels within supply chains, which contributed to lower customer demand. These conditions are expected to continue over the remainder of 2024. Revenues from aviation services increased 10.4% in the third quarter and 9.8% in the first nine months of 2024 versus 2023. The increases were primarily due to higher numbers of aircraft in shared aircraft ownership programs, increases in flight hours across NetJets’ various programs and higher average rates at FlightSafety.

Service group pre-tax earnings decreased 26.3% in both the third quarter and in the first nine months of 2024 compared to 2023, primarily attributable to TTI and the aviation services businesses. Pre-tax earnings as a percentage of revenues fell 4.0 percentage points in both the third quarter and first nine months of 2024 compared to 2023. Earnings from TTI declined 48.3% in the third quarter and 49.5% in the first nine 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 selling, general and administrative expenses. Earnings from aviation services declined 17.5% in the third quarter and 11.9% in the first nine months of 2024 versus 2023, primarily attributable to increased costs of services, including higher maintenance, personnel and fuel costs and depreciation expense, as well as increased impairment charges.

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”), which represented 70% of our combined retailing revenues in the first nine 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 nine 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 2.8% in the third quarter to $4.7 billion and 2.9% to $14.0 billion in the first nine months of 2024 compared to 2023. Almost all of our retailing businesses experienced revenue declines in 2024. BHA vehicle sales revenues decreased 1.4% in the first nine months of 2024 versus 2023. New vehicle unit sales in the first nine months of 2024 increased 7.0% and pre-owned unit sales declined 2.6% versus 2023. Further, average vehicle selling prices were lower in the first nine months of 2024 versus 2023, attributable to increased price competition and product mix changes. Home furnishing revenues declined 7.9% in the first nine months of 2024 versus 2023, primarily attributable to lower sales volumes and increasing price competition. Also, combined revenues of our other retailers declined 7.9% in the first nine months of 2024 compared to 2023.

Retailing group pre-tax earnings declined $106 million (25.6%) in the third quarter and $275 million (22.2%) in the first nine months of 2024 compared to 2023. BHA’s pre-tax earnings declined 10.0% in the third quarter and 9.8% in the first nine months of 2024 compared to 2023, primarily due to lower vehicle gross margins, partially offset by higher earnings from finance/service contract operations and lower selling, general and administrative expenses. Aggregate pre-tax earnings for the remainder of our retailing group declined $77 million (61.9%) in the third quarter and $192 million (48.4%) in the first nine months of 2024 compared to 2023. All of our other retailers generated lower earnings in 2024 compared to 2023, reflecting lower sales and gross margins, and higher selling, general and administrative expenses as percentages of sales.

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 5.6% in the third quarter and 4.5% in the first nine months of 2024 compared to 2023, primarily attributable to lower unit volumes. Most notably the restaurant business experienced a comparative 8.4% sales decline in the first nine months of 2024 compared to 2023 driven by lower volumes, attributable to changing consumer preferences for restaurant dining. Pre-tax earnings increased $29 million (25.0%) in the third quarter and $94 million (26.3%) in the first nine months of 2024 compared to 2023. The increases in earnings reflected small 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 $27 million in the third quarter and $505 million in the first nine months of 2024 versus 2023. The decline in earnings in the first nine months of 2024 reflected lower earnings from Kraft Heinz 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).

Third QuarterFirst Nine Months
2024202320242023
Investment gains (losses)$20,514$(29,778)$46,247$38,041
Income taxes and noncontrolling interests4,353(6,250)9,8568,261
Net earnings$16,161$(23,528)$36,391$29,780
Effective income tax rate21.1%20.9%21.2%21.6%

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 $18.6 billion in the third quarter and $45.1 billion in the first nine months of 2024 and net unrealized losses of $30.4 billion in the third quarter and net unrealized gains of $33.3 billion in the first nine months of 2023 on securities we held at the end of the applicable period. In addition, we recognized gains of $1.9 billion in the third quarter and $1.2 billion in the first nine months of 2024 on securities we sold during the applicable period. In the third quarter and first nine months of 2023, we recognized gains on securities we sold during each period of $605 million and $1.7 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 $23.4 billion in the third quarter and $97.1 billion in the first nine months of 2024 compared to $759 million in the third quarter and $5.4 billion in the first nine months of 2023. Pre-tax investment gains in the first nine 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).

Third QuarterFirst Nine Months
2024202320242023
Acquisition accounting expenses$(127)$(194)$(389)$(596)
Corporate interest expense, before foreign currency effects(56)(53)(178)(171)
Foreign currency exchange rate gains (loss) on Berkshire and BHFC non-U.S. Dollar senior notes(1,141)447(98)895
Other earnings447200994501
$(877)$400$329$629

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 are 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 $247 million in the third quarter and $493 million in the first nine months of 2024, primarily due to increased interest income, including interest earned on intercompany loans to operating subsidiaries.

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 September 30, 2024 was $629.1 billion, an increase of $67.8 billion since December 31, 2023. Net earnings attributable to Berkshire shareholders were $69.3 billion for the first nine months of 2024 and included after-tax investment gains of approximately $36.4 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 repurchase minimum or subject to maximum 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 nine months of 2024 to repurchase its common stock.

At September 30, 2024, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills, net of payables for unsettled purchases, of $305.5 billion. Investments in equity and fixed maturity securities, excluding our investments in Kraft Heinz and Occidental common stock, were $287.7 billion. During the first nine months of 2024, we paid $5.8 billion to acquire equity securities and we received $133.2 billion from sales of equity securities.

On January 16, 2024, we acquired the remaining 20% noncontrolling ownership interest in Pilot for $2.6 billion. On September 30, 2024, BHE repurchased shares of its common stock and a $100 million debenture held by certain noncontrolling BHE shareholders in exchange for cash of $2.4 billion and a promissory note with a par amount of $600 million, which was repaid in October 2024.

Our consolidated borrowings at September 30, 2024 were $124.5 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 September 30, 2024 was $19.6 billion, an increase of $857 million from December 31, 2023. In April 2024, Berkshire issued an aggregate ¥263.3 billion (approximately $1.7 billion) of senior notes. In September 2024, Berkshire issued ¥142.5 billion (approximately $1.0 billion) of 1.25% term debt due in 2028. In October 2024, Berkshire issued ¥281.8 billion (approximately $1.85 billion) of senior notes with interest rates ranging from 1.031% to 2.625% and maturity dates ranging from 2027 to 2054. In the first nine months of 2024, senior note maturities were $1.9 billion.

Senior note borrowings of BHFC, a wholly-owned financing subsidiary, were approximately $18.2 billion at September 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 $23.5 billion as of September 30, 2024, relatively unchanged from December 31, 2023. In the first nine months of 2024, BNSF issued $1.3 billion of 5.5% debentures due in 2055 and repaid approximately $1.2 billion of maturing senior debentures. BHE’s aggregate borrowings increased $1.0 billion in the first nine months of 2024 to approximately $57.3 billion at September 30. In the first nine 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 $4.4 billion. In October 2024, a BHE subsidiary issued $900 million of 5.6% senior notes due in 2054. Berkshire does not guarantee the repayment of debt issued by BNSF, BHE or any of their subsidiaries or affiliates.

In the first nine months of 2024, our diverse group of businesses generated net operating cash flows of $26.0 billion, which reflects income tax payments of $17.5 billion, including $15.3 billion paid in the third quarter. Income tax payments in 2024 included significant U.S. Federal estimated income tax payments derived from taxable gains on sales of equity securities. The gross proceeds from such sales were included in cash flows from investing activities.

Our consolidated capital expenditures for property, plant and equipment and equipment held for lease were $13.6 billion in the first nine months of 2024, which included capital expenditures by BNSF and BHE of $9.0 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 $3.7 billion.

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

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.

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 September 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 September 30, 2024 included estimated liabilities for unpaid losses and loss adjustment expenses from property and casualty insurance and reinsurance contracts of $148.9 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 September 30, 2024 included goodwill of acquired businesses of $84.6 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 were acquired in late 2022 and early 2023, and, in the aggregate, had an estimated fair value of $21.5 billion, or 1.5% greater than the carrying value, and 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 September 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.

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

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.

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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