(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Number of shares of common stock outstanding as of ~~October~~July 26, ~~2022:~~2023:

* Includes U.S. Treasury Bills with maturities of three months or less when purchased of $~~1.9~~24.5 billion at ~~September~~June 30, ~~2022~~2023 and $~~61.7~~2.6 billion at December 31, ~~2021.~~2022.

* Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings ~~(loss)~~ per average equivalent Class B share outstanding is equal to one-fifteen-hundredth of the equivalent Class A amount. See Note ~~17.~~19.

Note ~~10.~~11. Property, plant and equipment

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


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
Land, buildings and improvements	$	14,089		$	14,070		$	14,695		$	14,761
Machinery and equipment		26,072			26,063			27,464			26,690
Furniture, fixtures and other		4,968			4,640			5,297			4,847
		45,129			44,773			47,456			46,298
Accumulated depreciation		(24,751	)		(23,939	)		(26,043	)		(25,185	)
	$	20,378		$	20,834		$	21,413		$	21,113

A summary of property, plant and equipment of railroad and utilities and energy businesses follows (in millions). The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries. Assets of Pilot are included in land, buildings, improvements and other within the utilities and energy section of the following table.


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
Railroad:
Land, track structure and other roadway	$	66,744		$	65,843		$	68,885		$	67,350
Locomotives, freight cars and other equipment		15,989			13,822			16,051			16,031
Construction in progress		1,366			1,027			2,009			1,743
		84,099			80,692			86,945			85,124
Accumulated depreciation		(17,530	)		(14,978	)		(18,750	)		(17,899	)
		66,569			65,714			68,195			67,225
Utilities and energy:
Utility generation, transmission and distribution systems		90,756			90,223			94,351			92,759
Interstate natural gas pipeline assets		17,882			17,423			18,605			18,328
Independent power plants and other assets		14,352			13,695			14,680			14,650
Land, buildings, improvements and other								8,300			—
Construction in progress		5,198			4,196			7,610			5,357
		128,188			125,537			143,546			131,094
Accumulated depreciation		(37,285	)		(35,721	)		(39,994	)		(38,051	)
		90,903			89,816			103,552			93,043
	$	157,472		$	155,530		$	171,747		$	160,268

Depreciation expense for the first ~~nine~~six months of ~~2022~~2023 and ~~2021~~2022 is summarized below (in millions).


	First Nine Months				First Six Months
	2022		2021		2023		2022
Insurance and other	$	1,690	$	1,725	$	1,158	$	1,127
Railroad, utilities and energy		4,646		4,485		3,494		3,091
	$	6,336	$	6,210	$	4,652	$	4,218

Notes to Consolidated Financial Statements (Continued)

Note ~~16.~~18. Fair value measurements

Our financial assets and liabilities are summarized below as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, other receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of ~~their~~or otherwise approximate the fair values.


	Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2022
June 30, 2023
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	8,775	$	8,775	$	8,740	$	35	$	—	$	9,052	$	9,052	$	9,017	$	35	$	—
Foreign governments		8,505		8,505		8,207		298		—		11,481		11,481		11,170		311		—
Corporate bonds		1,029		1,029		—		1,029		—		1,554		1,554		—		908		646
Other		293		293		—		293		—		266		266		—		266		—
Investments in equity securities		306,167		306,167		294,094		7		12,066		353,409		353,409		342,596		11		10,802
Investment in Kraft Heinz & Occidental common stock		23,949		22,796		22,796		—		—
Investments in Kraft Heinz & Occidental common stock												27,060		24,732		24,732		—		—
Loans and finance receivables												23,530		24,020		—		1,097		22,923
Derivative contract assets (1)												355		355		74		256		25
Derivative contract liabilities (1)												309		309		48		73		188
Notes payable and other borrowings:
Insurance and other												41,389		36,100		—		36,071		29
Railroad, utilities and energy												83,958		77,040		—		77,040		—

December 31, 2022
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies											$	9,802	$	9,802	$	9,733	$	69	$	—
Foreign governments												10,327		10,327		9,854		473		—
Corporate bonds												2,195		2,195		—		1,546		649
Other												2,804		2,804		—		2,804		—
Investments in equity securities												308,793		308,793		296,610		9		12,174
Investments in Kraft Heinz & Occidental common stock												24,421		25,491		25,491		—		—
Loans and finance receivables		22,094		22,659		—		1,744		20,915		23,208		23,428		—		1,513		21,915
Derivative contract assets (1)		731		731		68		593		70		589		589		56		474		59
Derivative contract liabilities (1)		261		261		2		133		126		242		242		8		122		112
Notes payable and other borrowings:
Insurance and other		41,535		36,362		—		36,314		48		46,538		41,961		—		41,061		900
Railroad, utilities and energy		74,961		66,991		—		66,991		—		76,206		67,651		—		67,651		—
December 31, 2021
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	3,303	$	3,303	$	3,261	$	42	$	—
Foreign governments		10,994		10,994		10,286		708		—
Corporate bonds		1,774		1,774		—		1,774		—
Other		363		363		—		363		—
Investments in equity securities		350,719		350,719		339,225		8		11,486
Investment in Kraft Heinz common stock		13,112		11,683		11,683		—		—
Loans and finance receivables		20,751		22,174		—		2,178		19,996
Derivative contract assets (1)		329		329		6		230		93
Derivative contract liabilities (1)		376		376		2		150		224
Notes payable and other borrowings:
Insurance and other		39,272		42,339		—		42,292		47
Railroad, utilities and energy		74,990		87,065		—		87,065		—

——————

(1)

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

1923

Notes to Consolidated Financial Statements (Continued)

Note ~~16.~~18. Fair value measurements (Continued)

The fair values of substantially all of our financial instruments were measured using market or income approaches. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.

Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 follow (in millions).

Balance at
beginning
of year

Gains included in earnings

Acquisitions,
dispositions
and
settlements

Transfers out of Level 3

Balance at September 30

Investments in equity securities:

2022
$
11,480

$
581

$
—

$
—

$
12,061

2021

8,978

1,713

1,100

—

11,791

Equity index put option contract liabilities:

2021

(1,065
)

780

(1
)

—

(286
)


	Balance at beginning of year		Gains (losses) included in earnings			Acquisitions, dispositions and settlements			Transfers out of Level 3		Balance at June 30
Investments in equity securities:
2023	$	12,169	$	(86	)	$	(1,286	)	$	—	$	10,797
2022		11,480		455			—			—		11,935

Quantitative information as of ~~September~~June 30, ~~2022 with respect to~~2023 for the significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (dollars in millions).

Fair
Value

Principal Valuation
Techniques

Unobservable
Inputs

Weighted
Average

Fair
Value

Principal Valuation
Techniques

Unobservable
Inputs

Weighted
Average

Investments in equity securities:

Preferred stock

9,956

Discounted cash flow

Expected duration

7 years

8,994

Discounted cash flow

Expected duration

6 years

Discount for transferability
restrictions and subordination

372 bps

Discounts for liquidity
and subordination

372 bps

Common stock warrants

2,105

Warrant pricing model

Expected duration

7 years

1,803

Warrant pricing model

Expected duration

6 years

Volatility

39%

Volatility

40%

Investments in equity securities in the preceding table include our investments in certain preferred ~~stocks~~stock and common stock warrants that do not have readily determinable market values as defined under GAAP. These investments are ~~subject to~~private placements with contractual ~~restrictions on transferability~~terms that restrict transfers and ~~may contain provisions that~~currently prevent us from economically hedging our investments. We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of liquidity and subordination in liquidation. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration and volatility of the warrants.

2024

Notes to Consolidated Financial Statements (Continued)

Note ~~17.~~19. Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the first ~~nine~~six months of ~~2022~~2023 are shown in the table below. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.


	Class A, $5 Par Value (1,650,000 shares authorized)									Class B, $0.0033 Par Value (3,225,000,000 shares authorized)								Class A, $5 Par Value (1,650,000 shares authorized)									Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
	Issued			Treasury			Outstanding			Issued		Treasury			Outstanding			Issued			Treasury			Outstanding			Issued		Treasury			Outstanding
Balances at December 31, 2021		665,901			(48,788	)		617,113			1,488,292,852		(197,818,349	)		1,290,474,503
Balances at December 31, 2022																			651,450			(59,886	)		591,564			1,509,969,352		(207,715,276	)		1,302,254,076
Conversions of Class A to Class B common stock		(12,093	)		—			(12,093	)		18,139,500		—			18,139,500			(9,871	)		—			(9,871	)		14,806,500		—			14,806,500
Treasury stock acquired		—			(6,818	)		(6,818	)		—		(6,850,133	)		(6,850,133	)		—			(6,145	)		(6,145	)		—		(9,071,308	)		(9,071,308	)
Balances at September 30, 2022		653,808			(55,606	)		598,202			1,506,432,352		(204,668,482	)		1,301,763,870
Balances at June 30, 2023																			641,579			(66,031	)		575,548			1,524,775,852		(216,786,584	)		1,307,989,268

Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equal to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were ~~1,466,045~~1,447,541 shares outstanding as of ~~September~~June 30, ~~2022~~2023 and ~~1,477,429~~1,459,733 shares outstanding as of December 31, ~~2021.~~2022.

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

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

Note ~~18.~~20. Income taxes

Our consolidated effective income tax rates were ~~37.1~~20.3% in the ~~third~~second quarter and ~~23.5~~20.2% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~14.7~~21.8% in the ~~third~~second quarter and ~~18.8~~22.4% in the first ~~nine~~six months of ~~2021.~~2022. Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in certain equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S. Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings, including investment gains or losses with respect to our investments in equity securities, the amount of non-deductible goodwill impairment charges and other expenses and the underlying income tax rates applicable in the various taxing ~~jurisdictions.~~jurisdictions, and enacted changes thereto.

2125

Notes to Consolidated Financial Statements (Continued)

Note ~~19.~~21. Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for the ~~nine~~six months ending ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 follows (in millions).

Unrealized
appreciation of
fixed maturity
securities, net

Foreign
currency
translation

Defined benefit
pension plans

Other

Accumulated
other
comprehensive
income

First nine months of 2022

Balance at beginning of year

$
369

$
(4,092
)

$
(347
)

$
43

$
(4,027
)
Other comprehensive income, net

(767
)

(3,676
)

47

189

(4,207
)
Balance at end of period

$
(398
)

$
(7,768
)

$
(300
)

$
232

$
(8,234
)

First nine months of 2021

Balance at beginning of year

$
536

$
(3,082
)

$
(1,645
)

$
(52
)

$
(4,243
)
Other comprehensive income, net

(126
)

(619
)

112

42

(591
)
Balance at end of period

$
410

$
(3,701
)

$
(1,533
)

$
(10
)

$
(4,834
)


	Unrealized gains (losses) on investments			Foreign currency translation			Long-duration insurance contracts			Defined benefit pension plans			Other			Total
First six months of 2023
Beginning of year as previously reported	$	(187	)	$	(6,140	)	$	—		$	(552	)	$	288		$	(6,591	)
Adoption of ASU 2018-12		—			(2	)		1,541			—			—			1,539
Beginning balance as revised		(187	)		(6,142	)		1,541			(552	)		288			(5,052	)
Other comprehensive income		174			592			71			41			(66	)		812
Balance at end of period	$	(13	)	$	(5,550	)	$	1,612		$	(511	)	$	222		$	(4,240	)

First six months of 2022
Beginning of year as previously reported	$	369		$	(4,092	)	$	—		$	(347	)	$	43		$	(4,027	)
Adoption of ASU 2018-12		—			—			(4,096	)		—			—			(4,096	)
Beginning balance as revised		369			(4,092	)		(4,096	)		(347	)		43			(8,123	)
Other comprehensive income		(352	)		(1,969	)		4,566			27			148			2,420
Balance at end of period	$	17		$	(6,061	)	$	470		$	(320	)	$	191		$	(5,703	)

Note ~~20.~~22. Supplemental cash flow information

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


	First Nine Months				First Six Months
	2022		2021		2023		2022
Cash paid during the period for:
Income taxes	$	3,474	$	4,002	$	2,962	$	1,951
Interest:
Insurance and other		917		1,040		725		567
Railroad, utilities and energy		2,323		2,335		1,857		1,564
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions						10,815		21

Note ~~21.~~23. Contingencies and commitments

We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. WeGenerally, we do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations.

Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We currently believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.

OnPacifiCorp, a wholly owned subsidiary of Berkshire’s ~~March 20, 2022~~92% owned subsidiary, Berkshire Hathaway Energy Company (“BHE”), ~~Berkshire entered into~~operates as a ~~definitive agreement~~regulated electric utility in Oregon and ~~plan of merger with Alleghany Corporation (“Alleghany”)~~other Western states. In September 2020, a severe weather event resulting in high winds, low humidity and warm temperatures contributed to ~~acquire all of Alleghany’s outstanding common stock for cash consideration of approximately $11.6~~ ~~billion. Following the receipt of Alleghany shareholder approval on June 9, 2022~~several major wildfires (the “2020 Wildfires”), which resulted in real and ~~all required regulatory approvals, the acquisition was completed on~~ ~~October 19, 2022. The consideration paid was funded by existing cash balances. Alleghany operates a group of~~personal property and ~~casualty reinsurance~~natural resource damage, personal injuries and ~~insurance businesses. It also owns a portfolio~~loss of ~~non-financial businesses.~~life and widespread power outages in Oregon and Northern California. The wildfires spread across certain parts of PacifiCorp’s service territory and surrounding areas across multiple counties in Oregon and California, including Siskiyou County, California; Jackson County, Oregon; Douglas County, Oregon; Marion County, Oregon; Lincoln County, Oregon; and Klamath County, Oregon, burning over 500,000 acres in aggregate. Third-party reports for these wildfires indicate over 2,000 structures destroyed, including residences; several structures damaged; multiple individuals injured; and several fatalities.

~~Given the proximity of the Alleghany acquisition date~~26

Notes to ~~the date these interim~~ Consolidated Financial Statements ~~were issued, it~~(Continued)

Note 23. Contingencies and commitments (Continued)

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

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

Several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to ~~provide an initial estimate~~those made in the aforementioned lawsuits. Additionally, certain governmental agencies have informed PacifiCorp that they are contemplating filing actions in connection with certain of the fair values of identifiable assets acquired, liabilities assumed and residual goodwill or proforma information. We expect to provide disclosures of preliminary values of identifiable assets acquired and liabilities assumed as of the acquisition date as well as proforma information, if material, in our Consolidated Financial Statements for the year ending December 31, 2022. Alleghany’s most recently available historical consolidated financial statements are as of September 30, 2022. As of that date, Alleghany’s total assets and liabilities were $~~31.2~~ ~~billion and $23.4~~ ~~billion, respectively.~~Oregon 2020 Wildfires.

In June ~~2022, BHE acquired~~2023, a jury issued a verdict for the ~~BHE common stock held by Greg Abel, Berkshire’s Vice Chairman - non-insurance operations,~~17 named plaintiffs in the James case. The plaintiffs seek damages for $economic losses, non-economic losses, including mental suffering, emotional distress, personal injury and loss of life, punitive damages, other damages and attorneys’ fees. PacifiCorp intends to vigorously appeal the jury’s findings and damage awards, including whether the case can proceed as a class action. The appeals process and further actions could take several years.~~870~~

~~million. The purchase was pursuant~~Based on the facts and circumstances available to us as of the date of this filing, which includes the status of the verdict in the James case with respect to the ~~terms of a shareholders agreement between Berkshire, BHE~~17 named plaintiffs, other litigation and ~~BHE’s non-controlling shareholders. Berkshire recorded a charge~~recent settlements, PacifiCorp has accrued cumulative estimated pre-tax probable losses associated with the 2020 Wildfires of $~~362~~1,018 million through June 30, 2023, or $608 million net of probable insurance recoveries. PacifiCorp’s cumulative accrual includes estimates of probable losses for fire suppression costs, real and personal property damages, natural resource damages for certain areas and non-economic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is reasonably able to ~~capital in excess of par value for the excess~~estimate at this time. For certain aspects of the ~~consideration paid over~~2020 Wildfires for which loss is considered probable, information necessary to reasonably estimate the ~~carrying value~~potential losses, such as those related to certain areas of natural resource damages, is not currently available.

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

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

2227

Notes to Consolidated Financial Statements (Continued)

Note ~~22.~~24. Revenues from contracts with customers

We recognize revenue when a good or service is transferred to a customer. A good or service is transferred when or as the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for the ~~third~~second quarter and first ~~nine~~six months of ~~2022~~2023 and ~~2021~~2022 (in millions). Revenues from Pilot in 2023 are for the five months ending June 30, 2023. Other revenues, which are not considered to be revenues from contracts with customers under GAAP, are primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues.


	Manufacturing		McLane		Service and Retailing		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total		Manufacturing		McLane		Service and Retailing		BNSF		Berkshire Hathaway Energy		Pilot		Insurance, Corporate and other		Total
Three months ending September 30, 2022
Three months ending June 30, 2023
Manufactured products:
Industrial and commercial products	$	6,145	$	—	$	51	$	—	$	—	$	—	$	6,196	$	7,221	$	—	$	54	$	—	$	—	$	—	$	—	$	7,275
Building products		5,928		—		—		—		—		—		5,928		5,178		—		—		—		—		—		—		5,178
Consumer products		4,753		—		—		—		—		—		4,753		4,343		—		—		—		—		—		—		4,343
Grocery and convenience store distribution		—		8,315		—		—		—		—		8,315		—		7,535		—		—		—		—		—		7,535
Food and beverage distribution		—		4,946		—		—		—		—		4,946		—		4,902		—		—		—		—		—		4,902
Auto sales		—		—		2,686		—		—		—		2,686		—		—		2,789		—		—		—		—		2,789
Other retail and wholesale distribution		803		—		4,189		—		—		—		4,992		814		—		4,138		—		—		681		—		5,633
Service		328		277		1,006		6,646		1,328		—		9,585		347		213		1,390		5,791		1,217		88		—		9,046
Electricity and natural gas		—		—		—		—		5,905		—		5,905
Electricity, natural gas and fuel																—		—		—		—		4,779		13,903		—		18,682
Total		17,957		13,538		7,932		6,646		7,233		—		53,306		17,903		12,650		8,371		5,791		5,996		14,672		—		65,383
Other revenues		1,012		32		1,609		17		294		20,664		23,628		1,171		47		1,738		17		354		61		23,732		27,120
	$	18,969	$	13,570	$	9,541	$	6,663	$	7,527	$	20,664	$	76,934	$	19,074	$	12,697	$	10,109	$	5,808	$	6,350	$	14,733	$	23,732	$	92,503

Nine months ending September 30, 2022
Six months ending June 30, 2023
Manufactured products:
Industrial and commercial products	$	18,219	$	—	$	148	$	—	$	—	$	—	$	18,367	$	14,450	$	—	$	119	$	—	$	—	$	—	$	—	$	14,569
Building products		17,317		—		—		—		—		—		17,317		9,936		—		—		—		—		—		—		9,936
Consumer products		15,355		—		—		—		—		—		15,355		8,378		—		—		—		—		—		—		8,378
Grocery and convenience store distribution		—		24,000		—		—		—		—		24,000		—		15,328		—		—		—		—		—		15,328
Food and beverage distribution		—		14,510		—		—		—		—		14,510		—		9,664		—		—		—		—		—		9,664
Auto sales		—		—		7,888		—		—		—		7,888		—		—		5,354		—		—		—		—		5,354
Other retail and wholesale distribution		2,343		—		12,629		—		—		—		14,972		1,613		—		8,368		—		—		1,103		—		11,084
Service		894		739		3,090		19,173		4,001		—		27,897		701		497		2,716		11,776		2,028		109		—		17,827
Electricity and natural gas		—		—		—		—		15,359		—		15,359
Electricity, natural gas and fuel																—		—		—		—		10,070		22,918		—		32,988
Total		54,128		39,249		23,755		19,173		19,360		—		155,665		35,078		25,489		16,557		11,776		12,098		24,130		—		125,128
Other revenues		2,962		97		4,470		46		658		60,026		68,259		2,261		89		3,454		33		691		99		46,141		52,768
	$	57,090	$	39,346	$	28,225	$	19,219	$	20,018	$	60,026	$	223,924	$	37,339	$	25,578	$	20,011	$	11,809	$	12,789	$	24,229	$	46,141	$	177,896

2328

Notes to Consolidated Financial Statements (Continued)

Note ~~22.~~24. Revenues from contracts with customers (Continued)

Manufacturing

McLane

Service
and
Retailing

BNSF

Berkshire
Hathaway
Energy

Insurance,
Corporate
and other

Total

Three months ending September 30, 2021

Manufactured products:

Industrial and commercial products

$
5,600

$
—

$
43

$
—

$
—

$
—

$
5,643

Building products

5,005

—

—

—

—

—

5,005

Consumer products

4,758

—

—

—

—

—

4,758

Grocery and convenience store distribution

—

7,933

—

—

—

—

7,933

Food and beverage distribution

—

4,478

—

—

—

—

4,478

Auto sales

—

—

2,423

—

—

—

2,423

Other retail and wholesale distribution

742

—

3,913

—

—

—

4,655

Service

400

175

1,073

5,747

1,586

—

8,981

Electricity and natural gas

—

—

—

—

5,138

—

5,138

Total

16,505

12,586

7,452

5,747

6,724

—

49,014

Other revenues

951

26

1,202

14

289

19,087

21,569

$
17,456

$
12,612

$
8,654

$
5,761

$
7,013

$
19,087

$
70,583

Nine months ending September 30, 2021

Manufactured products:

Industrial and commercial products

$
16,549

$
—

$
142

$
—

$
—

$
—

$
16,691

Building products

14,518

—

—

—

—

—

14,518

Consumer products

13,525

—

—

—

—

—

13,525

Grocery and convenience store distribution

—

23,104

—

—

—

—

23,104

Food and beverage distribution

—

12,838

—

—

—

—

12,838

Auto sales

—

—

7,485

—

—

—

7,485

Other retail and wholesale distribution

2,199

—

11,577

—

—

—

13,776

Service

1,099

509

3,060

16,875

4,219

—

25,762

Electricity and natural gas

—

—

—

—

14,048

—

14,048

Total

47,890

36,451

22,264

16,875

18,267

—

141,747

Other revenues

2,821

78

3,287

42

755

55,566

62,549

$
50,711

$
36,529

$
25,551

$
16,917

$
19,022

$
55,566

$
204,296


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

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

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of ~~September~~June 30, ~~2022~~2023 and the timing of when the performance obligations are expected to be satisfied follows (in millions).


	Less than 12 months		Greater than 12 months		Total		Less than 12 months		Greater than 12 months		Total
Electricity and natural gas	$	3,619	$	21,586	$	25,205
Electricity, natural gas and fuel							$	3,390	$	20,764	$	24,154
Other sales and service contracts		1,588		3,039		4,627		3,377		5,258		8,635

2429

Notes to Consolidated Financial Statements (Continued)

Note ~~23.~~25. Business segment data

Our operating businesses include a large and diverse group of insurance, manufacturing, service and retailing businesses. We organize our reportable business segments in a manner that reflects how management views those business activities. Certain businesses are grouped together for segment reporting based upon similar products or product lines and marketing, selling and distribution characteristics, even though those business units are operated under separate local management. We acquired control of Pilot Travel Centers (“Pilot”) on January 31, 2023. Pilot’s revenues, costs and earnings are included in our Consolidated Financial Statements, and Pilot is considered a reportable segment beginning February 1, 2023. In this presentation, the revenues and pre-tax earnings of the Pilot segment are for the five months ending June 30, 2023. Previously, our earnings from Pilot were determined under the equity method and are included in earnings from equity method investments. Revenues and earnings (loss) before income taxes by segment for the ~~third~~second quarter and first ~~nine~~six months of ~~2022~~2023 and ~~2021~~2022 were as follows (in millions).


	Third Quarter					First Nine Months					Second Quarter					First Six Months
	2022		2021			2022		2021			2023			2022		2023			2022
Revenues of Operating Businesses
Insurance:
Underwriting:
GEICO	$	9,808	$	9,604		$	29,169	$	28,073		$	9,714		$	9,807	$	19,340		$	19,361
Berkshire Hathaway Primary Group		3,485		2,964			9,916		8,373			4,233			3,313		8,194			6,431
Berkshire Hathaway Reinsurance Group		5,517		5,159			15,304		14,868			6,614			4,961		12,823			9,777
Investment income		1,683		1,339			5,331		4,212			2,918			2,284		5,310			3,648
Total insurance		20,493		19,066			59,720		55,526			23,479			20,365		45,667			39,217
BNSF		6,693		5,790			19,301		17,000			5,828			6,640		11,847			12,608
BHE		7,531		7,013			20,032		19,022
Berkshire Hathaway Energy (“BHE”)												6,362			6,545		12,813			12,565
Pilot Travel Centers (“Pilot”)												14,754			—		24,262			—
Manufacturing		19,000		17,496			57,193		50,821			19,102			19,772		37,391			38,193
McLane		13,569		12,612			39,346		36,529			12,883			13,262		25,942			25,777
Service and retailing		9,567		8,679			28,299		25,614			10,141			9,617		20,072			18,732
		76,853		70,656			223,891		204,512			92,549			76,201		177,994			147,092
Reconciliation of segments to consolidated amount
Corporate, eliminations and other		81		(73	)		33		(216	)		(46	)		—		(98	)		(48	)
	$	76,934	$	70,583		$	223,924	$	204,296		$	92,503		$	76,201	$	177,896		$	147,044


	Third Quarter						First Nine Months						Second Quarter						First Six Months
	2022			2021			2022			2021			2023			2022			2023			2022
Earnings (Loss) Before Income Taxes of Operating Businesses
Insurance:
Underwriting:
GEICO	$	(759	)	$	(289	)	$	(1,424	)	$	1,360		$	514		$	(487	)	$	1,217		$	(665	)
Berkshire Hathaway Primary Group		(281	)		(23	)		53			349			272			242			540			334
Berkshire Hathaway Reinsurance Group		(110	)		(708	)		1,013			(1,298	)		827			1,141			1,058			1,442
Investment income		1,678			1,337			5,322			4,205			2,912			2,283			5,297			3,644
Total insurance		528			317			4,964			4,616			4,525			3,179			8,112			4,755
BNSF		1,884			2,029			5,844			5,667			1,615			2,151			3,264			3,960
BHE		1,321			1,375			2,561			2,797			624			591			847			1,304
Pilot														186			—			322			—
Manufacturing		2,883			2,445			8,735			7,595			3,103			3,028			5,714			5,852
McLane		112			(8	)		270			179			129			76			242			158
Service and retailing		1,202			1,110			3,536			3,234			1,262			1,199			2,483			2,334
		7,930			7,268			25,910			24,088			11,444			10,224			20,984			18,363
Reconciliation of segments to consolidated amount
Investment and derivative gains (losses)		(13,465	)		4,921			(82,362	)		38,015			33,061			(66,919	)		67,819			(68,897	)
Interest expense, not allocated to segments		(99	)		(128	)		(303	)		(386	)		(103	)		(100	)		(217	)		(204	)
Equity method investments		441			377			1,048			775			511			204			1,199			543
Corporate, eliminations and other		1,076			46			2,920			241			522			1,283			402			1,844
	$	(4,117	)	$	12,484		$	(52,787	)	$	62,733		$	45,435		$	(55,308	)	$	90,187		$	(48,351	)

2530

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

Results of Operations

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


	Third Quarter						First Nine Months					Second Quarter					First Six Months
	2022			2021			2022			2021		2023		2022			2023		2022
Insurance – underwriting	$	(962	)	$	(784	)	$	(334	)	$	356	$	1,247	$	715		$	2,158	$	882
Insurance – investment income		1,408			1,161			4,484			3,588		2,369		1,906			4,338		3,076
Railroad		1,442			1,538			4,477			4,305
Utilities and energy		1,585			1,496			3,101			2,939
BNSF													1,264		1,664			2,511		3,035
Berkshire Hathaway Energy (“BHE”)													785		789			1,201		1,564
Pilot Travel Centers (“Pilot”)													114		—			197		—
Manufacturing, service and retailing		3,247			2,706			9,521			8,329		3,389		3,249			6,371		6,274
Non-controlled businesses*													535		182			1,103		464
Investment and derivative contract gains (losses)		(10,449	)		3,878			(65,067	)		29,979		25,869		(53,038	)		53,308		(54,618	)
Other		1,041			349			2,835			653		340		912			229		1,282
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(2,688	)	$	10,344		$	(40,983	)	$	50,149	$	35,912	$	(43,621	)	$	71,416	$	(38,041	)

——————

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

Through our subsidiaries, we engage in numerous diverse business activities. We manage our operating businesses on an unusually decentralized basis. There are few centralized or integrated business functions. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. The business segment data (Note 2325 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

InTo varying degrees, our operating businesses have been impacted by government and private sector actions taken to mitigate the adverse economic effects of the COVID-19 ~~pandemic has affected our operating businesses. In addition, significant disruptions~~virus and its variants as well as by the development of ~~supply chains and higher costs emerged in 2021 and have persisted in 2022. Further,~~global geopolitical conflicts, ~~including the Russia-Ukraine conflict, have developed in 2022.~~supply chain disruptions and government actions to slow inflation. We cannot reliably predict the future economic effects of these events on our ~~businesses or when our operations will normalize. Nor can we reliably predict how these events will alter the future consumption patterns of consumers and businesses we serve.~~businesses.

Insurance underwriting ~~after-tax~~generated earnings ~~decreased $178~~of $1.25 billion in the second quarter and $2.16 billion in the first six months of 2023 versus $715 million in the ~~third~~second quarter and ~~$690~~$882 million in the first ~~nine~~six months of 2022. Earnings in 2022 ~~versus 2021. After-tax incurred losses~~reflect increases of $134 million in the second quarter and $254 million in the first six months from the previously reported amounts attributable to ~~significant catastrophe occurrences in~~ the third quarter were approximately $2.7 billion from Hurricane Ian in 2022 and $1.7 billion from Hurricane Ida and floods in Europe in 2021. Underwriting results in 2022 were also negatively impacted by increases in private passenger automobile claims frequencies and severities, and favorably impacted by higher foreign currency exchange rate gains arising from the remeasurementadoption of ~~non-U.S. Dollar denominated liabilities of our U.S. insurance subsidiaries and improved life and health reinsurance results. After-tax earnings~~ASU 2018-12 on January 1, 2023. Earnings from insurance investment income increased ~~$247~~$463 million in the ~~third~~second quarter and ~~$896 million~~$1.3 billion in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, attributable~~2022. The increases were primarily due to ~~increased~~higher short-term interest rates, partly offset by lower dividend ~~income and higher interest rates.~~income.

~~After-tax earnings~~Earnings of ~~our railroad,~~ BNSF declined ~~6.2%~~24.0% in the ~~third~~second quarter and ~~increased 4.0%~~17.3% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. The ~~comparative changes in earnings in 2022 reflected higher revenue per car/unit,~~decreases were primarily attributable to lower overall freight volumes and higher non-fuel operating costs, offset by lower fuel ~~and other operating~~ costs. After-tax earnings of ~~our utilities and energy business increased 5.9%~~BHE were essentially unchanged in the ~~third~~second quarter and ~~5.5%~~declined 23.2% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. The ~~increases~~earnings decline in the first six months reflected ~~higher earnings from tax equity investments and from the natural gas pipeline and Northern Powergrid businesses, partly offset by~~ lower earnings from the U.S. regulated utilities, other energy businesses and real estate brokerage businesses. ~~After-tax~~

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

Earnings from our manufacturing, service and retailing businesses increased ~~20.0%~~4.3% in the ~~third~~second quarter and ~~14.3%~~1.5% in the first ~~nine~~six months of 2023 versus 2022. While earnings for certain industrial products manufacturers and services businesses improved versus 2022, ~~versus 2021. Results were mixed among~~earnings of several of our ~~various businesses. While customer demand for~~building products, consumer products and services was relatively good in 2022, demand began to weaken in the third quarter at certain of our businesses. We continue to experience the negative effects of higher materials, freight, labor and other input costs.retailing businesses deteriorated.

Investment and derivative contract gains (losses) in each period of 2023 and ~~losses in~~ 2022 ~~and 2021~~ predominantly derived from our investments in equity securities and ~~includes~~included significant net unrealized gains and losses from market price ~~changes during the period.~~changes. We believe that investment gains and ~~derivative gains/~~losses on investments in equity securities, whether realized from dispositions or unrealized from changes in market prices, ~~of equity securities,~~ are generally meaningless in understanding our reported quarterly or annual results or in evaluating the economic performance of our operating businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings. ~~Other earnings~~Investment and derivative contract gains (losses) also included an after-tax ~~foreign currency exchange gains related to non-U.S. Dollar denominated debt~~non-cash remeasurement gain of ~~$858 million in the third quarter and~~ $2.4 billion in the first ~~nine months~~quarter of ~~2022, compared~~2023 related to ~~$196 million and $676 million~~our previously held 38.6% interest in Pilot through the ~~third quarter and first nine months~~application of ~~2021, respectively.~~the acquisition accounting method.

2631

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

Results of Operations(Continued)

Other earnings included after-tax foreign exchange rate gains of $465 million in the second quarter and $448 million in the first six months of 2023 and $1.1 billion in the second quarter and $1.6 billion in the first six months of 2022. These gains related to the non-U.S. Dollar denominated debt issued by Berkshire and its U.S.-based finance subsidiary, Berkshire Hathaway Finance Corporation (“BHFC”).

Insurance—Underwriting

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

The timing and magnitude of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to our reinsurance businesses. ~~Generally, we~~We currently consider pre-tax incurred losses exceeding ~~$100~~$150 million from a current year catastrophic event to be significant. Significant catastrophe events in ~~2022 included Hurricane Ian~~the first six months of 2023 were a cyclone and floods in ~~the third quarter~~New Zealand and floods in Australia ~~and South Africa during the first six months, while significant~~in 2022. Each of these events ~~in 2021 included Hurricane Ida and floods in Europe in the third quarter and Winter Storm Uri~~occurred in the first ~~quarter. We recorded estimated pre-tax losses of $3.4 billion from Hurricane Ian in the third~~ quarter of ~~2022 and $2.2 billion from Hurricane Ida and European floods in~~ the ~~third quarter of 2021.~~year.

Changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years, can also significantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts, were approximately ~~$128~~$143 billion as of ~~September~~June 30, ~~2022.~~2023. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated liabilities of our ~~U.S. based insurance~~U.S.-based subsidiaries ~~from~~due to foreign currency exchange rate ~~changes.~~

Underwriting results of certain of our commercial insurance and reinsurance businesses have been affected by estimated losses and costs associated with the COVID-19 pandemic. While pandemic-related losses in the first nine months of 2022 were insignificant, results in future periods may be affected by legal and regulatory actions pertaining to insurance coverage, which we cannot reasonably estimate at this time.fluctuations.

We provide primary insurance and reinsurance products covering property and casualty risks, as well as life and health risks. On October 19, 2022, Berkshire acquired Alleghany Corporation ("Alleghany"), which operates property and casualty insurance and reinsurance businesses. These businesses will be incorporated into our reinsurance and primary insurance results beginning as of the acquisition date. Our insurance and reinsurance businesses are GEICO, Berkshire Hathaway Primary Group (“BH Primary”) and Berkshire Hathaway Reinsurance ~~Group.~~ Group (“BHRG”). Berkshire acquired Alleghany Corporation (“Alleghany”) on October 19, 2022. Alleghany operates a property and casualty insurance business through its subsidiaries, RSUI Group Inc. and CapSpecialty, Inc. (“RSUI and CapSpecialty” or “Alleghany Insurance”), and a reinsurance business through Transatlantic Reinsurance Company and affiliates (“TransRe Group”). Underwriting results of Alleghany Insurance are included in BH Primary and underwriting results of TransRe Group are included in BHRG.

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

Underwriting results of our insurance businesses are summarized below (dollars in millions). BHRG’s pre-tax underwriting earnings for the second quarter and first six months of 2022 increased $174 million and $319 million, respectively, from pre-tax earnings previously reported due to the adoption of ASU 2018-12.


	Third Quarter						First Nine Months						Second Quarter						First Six Months
	2022			2021			2022			2021			2023			2022			2023			2022
Pre-tax underwriting earnings (loss):
GEICO	$	(759	)	$	(289	)	$	(1,424	)	$	1,360		$	514		$	(487	)	$	1,217		$	(665	)
Berkshire Hathaway Primary Group		(281	)		(23	)		53			349			272			242			540			334
Berkshire Hathaway Reinsurance Group		(110	)		(708	)		1,013			(1,298	)		827			1,141			1,058			1,442
Pre-tax underwriting earnings		(1,150	)		(1,020	)		(358	)		411			1,613			896			2,815			1,111
Income taxes and noncontrolling interests		(188	)		(236	)		(24	)		55			366			181			657			229
Net underwriting earnings (loss)	$	(962	)	$	(784	)	$	(334	)	$	356
Net underwriting earnings													$	1,247		$	715		$	2,158		$	882
Effective income tax rate		16.3	%		23.0	%		6.6	%		13.6	%		22.6	%		20.1	%		23.4	%		20.6	%

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

Insurance—Underwriting (Continued)

GEICO

GEICO primarily writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone. A summary of GEICO’s underwriting results follows (dollars in millions).

Third Quarter

First Nine Months

2022

2021

2022

2021

Amount

%

Amount

%

Amount

%

Amount

%

Premiums written
$
10,137

$
10,097

$
29,818

$
29,333

Premiums earned
$
9,808

100.0

$
9,604

100.0

$
29,169

100.0

$
28,073

100.0

Losses and loss adjustment expenses

9,515

97.0

8,486

88.4

27,164

93.1

22,566

80.4

Underwriting expenses

1,052

10.7

1,407

14.6

3,429

11.8

4,147

14.8

Total losses and expenses

10,567

107.7

9,893

103.0

30,593

104.9

26,713

95.2

Pre-tax underwriting earnings (loss)
$
(759
)

$
(289
)

$
(1,424
)

$
1,360

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

~~Insurance—Underwriting~~ ~~(Continued)~~

~~GEICO (Continued)~~


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

GEICO’s pre-tax underwriting ~~losses in 2022 reflected increased claims severities, primarily due to significant cost inflation in property and physical damage claims, which began to accelerate~~earnings in the second half of 2021 and have continued through 2022. Increases in used car prices are producing increased claims severities on total losses and shortages of car parts are contributing to elevated claims severities on partial losses. In addition, injury claims severities continue to trend higher.

~~Premiums written were relatively unchanged in the third quarter and the~~ first ~~nine~~six months of ~~2022 compared to 2021, reflecting increases in~~2023 reflected higher average premiums per auto policy, ~~due~~a reduction in advertising costs, as well as reductions in prior accident years’ claims estimates. Premiums written and earned were substantially unchanged in the second quarter and first six months of 2023 compared to 2022. Premiums in 2023 reflected rate increases ~~which were substantially offset by a decrease in policies-in-force. Voluntary auto policies-in-force declined 4.6% over~~during the ~~first nine~~past 12 months ~~of 2022 while~~that produced higher average premiums per ~~voluntary~~ auto policy ~~increased by approximately 5.4%. Premiums earned increased $204~~(16.3%), as well as a 2.7 million ~~(2.1%~~decrease (14.4%) in ~~the third quarter~~policies-in-force over that period. GEICO significantly reduced advertising in 2022 and ~~$1.1 billion (3.9%) in the first nine months of 2022 compared to 2021. Premiums earned in the first nine months of 2021 included a reduction of approximately $475 million attributable~~2023, which contributed to the ~~remaining impact of the GEICO Giveback program that provided a 15% premium credit to new and renewing voluntary auto and motorcycle policies written between April 8, 2020 and October 7, 2020.~~reduction in policies-in-force.

Losses and loss adjustment expenses ~~increased $1.0 billion (12.1%~~declined $913 million (10.0%) in the ~~third~~second quarter and ~~$4.6~~$1.5 billion ~~(20.4%~~(8.3%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. GEICO’s loss ratio ~~of losses~~(losses and loss adjustment expenses to premiums ~~earned~~earned) was ~~97.0%~~84.3% in the ~~third~~second quarter and ~~93.1%~~83.7% in the first ~~nine~~six months of ~~2022, increases~~2023, decreases of ~~8.6~~8.5 percentage points and ~~12.7~~7.5 percentage points, respectively, compared to the same periods in ~~2021. The increases were primarily attributable to~~2022. These decreases reflected the impact of higher average premiums per auto policy, additional reductions in prior accident years’ claims estimates, the reduction in policies-in-force and lower claims frequencies, ~~and severities, as well as lower reductions of loss estimates for prior years’ loss events and an increase~~partially offset by increases in ~~significant catastrophe losses.~~average claims severities.

Claims frequencies in the first nine months of 2022 were higher for all coverages, including property damage (one to two percent range), bodily injury and personal injury (four to five percent range) and collision (six to seven percent range). Average claims severities in the first nine months of 2022 were higher for property damage and collision coverages (seventeen to nineteen percent range) and bodily injury coverage (nine to eleven percent range). Losses and loss adjustment expenses ~~reflected~~in the first six months of 2023 included reductions in the ultimate loss estimates for prior accident years’ ~~loss events~~claims of ~~$386~~$888 million compared to $207 million in ~~the first nine months of 2022 compared to $1.2 billion~~2022. The reduction in ~~2021. The reductions in 2022~~2023 reflected ~~decreases in all major coverages except collision and property damage~~decreased estimates across several coverages, while the reductions in ~~2021~~2022 were ~~across all major~~primarily attributable to bodily and personal injury coverages, partially offset by increases for collision and property damage coverages. ~~Losses and loss adjustment expenses~~

Claims frequencies in the ~~third quarter~~first six months of 2023 were ~~approximately $600 million from Hurricane Ian~~lower for property damage (seven to eight percent range) and collision (seven to eight percent range) coverages, while claims frequencies increased for bodily injury (three to four percent range) and personal injury (one to two percent range) coverages. Average claims severities in ~~2022~~the first six months of 2023 were higher for property damage (twenty-one to twenty-three percent range), collision (seven to nine percent range) and ~~$400 million from Hurricane Ida in 2021.~~bodily injury (seven to nine percent range) coverages.

Underwriting expenses ~~decreased $355~~declined $181 million ~~(25.2%~~(15.2%) in the ~~third~~second quarter and ~~$718~~$438 million ~~(17.3%~~(18.4%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, primarily due to significant reductions in advertising costs in both periods and lower employee-related costs in the first nine months.~~2022. GEICO’s expense ratio (underwriting expense to premiums earned) was ~~10.7%~~10.4% in the ~~third~~second quarter and ~~11.8%~~10.0% in the first ~~nine~~six months of ~~2022,~~2023, decreases of ~~3.9~~1.8 percentage points and ~~3.0~~2.2 percentage points, respectively, compared to the same periods in ~~2021, attributable to both~~2022. These decreases were driven by the ~~decreases~~reduction in ~~expenses as well as the increases in earned premiums.~~advertising expenses.

Berkshire Hathaway Primary Group

The Berkshire Hathaway Primary Group ~~(“BH Primary”) provides~~consists of several independently managed businesses that provide a variety of primarily commercial insurance solutions, including healthcare professional liability, workers’ compensation, automobile, general liability, property and specialty coverages for small, medium and large clients. BH Primary’s ~~larger~~ insurers include Berkshire Hathaway Specialty Insurance (“BH Specialty”), Berkshire Hathaway Homestate Companies (“BHHC”), MedPro Group, Berkshire Hathaway GUARD Insurance Companies (“GUARD”), National Indemnity Company (“NICO Primary”), Berkshire Hathaway Direct Insurance Company (“BH Direct”) and U.S. Liability Insurance Company (“USLI”). ~~A summary of BH Primary underwriting results follows (dollars in millions).~~

Third Quarter

First Nine Months

2022

2021

2022

2021

Amount

%

Amount

%

Amount

%

Amount

%

Premiums written
$
3,895

$
3,506

$
10,791

$
9,357

Premiums earned
$
3,485

100.0

$
2,964

100.0

$
9,916

100.0

$
8,373

100.0

Losses and loss adjustment expenses

2,825

81.1

2,240

75.6

7,342

74.0

6,044

72.2

Underwriting expenses

941

27.0

747

25.2

2,521

25.5

1,980

23.6

Total losses and expenses

3,766

108.1

2,987

100.8

9,863

99.5

8,024

95.8

Pre-tax underwriting earnings (loss)
$
(281
)

$
(23
)

$
53

$
349

Premiums written increased $389 million (11.1%) in the third quarter and $1.4 billion (15.3%) in the first nine months of 2022 compared to 2021, reflecting year-to-date increases at BH Specialty (20%), USLI (17%) and BHHC (15%). The increases were across a variety of property and casualty coverages and across several markets.This group also includes Alleghany Insurance beginning October 19, 2022.

2833

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Primary Group (Continued)

A summary of BH Primary’s ~~loss ratio was 81.1%~~underwriting results follows (dollars in millions).


	Second Quarter								First Six Months
	2023				2022				2023				2022
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	4,757			$	3,504			$	8,915			$	6,896
Premiums earned	$	4,233		100.0	$	3,313		100.0	$	8,194		100.0	$	6,431		100.0
Losses and loss adjustment expenses		2,861		67.6		2,243		67.7		5,517		67.3		4,517		70.2
Underwriting expenses		1,100		26.0		828		25.0		2,137		26.1		1,580		24.6
Total losses and expenses		3,961		93.6		3,071		92.7		7,654		93.4		6,097		94.8
Pre-tax underwriting earnings	$	272			$	242			$	540			$	334

Premiums written increased $1.3 billion (35.8%) in the ~~third~~second quarter and ~~74.0%~~$2.0 billion (29.3%) in the first ~~nine~~six months of ~~2022, an increase~~2023 compared to 2022. The increases were primarily due to the inclusion of ~~5.5~~Alleghany Insurance ($746 million in the second quarter and $1.3 billion in the first six months), as well as comparative increases from BH Specialty and BH Direct.

Losses and loss adjustment expenses increased $618 million (27.6%) in the second quarter and $1.0 billion (22.1%) in the first six months of 2023 compared to 2022. The loss ratio decreased 0.1 percentage points in the ~~third~~second quarter and ~~1.8~~2.9 percentage points in the first ~~nine~~six months of 2023 compared to ~~2021. Losses~~2022, reflecting changes in business mix (including the impact of Alleghany Insurance), lower incurred losses from ~~catastrophe events~~current year catastrophes and increased reductions in ~~2022 were approximately $660 million in the third quarter (Hurricane Ian) and $740 million~~loss estimates for prior years’ events.

Incurred losses from significant catastrophes occurring in the first ~~nine months. Losses from catastrophe events in 2021~~six months were ~~approximately $260~~$36 million in ~~the third quarter (largely Hurricane Ida)~~2023 and ~~$420~~$75 million in ~~the first nine months. Losses~~2022. Incurred losses and loss adjustment expenses ~~also included~~in the first six months reflected net reductions in estimated ultimate liabilities for prior accident years’ ~~loss events in the first nine months~~claims of ~~$348~~$177 million in ~~2022~~2023 and ~~$420~~$106 million in ~~2021.~~2022. BH Primary insurers write significant levels of workers’ compensation, commercial and professional liability insurance and the related claim costs may be subject to high severity and long claim-tails. ~~Claims~~Ultimate claims liabilities could be greater than anticipated due to a variety of ~~factors.~~factors, including from adverse legal and judicial rulings.

Underwriting expenses increased ~~$194~~$272 million ~~(26.0%~~(32.9%) in the ~~third~~second quarter and ~~$541~~$557 million ~~(27.3%~~(35.3%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~the same periods in 2021.~~2022. The expense ratio increased ~~1.8~~1.0 percentage points in the ~~third~~second quarter and ~~1.9~~1.5 percentage points in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021. These~~2022. The increases ~~reflected costs associated with new business development programs and~~were primarily attributable to changes in business ~~mix.~~mix, including the effects of the Alleghany Insurance acquisition.

Berkshire Hathaway Reinsurance Group

The Berkshire Hathaway Reinsurance Group (“BHRG”) offers excess-of-loss and quota-share reinsurance coverages on property and casualty risks to insurers and reinsurers worldwide through several subsidiaries, led by National Indemnity Company (“NICO”), General Reinsurance Corporation, ~~and~~ General Reinsurance ~~AG.~~AG and, beginning October 19, 2022, TransRe Group. We also write life and health reinsurance coverages through General Re Life Corporation, General Reinsurance AG and Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”). We ~~periodically~~ assume property and casualty risks under retroactive reinsurance contracts written through ~~NICO. In addition,~~NICO and we write periodic payment annuity contracts through BHLN.

Generally, we strive to generate underwriting profits. However, time-value-of-money concepts are important elements in establishing prices for retroactive reinsurance and periodic payment annuity business due to the expected long durations of the claim liabilities. We expect to incur pre-tax underwriting losses from such business, primarily through deferred charge amortization and discount accretion charges. We receive premiums at the inception of these contracts, which are then available for investment. A summary of BHRG’s premiums and pre-tax underwriting results follows (in millions). The retrospective adoption of ASU 2018-12 resulted in increases in pre-tax earnings of $174 million in the second quarter and $319 million in the first six months of 2022 from the previously reported amounts. These increases derived primarily from reductions in certain variable annuity guarantee liabilities.


	Third Quarter										First Nine Months										Second Quarter										First Six Months
	Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)
	2022		2021		2022			2021			2022		2021		2022			2021			2023		2022		2023			2022			2023		2022		2023			2022
Property/casualty	$	4,013	$	3,637	$	23		$	(247	)	$	10,943	$	10,385	$	1,404		$	121		$	5,325	$	3,531	$	1,124		$	976		$	10,474	$	6,930	$	1,514		$	1,381
Life/health		1,309		1,328		67			(181	)		3,822		3,932		130			(522	)		1,289		1,262		47			124			2,349		2,510		184			98
Retroactive reinsurance		—		—		(83	)		(158	)		—		82		(325	)		(620	)		—		—		(263	)		(52	)		—		—		(458	)		(242	)
Periodic payment annuity		192		191		(149	)		(94	)		529		458		(279	)		(374	)		—		168		(211	)		(54	)		—		337		(375	)		(173	)
Variable annuity		3		3		32			(28	)		10		11		83			97			—		—		130			147			—		—		193			378
	$	5,517	$	5,159	$	(110	)	$	(708	)	$	15,304	$	14,868	$	1,013		$	(1,298	)	$	6,614	$	4,961	$	827		$	1,141		$	12,823	$	9,777	$	1,058		$	1,442

~~Property/casualty~~

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

Third Quarter

First Nine Months

2022

2021

2022

2021

Amount

%

Amount

%

Amount

%

Amount

%

Premiums written
$
4,574

$
4,115

$
13,119

$
11,924

Premiums earned
$
4,013

100.0

$
3,637

100.0

$
10,943

100.0

$
10,385

100.0

Losses and loss adjustment expenses

3,451

86.0

2,986

82.1

7,825

71.5

7,689

74.0

Underwriting expenses

539

13.4

898

24.7

1,714

15.7

2,575

24.8

Total losses and expenses

3,990

99.4

3,884

106.8

9,539

87.2

10,264

98.8

Pre-tax underwriting earnings (loss)
$
23

$
(247
)

$
1,404

$
121

2934

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Property/casualty ~~(Continued)~~

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


	Second Quarter								First Six Months
	2023				2022				2023				2022
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	5,866			$	4,159			$	12,134			$	8,545
Premiums earned	$	5,325		100.0	$	3,531		100.0	$	10,474		100.0	$	6,930		100.0
Losses and loss adjustment expenses		2,793		52.5		2,067		58.5		6,180		59.0		4,374		63.1
Underwriting expenses		1,408		26.4		488		13.9		2,780		26.5		1,175		17.0
Total losses and expenses		4,201		78.9		2,555		72.4		8,960		85.5		5,549		80.1
Pre-tax underwriting earnings	$	1,124			$	976			$	1,514			$	1,381

Premiums written ~~increased $459 million (11.2%)~~ in the ~~third~~second quarter and first six months of 2023 included $1.2 billion ~~(10.0%)~~and $2.6 billion, respectively, by TransRe Group. Otherwise, premiums written in the first ~~nine~~six months of ~~2022~~2023 increased $1.0 billion (11.9%) compared to ~~the same periods in 2021,~~2022, primarily due to ~~net~~ increases in ~~new~~ property business and higher ~~rates, partially offset by unfavorable foreign currency translation effects.~~ rates. Given the levels of property lines written and that we generally do not retrocede the risks we assume, our periodic underwriting earnings are subject to considerable volatility from significant catastrophe events.

Losses and loss adjustment expenses increased ~~$465~~$726 million ~~(15.6%~~(35.1%) in the ~~third~~second quarter and ~~$136 million (1.8%~~$1.8 billion (41.3%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021. Losses incurred~~2022, primarily from ~~catastrophe events were $1.9 billion~~the inclusion of TransRe Group ($785 million in the ~~third~~second quarter ~~(primarily Hurricane Ian)~~ and ~~$2.6~~$1.5 billion in the first ~~nine~~six months of ~~2022 and were $1.5 billion in~~2023). Overall, the ~~third quarter and $1.9 billion~~loss ratio decreased 4.1 percentage points in the first ~~nine~~six months of ~~2021. Reductions~~2023 compared to 2022. Losses incurred from significant catastrophes in the first six months were $528 million in 2023 and $629 million in 2022. Losses and loss adjustment expenses incurred reflected reductions in estimated ultimate liabilities for ~~losses occurring in~~ prior ~~years were $833~~accident years’ claims of $883 million in the ~~third~~first six months of 2023 and $574 million in the first six months of 2022.

Underwriting expenses in 2023 increased $920 million in the second quarter and ~~$1.4~~$1.6 billion in the first ~~nine~~six months ~~of 2022 and were $599 million in the third quarter and $564 million in the first nine months of 2021.~~

~~Underwriting expenses as percentages of premiums earned decreased 11.3~~compared to 2022. The expense ratio increased 12.5 percentage points in the ~~third~~second quarter and ~~9.1~~9.5 percentage points in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021,~~2022. The increases were primarily attributable to changes in foreign currency exchange ~~rate effects~~rates and changes in business ~~mix. Underwriting expenses included foreign~~mix, including the impact of TransRe Group. Foreign currency exchange ~~gains of $315~~losses were $118 million in the ~~third~~second quarter and ~~$704~~$192 million in the first ~~nine~~six months of 2023 compared to gains of $308 million in the second quarter and $389 million in the first six months of 2022 ~~primarily~~and related to ~~a third quarter 2021 intercompany reinsurance agreement in which a non-U.S. based Berkshire subsidiary ceded~~the remeasurement of certain non-U.S. Dollar denominated liabilities ~~to a~~of our U.S. ~~based Berkshire subsidiary. The foreign currency exchange gains~~subsidiaries. Underwriting expenses included $385 million in the ~~third~~second quarter and $770 million in the first six months of 2021 were not significant. Under U.S. GAAP, the effects of exchange rate changes from the remeasurement of liabilities assumed by the U.S. subsidiary are reflected in earnings as its functional currency is the U.S. Dollar. The net foreign currency exchange rate effects from translating the financial statements of the non-U.S. subsidiary2023 related to ~~the U.S. Dollar are included in other comprehensive income.~~TransRe Group.

Life/health

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


	Third Quarter									First Nine Months									Second Quarter								First Six Months
	2022				2021					2022				2021					2023				2022				2023				2022
	Amount		%		Amount			%		Amount		%		Amount			%		Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	1,251			$	1,332				$	3,743			$	3,929				$	1,292			$	1,249			$	2,353			$	2,492
Premiums earned	$	1,309		100.0	$	1,328			100.0	$	3,822		100.0	$	3,932			100.0	$	1,289		100.0	$	1,262		100.0	$	2,349		100.0	$	2,510		100.0
Life and health insurance benefits		1,013		77.4		1,247			93.9		3,028		79.2		3,733			94.9		1,020		79.1		912		72.3		1,698		72.3		1,973		78.6
Underwriting expenses		229		17.5		262			19.7		664		17.4		721			18.4		222		17.3		226		17.9		467		19.9		439		17.5
Total benefits and expenses		1,242		94.9		1,509			113.6		3,692		96.6		4,454			113.3		1,242		96.4		1,138		90.2		2,165		92.2		2,412		96.1
Pre-tax underwriting earnings (loss)	$	67			$	(181	)			$	130			$	(522	)
Pre-tax underwriting earnings																			$	47			$	124			$	184			$	98

~~Life/health premiums written decreased $81~~Premiums earned increased $27 million ~~(6.1%~~(2.1%) in the ~~third~~second quarter and ~~$186~~decreased $161 million ~~(4.7%~~(6.4%) in the first ~~nine~~six months of ~~2022~~2023 compared to 2022. In the ~~same periods in 2021, primarily due to unfavorable foreign currency translation effects. Life~~first quarter of 2023, several of General Re’s life reinsurance contracts were commuted, which reduced premiums earned by $161 million and ~~health~~life benefits ~~declined $234 million (18.8%)~~incurred by $304 million. Excluding these effects, premiums earned increased slightly in the ~~third~~second quarter and ~~$705 million (18.9%)~~were substantially unchanged in the first ~~nine~~six months of ~~2022 compared to 2021, primarily due to relatively high pandemic-related mortality claims~~2023, and life benefits incurred increased 11.8% in the ~~U.S., South Africa, India~~second quarter and ~~Latin America~~1.5% in ~~2021.~~the first six months of 2023 versus 2022. The increase in the expense ratio in the first six months of 2023 versus 2022 was primarily attributable to the impact of the life reinsurance contract commutations and increased underwriting expenses.

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

Insurance—Underwriting (Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Retroactive reinsurance

Pre-tax underwriting losses from retroactive reinsurance in each period derived from the amortization of deferred charges and the effects of changes in the estimated timing and amounts of future claim payments. Underwriting results also include foreign currency exchange gains and losses from the effects of changes in foreign currency exchange rates on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. ~~Foreign~~Pre-tax foreign currency exchange ~~gains~~losses were ~~$130~~$18 million in the ~~third~~second quarter and ~~$287~~$24 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$70~~pre-tax gains of $152 million in the second quarter and $157 million in the first ~~nine~~six months of ~~2021, substantially all of which was in the third quarter. Pre-tax underwriting losses before~~2022. Before foreign currency exchange effects, pre-tax underwriting losses were ~~$213~~$245 million in the ~~third~~second quarter and ~~$612~~$434 million in the first ~~nine~~six months of ~~2022 compared to $227~~2023 and $204 million in the ~~third~~second quarter and ~~$690~~$399 million in the first ~~nine~~six months of ~~2021.~~2022.

~~Unpaid~~Gross unpaid losses assumed under retroactive reinsurance contracts ~~declined $1.6 billion in the first nine months of 2022 to $36.7~~were $34.4 billion at ~~September~~June 30, 2023, a decline of $1.0 billion since December 31, 2022, primarily ~~due~~attributable to ~~loss~~claim payments. Unamortized deferred charges related to retroactive reinsurance contracts ~~declined $649 million in the first nine months of 2022 to $10.0~~were $9.5 billion at ~~September~~June 30, ~~2022, primarily attributable to periodic amortization.~~2023, a decline of $416 million since December 31, 2022. Deferred charge amortization will be included in underwriting earnings over the expected remaining claims settlement periods.

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

~~Insurance—Underwriting~~ ~~(Continued)~~

~~Berkshire Hathaway Reinsurance Group (Continued)~~

Periodic payment annuity

Periodic payment annuity ~~premiums earned were relatively unchanged in the third quarter and increased 15.5% in the first nine months of 2022 compared to the same periods in 2021. Periodic payment annuity~~ business is ~~both~~ price and demand sensitive and the supply of available business is affected by the timing of underlying legal claim settlements. Our volumes written may change rapidly due to changes in prices, ~~which are affected by prevailing interest rates, the perceived risks and durations associated with the expected annuity payments,~~ as well as the level of competition. Beginning in the latter part of 2022, prices for new business have declined to unacceptable levels and we have restricted writing new business.

Our periodic payment annuity contracts normally produce pre-tax underwriting losses ~~deriving~~ from the recurring accretion of time-value discounted ~~annuity~~ liabilities, which includes ~~discount accrual on~~ liabilities offor contracts without life contingencies. Underwriting results also include gains or losses from foreign currency exchange rate changes on non-U.S. Dollar denominated liabilities of our U.S. subsidiaries. Pre-tax underwriting results included foreign currency ~~gains~~exchange losses of ~~$119~~$64 million in the ~~third~~second quarter and ~~$279~~$83 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~$45~~gains of $86 million in the ~~third~~second quarter and ~~$25~~$109 million in the first ~~nine~~six months of ~~2021.~~2022.

Pre-tax underwriting losses before foreign currency exchange effects were ~~$268~~$147 million in the ~~third~~second quarter and ~~$558~~$292 million in the first ~~nine~~six months of ~~2022~~2023 and ~~$139~~$140 million in the ~~third~~second quarter and ~~$399~~$282 million in the first ~~nine~~six months of 2021. Pre-tax losses in the third quarter of 2022 included approximately $130 million attributable to an agreement to terminate an existing reinsurance contract, in which the settlement payable exceeded the carrying value of the liabilities.2022. Discounted ~~annuity~~ liabilities were ~~$15.2~~$14.8 billion at ~~September~~June 30, ~~2022,~~2023, which included ~~$3.9~~$4.0 billion for contracts without life ~~contingencies, and had a weighted average discount rate of approximately 3.9%. Upon the adoption of~~contingencies. We adopted ASU 2018-12 inon January 1, 2023, which requires that the discount rates ~~will~~on contracts with life-contingent liabilities be adjusted quarterly based upon prevailing interest rates ~~which could have a significant effect on our recorded annuity liabilities. The periodic effect from~~with the effects of discount rate changes ~~will be largely reflected~~included in other comprehensive income.

Variable annuity

~~Variable~~Our variable annuity guarantee reinsurance contracts produced pre-tax gains of ~~$32~~$130 million in the ~~third~~second quarter and ~~$83~~$193 million in the first ~~nine~~six months of ~~2022 compared to pre-tax losses of $28~~2023 and $147 million in the ~~third~~second quarter and ~~gains of $97~~$378 million in the first ~~nine~~six months of ~~2021.~~2022. The results from these contracts are affected by changes in securities markets, interest rates and foreign currency exchange rates, which can be ~~volatile, and from the periodic amortization~~volatile. Our estimated liabilities associated with these contracts, which are in run-off, were approximately $1.0 billion as of expected profit margins. Underwriting earnings in the first nine months of 2022 and 2021 were primarily attributable to the net effects of interest rate increases and changes in securities markets which were unfavorable in 2022 and favorable in 2021. Underwriting results in the third quarter of 2021 included losses from lower underlying lapse rate assumptions.June 30, 2023.

Insurance—Investment Income

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


	Third Quarter						First Nine Months						Percentage Change						Second Quarter						First Six Months						Percentage Change
	2022			2021			2022			2021			Third Quarter			First Nine Months			2023			2022			2023			2022			Second Quarter			First Six Months
Dividend income	$	1,281		$	1,196		$	4,533		$	3,747			7.1	%		21.0	%	$	1,522		$	2,055		$	2,766		$	3,252			(25.9	)%		(14.9	)%
Interest and other investment income		397			141			789			458			181.6			72.3			1,390			228			2,531			392			509.6			545.7
Pre-tax net investment income		1,678			1,337			5,322			4,205			25.5			26.6			2,912			2,283			5,297			3,644			27.6			45.4
Income taxes and noncontrolling interests		270			176			838			617									543			377			959			568
Net investment income	$	1,408		$	1,161		$	4,484		$	3,588								$	2,369		$	1,906		$	4,338		$	3,076
Effective income tax rate		16.1	%		13.1	%		15.7	%		14.7	%								18.6	%		16.5	%		18.1	%		15.6	%

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

Insurance—Investment Income (Continued)

Dividend income ~~increased 7.1%~~declined 25.9% in the ~~third~~second quarter and ~~21.0%~~14.9% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021. The increases~~2022. These reductions reflected net dispositions of investments since the end of the second quarter of 2022. Income in the first six months included $17 million in 2023 and $29 million in 2022 ~~reflected an overall increase in equity security investments during 2022.~~from BHE preferred stock. Such amounts were deducted from earnings of the BHE segment. Dividend income ~~also~~ varies from period to period due to changes in the investment portfolio and the frequency and timing of dividends from certain investees. Dividend income included $8 million in the third quarter and $37 million in the first nine months of 2022 and $26 million in the third quarter and $101 million in the first nine months of 2021 from investments in preferred stock of Berkshire Hathaway Energy. Such amounts are deducted from earnings of the utilities and energy segment.

Interest and other investment income increased ~~$256 million (181.6%)~~$1.2 billion in the ~~third~~second quarter and ~~$331 million (72.3%)~~$2.1 billion in the first ~~nine~~six months of ~~2022~~2023 compared to the same periods in ~~2021.~~2022. The increases were primarily due to increases in short-term interest rates. We continue to hold substantial balances of cash, cash equivalents and short-term U.S. Treasury Bills. ~~While exceptionally low interest rates prevailed in recent years, interest rates increased significantly over the first nine months of 2022.~~ We continue to believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments.

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

~~Insurance—Investment Income~~ ~~(Continued)~~

Invested assets of our insurance businesses derive from shareholder capital and ~~from~~ net liabilities under insurance and reinsurance contracts or “float.” The major components of float are unpaid losses and loss adjustment expenses, including 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 assumed under retroactive reinsurance contracts and deferred policy acquisition costs. Float approximated ~~$150~~$166 billion at ~~September~~June 30, ~~2022~~2023 and ~~$147~~$164 billion at December 31, ~~2021.~~2022. Our combined insurance operations generated pre-tax underwriting ~~losses of $358 million~~gains in the first ~~nine~~six months of ~~2022~~2023 and, consequently, the average cost of float ~~for that period~~ was 0.24%. In October 2022, Berkshire acquired Alleghany, which operates insurance and reinsurance businesses. Estimated float of Alleghany’s businesses approximated $13.5 billion based on its historical balance sheet at September 30, 2022.negative. A summary of cash and investments held in our insurance businesses as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 follows (in millions).


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Cash, cash equivalents and U.S. Treasury Bills	$	59,699	$	90,688	$	105,747	$	86,816
Equity securities		295,387		334,907		344,821		298,934
Fixed maturity securities		18,476		16,386		22,223		24,998
Other		3,252		4,296		2,214		3,417
	$	376,814	$	446,277	$	475,005	$	414,165

Fixed maturity securities as of ~~September~~June 30, ~~2022~~2023 were as follows (in millions).


	Amortized Cost		Unrealized Gains (Losses)			Carrying Value		Amortized Cost		Unrealized Gains (Losses)			Carrying Value
U.S. Treasury, U.S. government corporations and agencies	$	9,023	$	(264	)	$	8,759	$	9,233	$	(190	)	$	9,043
Foreign governments		8,630		(196	)		8,434		11,495		(91	)		11,404
Corporate bonds		821		200			1,021		1,322		222			1,544
Other		244		18			262		218		14			232
	$	18,718	$	(242	)	$	18,476	$	22,268	$	(45	)	$	22,223

U.S. government obligations are rated AA+ or Aaa by the major rating agencies. Approximately ~~93%~~94% of all foreign government obligations were rated AA or higher by at least one of the major rating agencies as of ~~September~~June 30, ~~2022. Foreign government securities include obligations issued or unconditionally guaranteed by national or provincial government entities.~~2023.

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

~~Railroad~~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 Quarter						First Nine Months						Second Quarter						First Six Months
	2022			2021			2022			2021			2023			2022			2023			2022
Railroad operating revenues	$	6,530		$	5,591		$	18,761		$	16,421		$	5,704		$	6,454		$	11,592		$	12,231
Railroad operating expenses:
Compensation and benefits		1,479			1,168			3,916			3,477			1,378			1,213			2,691			2,437
Fuel		1,272			705			3,409			1,948			833			1,276			1,797			2,137
Purchased services		530			510			1,538			1,525			489			509			1,000			1,008
Depreciation and amortization		633			608			1,875			1,832			650			618			1,295			1,242
Equipment rents, materials and other		508			338			1,494			1,262			540			460			1,133			986
Total		4,422			3,329			12,232			10,044			3,890			4,076			7,916			7,810
Railroad operating earnings		2,108			2,262			6,529			6,377			1,814			2,378			3,676			4,421
Other revenues (expenses):
Other revenues		163			199			540			579			124			186			255			377
Other expenses, net		(129	)		(176	)		(458	)		(514	)		(67	)		(159	)		(154	)		(329	)
Interest expense		(258	)		(256	)		(767	)		(775	)		(256	)		(254	)		(513	)		(509	)
Pre-tax earnings		1,884			2,029			5,844			5,667			1,615			2,151			3,264			3,960
Income taxes		442			491			1,367			1,362			351			487			753			925
Net earnings	$	1,442		$	1,538		$	4,477		$	4,305		$	1,264		$	1,664		$	2,511		$	3,035
Effective income tax rate		23.5	%		24.2	%		23.4	%		24.0	%		21.7	%		22.6	%		23.1	%		23.4	%

32The following table summarizes BNSF’s railroad freight volumes by business group (cars/units in thousands).


	Cars/Units								Percentage Change
	Second Quarter				First Six Months				Second			First Six
	2023		2022		2023		2022		Quarter			Months
Consumer products		1,157		1,379		2,223		2,654		(16.1	)%		(16.2	)%
Industrial products		407		421		796		824		(3.3	)		(3.4	)
Agricultural products		278		303		578		608		(8.3	)		(4.9	)
Coal		360		373		729		759		(3.5	)		(4.0	)
		2,202		2,476		4,326		4,845		(11.1	)		(10.7	)

Railroad operating revenues declined 11.6% in the second quarter and 5.2% in the first six months of 2023 compared to 2022, reflecting lower volumes of 11.1% in the second quarter and 10.7% in the first six months of 2023 compared to 2022. Average revenue per car/unit decreased slightly in the second quarter, while average revenue per car/unit increased 6.4% in the first six months of 2023 resulting from higher yield. BNSF’s pre-tax earnings were $1.6 billion in the second quarter and $3.3 billion the first six months of 2023, declines of 24.9% and 17.6%, respectively, compared to 2022.

Operating revenues from consumer products were $1.9 billion in the second quarter and $3.8 billion in the first six months of 2023, decreases of 22.7% and 17.0%, respectively, from 2022. The revenue declines were attributable to volume decreases of 16.1% in the second quarter and 16.2% in the first six months of 2023 compared to 2022 and lower average revenue per car/unit. The volume decreases were primarily due to lower intermodal shipments resulting from lower west coast imports, the loss of an intermodal customer and competition from lower spot rates in the trucking market which has impacted our domestic intermodal demand. These decreases were partially offset by an increase in automotive volume from higher vehicle production.

Operating revenues from industrial products were $1.4 billion in the second quarter and $2.8 billion in the first six months of 2023, a decrease of 0.8% and an increase of 2.6%, respectively, from 2022. The decline in the second quarter was primarily due to a volume decrease of 3.3%, partially offset by higher average revenue per car/unit. The increase in the first six months was primarily due to higher average revenue per car/unit, partially offset by a 3.4% volume decline. The volume declines were primarily due to lower demand for chemicals, plastics and lumber, as well as lower shipments of petroleum products resulting from refinery outages.

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

~~Railroad~~BNSF (Continued)

~~The following table summarizes BNSF’s railroad freight volumes by business group (cars/units in thousands).~~

Cars/Units

Percentage Change

Third Quarter

First Nine Months

Third

First Nine

2022

2021

2022

2021

Quarter

Months

Consumer products

1,323

1,425

3,977

4,307

(7.2
)%

(7.7
)%
Industrial products

413

443

1,237

1,280

(6.8
)

(3.4
)
Agricultural products

276

265

884

896

4.2

(1.3
)
Coal

399

404

1,158

1,127

(1.2
)

2.8

2,411

2,537

7,256

7,610

(5.0
)

(4.7
)

Railroad operating revenues increased 16.8% in the third quarter and 14.3% in the first nine months of 2022 compared to 2021, attributable to increases in average revenue per car/unit resulting from higher fuel surcharge revenue driven by higher fuel prices, along with increased rates per car/unit, partially offset by lower volumes. BNSF’s pre-tax earnings decreased 7.1% in the third quarter and increased 3.1% in the first nine months of 2022 compared to 2021. Results for the third quarter were impacted by lower freight volumes and higher fuel and other operating costs, partially offset by higher revenue per car.

Operating revenues from consumer products were $2.4 billion in the third quarter and $7.0 billion in the first nine months of 2022, increases of 15.3% and 14.5%, respectively, from 2021. The increases reflected higher average revenue per car/unit, partially offset by volume decreases of 7.2% in the third quarter and 7.7% in the first nine months of 2022 compared to 2021. The volume decreases were primarily due to lower international intermodal shipments resulting from supply chain disruptions. Operating revenues from industrial products were $1.5 billion in the third quarter and $4.2 billion in the first nine months of 2022, increases of 7.1% and 6.9%, respectively, from 2021. The increases reflected higher average revenue per car/unit, partially offset by volume decreases of 6.8% in the third quarter and 3.4% in the first nine months of 2022 compared to 2021. The volume decreases in both the third quarter and first nine months were primarily due to lower petroleum and building products shipments.

Operating revenues from agricultural products were $1.3 billion in the ~~third~~second quarter and ~~$4.1~~$2.8 billion in the first ~~nine~~six months of ~~2022, increases~~2023, a decrease of ~~25.7%~~6.9% in the second quarter and ~~12.0%, respectively,~~an increase of 0.8% in the first six months compared to ~~2021.~~2022. The ~~increases were~~second quarter revenue change was attributable to an 8.3% decline in volume, partially offset by higher average revenue per car/unit. The revenue increase in the first six months was primarily ~~attributable~~due to higher average revenue per car/unit. Volumes increased 4.2% in the third quarter due to higher domestic grain shipments and increased renewable diesel and oil feedstock shipments, while volumes decreased 1.3% in the first nine monthsunit, partially offset by a volume decrease of ~~2022, primarily~~4.9%. The volume decreases were mainly due to lower grain exports, partially offset by higher volumes of domestic grains, renewable diesel and ~~oil~~ feedstocks.

Operating revenues from coal were ~~$1.1 billion~~$936 million in the ~~third~~second quarter and ~~$3.0~~$2.0 billion in the first ~~nine~~six months of ~~2022, increases~~2023, a decrease of ~~27.0%~~6.3% in the second quarter and ~~28.8%, respectively, from 2021.~~an increase of 4.1% in the first six months versus 2022. The ~~increases were primarily~~revenue decline in the second quarter was attributable to lower volumes of 3.5% and lower average revenue per car/unit. The revenue increase in the first six months was driven by higher average revenue per car/~~unit. Volumes decreased 1.2% in the third quarter primarily due~~unit, partially offset by a volume decrease of 4.0%. The volume decreases derived from moderating demand attributable to ~~network challenges, while volumes increased 2.8% in the first nine months of 2022 due to increased electricity generation, higher~~lower natural gas prices and ~~improved export demand.~~weather related impacts.

Railroad operating expenses were ~~$4.4~~$3.9 billion in the ~~third~~second quarter and ~~$12.2~~$7.9 billion in the first ~~nine~~six months of ~~2022, increases~~2023, a decrease of ~~$1.1 billion (32.8%~~$186 million (4.6%) in the second quarter and ~~$2.2 billion (21.8%~~an increase of $106 million (1.4%)~~, respectively,~~ in the first six months compared to ~~2021.~~2022. The ~~increases were primarily due to significant increases~~decline in the ~~cost~~second quarter of 2023 reflected lower fuel ~~as well as~~costs, partially offset by higher compensation and benefits ~~expenses. Our~~expenses and general inflation. The increase during the first six months of 2023 reflected increases in all operating expenses, with the exception of fuel costs and purchased services. The ratio of railroad operating expenses to railroad operating revenues increased ~~8.2~~5.0 percentage points to ~~67.7%~~68.2% in the ~~third~~second quarter and ~~4.0~~4.4 percentage points to ~~65.2%~~68.3% in the first ~~nine~~six months of ~~2022~~2023 versus the comparable ~~2021~~2022 periods.

Compensation and benefits expenses increased ~~$311~~$165 million ~~(26.6%~~(13.6%) in the ~~third~~second quarter and ~~$439~~$254 million ~~(12.6%~~(10.4%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021,~~2022, primarily due to increased headcount, wage inflation ~~including the impact from tentative or ratified union labor agreements, higher health and welfare costs~~ and lower productivity. Fuel expenses ~~increased $567~~decreased $443 million ~~(80.4%~~(34.7%) in the ~~third~~second quarter and ~~$1.5 billion (75.0%~~$340 million (15.9%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021,~~2022, primarily due to lower average fuel prices and lower volumes, as well as improved efficiency. Depreciation expense increased $32 million (5.2%) in the second quarter and $53 million (4.3%) in the first six months of 2023 compared to 2022, primarily due to higher ~~fuel prices, partially offset by lower volumes.~~capital expenditures. Equipment rents, materials and other expenses increased ~~$170~~$80 million ~~(50.3%~~(17.4%) in the ~~third~~second quarter and ~~$232~~$147 million ~~(18.4%~~(14.9%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021,~~2022. The increases were primarily due to general inflation, increased casualty and litigation costs, higher property and other taxes and lower gains from land and easement ~~sales and higher casualty costs.~~

Approximately 30,500 of BNSF’s employees are members of a labor union. The U.S. Class I railroads and rail labor unions were engaged in negotiations from January 2020 through June 2022. Federal mediation was included in that timeframe, followed by a release from the National Mediation Board for a Presidential Emergency Board (PEB). In accordance with the Railway Labor Act (RLA), the PEB issued its report and recommendations to settle the bargaining disputes on August 16, 2022. Tentative agreements based on these recommendations were reached with all labor unions in September 2022. To date, six unions have ratified those agreements. Two labor unions did not ratify their tentative agreement, and the parties have agreed to maintain the status quo as discussions continue. Ratification results for the remaining unions are scheduled to be announced through November 2022. Where settlements have not been successful following the RLA process, Congress may act by extending the status quo period or passing a law imposing a resolution on the parties.

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

~~Utilities and Energy~~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 subsidiaries also operate two regulated electricity distribution businesses referred to as Northern Powergrid in Great Britain.~~ BHE’s natural gas pipelines consist of five domestic regulated interstate natural gas pipeline systems and a 25% interest in a liquefied natural gas export, import and storage facility (“LNG interest”), which BHE ~~operates and~~ consolidates for financial reporting purposes. Other energy businesses include two regulated electricity distribution businesses operated by BHE subsidiaries (referred to as Northern Powergrid) in Great Britain, a regulated electricity transmission-only business in Alberta, Canada (“AltaLink, L.P.”) ~~and~~, a diversified portfolio of mostly renewable independent power projects and ~~investments.~~investments and an unregulated retail energy services company. BHE also operates a residential real estate brokerage business and a large network of ~~residential~~ real estate brokerage franchises in the United States.

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

BHE (Continued)

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).


	Third Quarter						First Nine Months						Second Quarter						First Six Months
	2022			2021			2022			2021			2023			2022			2023			2022
Revenues:
Energy operating revenue	$	6,095		$	5,225		$	15,858		$	14,375		$	4,933		$	4,940		$	10,404		$	9,763
Real estate operating revenue		1,405			1,743			4,284			4,738			1,296			1,672			2,171			2,879
Other income (loss)		31			45			(110	)		(91	)		133			(67	)		238			(77	)
Total revenue		7,531			7,013			20,032			19,022			6,362			6,545			12,813			12,565
Costs and expense:
Costs and expenses:
Energy cost of sales		1,959			1,385			4,944			4,064			1,566			1,525			3,521			2,985
Energy operating expense		2,362			2,132			6,858			6,302
Real estate operating costs and expense		1,352			1,608			4,086			4,312
Energy operating expenses														2,357			2,343			5,147			4,496
Real estate operating costs and expenses														1,250			1,555			2,170			2,734
Interest expense		537			513			1,583			1,547			565			531			1,128			1,046
Total costs and expense		6,210			5,638			17,471			16,225
Total costs and expenses														5,738			5,954			11,966			11,261
Pre-tax earnings		1,321			1,375			2,561			2,797			624			591			847			1,304
Income tax expense (benefit)*		(570	)		(398	)		(1,274	)		(842	)		(379	)		(420	)		(742	)		(693	)
Net earnings after income taxes		1,891			1,773			3,835			3,639			1,003			1,011			1,589			1,997
Noncontrolling interests of BHE subsidiaries		147			103			376			311			130			120			244			229
Net earnings attributable to BHE		1,744			1,670			3,459			3,328			873			891			1,345			1,768
Noncontrolling interests and preferred stock dividends		159			174			358			389			88			102			144			204
Net earnings attributable to Berkshire Hathaway shareholders	$	1,585		$	1,496		$	3,101		$	2,939		$	785		$	789		$	1,201		$	1,564
Effective income tax rate		(43.1	)%		(28.9	)%		(49.7	)%		(30.1	)%		(60.7	)%		(71.1	)%		(87.6	)%		(53.1	)%

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

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 follows (dollars in millions).


	Third Quarter				First Nine Months						Percentage Change						Second Quarter						First Six Months						Percentage Change
	2022		2021		2022			2021			Third Quarter			First Nine Months			2023			2022			2023			2022			Second Quarter			First Six Months
PacifiCorp	$	409	$	333	$	622		$	728			22.8	%		(14.6	)%
MidAmerican Energy Company		300		373		745			728			(19.6	)		2.3
NV Energy		270		282		392			416			(4.3	)		(5.8	)
Northern Powergrid		100		83		282			162			20.5			74.1
U.S. utilities																	$	430		$	380		$	593		$	780			13.2	%		(24.0	)%
Natural gas pipelines		232		144		729			627			61.1			16.3			187			199			556			521			(6.0	)		6.7
Other energy businesses		243		230		726			521			5.7			39.3			389			411			572			750			(5.4	)		(23.7	)
Real estate brokerage		29		102		134			321			(71.6	)		(58.3	)		34			84			—			105			(59.5	)		(100.0	)
Corporate interest and other		161		123		(171	)		(175	)		30.9			(2.3	)		(167	)		(183	)		(376	)		(388	)		(8.7	)		(3.1	)
	$	1,744	$	1,670	$	3,459		$	3,328			4.4			3.9		$	873		$	891		$	1,345		$	1,768			(2.0	)		(23.9	)

Our U.S. utilities operate in several states, including Utah, Oregon and Wyoming (PacifiCorp), Iowa and Illinois (MEC) and Nevada (NV Energy). After-tax earnings increased $50 million (13.2%) in the second quarter and declined $187 million (24.0%) in the first six months of 2023 compared to 2022. The earnings increase for the second quarter was primarily attributable to higher interest and other income, lower depreciation and amortization expense and increased income tax benefits, partly offset by increases in operations and maintenance expense and interest expense. The earnings decrease in the first six months reflected an increase in operations and maintenance expense of $519 million, including a pre-tax increase in loss accruals, net of expected insurance recoveries, of $344 million associated with the 2020 wildfires, and an increase in interest expense. These items were partially offset by increases in interest and other income, lower depreciation and amortization expense and higher electric utility margin (operating revenue less cost of sales), as well as higher income tax benefits.

34The U.S. utilities’ electric utility margin was $1.8 billion in the second quarter of 2023, relatively unchanged from 2022. Electric utility margin was $3.5 billion in the first six months of 2023, an increase of $60 million (1.7%) versus 2022. The year-to-date increase reflected a variety of changes in operating revenues attributable to rates and volumes and in power generation and purchased costs. Electric retail customer volumes increased 0.1% (up 0.6% at PacifiCorp and 1.3% at MEC and down 1.7% at NV Energy) in the first six months of 2023 compared to 2022, primarily due to an overall increase in customer usage and in the average number of customers, partially offset by the unfavorable impact of weather at MEC and NV Energy.

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

~~Utilities and Energy~~BHE (Continued)

~~PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming.~~ After-tax earnings of natural gas pipelines decreased $12 million (6.0%) in the second quarter and increased ~~$76~~$35 million (6.7%) in the first six months of 2023 compared to 2022. The increase in earnings for the first six months reflected higher regulated transportation and storage services revenues from certain general rate cases and favorable interest and other income, partially offset by higher operations and maintenance expenses and the impact of state income tax reductions in the second quarter of 2022.

After-tax earnings of other energy businesses decreased $22 million (5.4%) in the second quarter and $178 million (23.7%) in the first six months of 2023 compared to 2022. The declines in earnings reflected lower earnings from renewable energy and retail services businesses, primarily attributable to lower income tax benefits and higher operating expenses and the impact of unfavorable changes in valuations of derivatives contracts, partially offset by debt extinguishment gains. Earnings in the first six months of 2023 also included a deferred income tax charge of $82 million recognized in the first quarter related to the enactment of the new Energy Profits Levy income tax in the United Kingdom.

After-tax earnings of real estate brokerage decreased $50 million in the ~~third~~second quarter and ~~decreased $106~~$105 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. The ~~changes~~decreases reflected ~~increases~~lower brokerage services revenues and margins, primarily due to a 26% year-to-date reduction in ~~utility margin (operating revenue less cost~~closed brokerage transaction volumes, as well as lower mortgage services revenues and margins from a 38% year-to-date decrease in closed transaction volumes. These declines were attributable to the impact of ~~sales)~~rising interest rates, including lower existing home sales and ~~higher production tax credits recognized~~mortgage refinancing demand.

Corporate interest and other after-tax losses decreased $16 million in the ~~third~~second quarter and ~~higher operating expenses. The increases in operating expenses reflected higher accruals~~$12 million in the first ~~nine~~six months of ~~2022 associated with wildfires in 2020, higher general and plant maintenance costs and incremental costs from additional assets placed in-service.~~

PacifiCorp’s utility margin was $1.1 billion in the third quarter and $2.7 billion in the first nine months of 2022, increases of $68 million and $88 million, respectively, from the comparable periods in 2021. The increases reflected higher operating revenue from favorable retail and wholesale pricing and increases in retail customer volumes, partially offset by higher purchased power and thermal generation costs. Retail customer volumes increased 3.5% in the third quarter and 0.8% in the first nine months of 20222023 compared to ~~2021, primarily due to an increase in the average number of customers and the favorable impact of weather,~~2022, reflecting higher other income, partially offset by lower ~~customer usage.~~federal income tax credits recognized and higher BHE corporate interest expense from an April 2022 debt issuance.

~~MEC~~Pilot

Pilot is headquartered in Knoxville, Tennessee and operates ~~a regulated electric~~travel centers in North America (primarily under the names Pilot or Flying J) with more than 650 travel center locations across the U.S. and ~~natural gas utility primarily~~ in ~~Iowa and Illinois. After-tax earnings decreased $73 million~~six Canadian provinces. Pilot also has over 150 retail locations in the U.S. and Canada where it sells diesel fuel through various arrangements with third ~~quarter~~party travel centers. A substantial portion of Pilot’s revenues and ~~increased $17 million~~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 proportionate share of Pilot’s net earnings for the month ending January 31, 2023 and first ~~nine~~six months of 2022 ~~compared to 2021. The changes reflected increases~~are included in ~~electric utility margin offset by higher operating expenses and lower other income. Additionally, comparative income tax benefits were lower~~equity method earnings in the ~~third~~accompanying Consolidated Statements of Earnings. On January 31, 2023, we acquired an additional 41.4% interest in Pilot, and we currently own an 80% controlling interest. Thus, we began consolidating Pilot’s results of operations in our Consolidated Statements of Earnings on February 1, 2023. Pilot’s earnings for the second quarter of 2023 and ~~higher in~~ the ~~first nine~~five months of 2022, as higher production tax credits recognized on new wind-powered and solar-powered generating facilities placed in-service ($14 million in the third quarter and $106 million in the first nine months) were offset by the impacts of ratemaking. The increase in operating expenses included higher costs associated with certain regulatory mechanisms.ending June 30, 2023 are summarized below (in millions).


	Second Quarter		Five Months Ending
	2023		June 30, 2023
Revenues	$	14,754	$	24,262
Cost of sales		13,600		22,405
Operating and other expenses		855		1,351
Interest expense		113		184
Pre-tax earnings		186		322
Income taxes and noncontrolling interests		72		125
Net earnings attributable to Berkshire Hathaway shareholders	$	114	$	197

MEC’s electric utility margin was $774 million in the third quarter and $1.8 billion in the first nine months of 2022, increases of 12% and 15%, respectively, versus 2021. The increases were attributable to higher operating revenue from increased retail and wholesale customer volumes and favorable wholesale pricing, partially offset by higher purchased power costs. Electric retail customer volumes increased 3.1% in the third quarter and 4.0% in the first nine months of 2022 compared to 2021, primarily due to higher customer usage.

NV Energy operates regulated electric and natural gas utilities in Nevada. After-tax earnings decreased $12 million in the third quarter and $24 million in the first nine months of 2022 compared to 2021. The decreases reflected higher operating expenses from increased plant operations and maintenance expenses, higher accruals for earnings sharing and incremental costs from additional assets placed in-service, partially offset by higher interest income from carrying charges on regulatory balances.

NV Energy’s electric utility margin was $622 million in the third quarter and $1.3 billion in the first nine months of 2022, relatively unchanged compared to 2021. Electric retail customer volumes increased 0.3% in the third quarter and 1.3% in the first nine months of 2022 compared to 2021, primarily due to an increase in the average number of customers, partially offset by the unfavorable impact of weather.

Northern Powergrid’s after-tax earnings increased $17 million in the third quarter and $120 million in the first nine months of 2022 compared to 2021. Earnings in the first nine months of 2021 included deferred income tax expense of $109 million related to the enactment in June 2021 of an increase in the United Kingdom income tax rate from 19% to 25%, effective April 1, 2023. In addition, earnings increased at CE Gas from new projects placed in-service in March and July 2022 and improved distribution business results largely from higher tariff rates, which were partially offset by unfavorable foreign currency translation effects in 2022.

Natural gas pipelines’ after-tax earnings increased $88 million in the third quarter and $102 million in the first nine months of 2022 compared to 2021. The increases were primarily due to higher earnings at BHE GT&S, largely from the impacts of a general rate case, favorable income tax adjustments and lower operating expenses. The year-to-date increase was partially offset by reduced margins in 2022 due to higher natural gas sales and higher transportation revenue in 2021, attributable to an increase in demand as a result of the February 2021 winter storms.

Other energy businesses’ after-tax earnings increased $13 million in the third quarter and $205 million in the first nine months of 2022 compared to 2021. The increases in earnings were primarily due to increased wind tax equity investment earnings of $24 million in the third quarter and $182 million in the first nine months of 2022 as well as from higher operating revenue from owned renewable energy projects, partly offset by lower earnings from natural gas generating facilities. The increases in wind tax equity investment earnings reflected increased income tax benefits from projects reaching commercial operation over the past twelve months. The comparative increase in year-to-date earnings also reflected the impact of losses in 2021 on pre-existing tax equity investments due to the February 2021 winter storms.

3541

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

~~Utilities and Energy~~Pilot (Continued)

~~Real estate brokerage after-tax~~Pilot’s revenues and earnings ~~decreased $73~~are highly dependent on fuel volumes, prices and margins. Revenues for the second quarter of 2023 and the five months ending June 30, 2023 were $14.8 billion and $24.3 billion, respectively.

Pilot’s pre-tax earnings for the second quarter of 2023 and the five months ending June 30, 2023 were $186 million and $322 million, respectively. Operating and other expenses include depreciation and amortization expense of $243 million in the ~~third~~second quarter of 2023 and $411 million in the five months ending June 30, 2023, a significant portion of which derives from property, plant and equipment and finite-lived intangible asset fair value remeasurements in connection with our application of the acquisition accounting method in 2023.

Pilot’s consolidated pre-tax earnings for the second quarter and ~~$187~~the first six months of 2023 and 2022 are summarized below. Revenues, costs and expenses for the first six months of 2022 and first month of 2023 are based on Pilot’s historical accounting and are not included in our Consolidated Financial Statements, whereas such information for the five months ending June 30, 2023 was included in our Consolidated Financial Statements (dollars in millions).


	Second Quarter				First Six Months				Percentage Change
	2023		2022		2023		2022		Second Quarter			First Six Months
Revenues	$	14,754	$	21,534	$	29,282	$	36,001		(31.5	)%		(18.7	)%
Cost of sales		13,600		20,609		27,099		34,128		(34.0	)		(20.6	)
Operating and other expenses		855		633		1,564		1,238		35.1			26.3
Interest expense		113		51		208		93		121.6			123.7
Pre-tax earnings	$	186	$	241	$	411	$	542		(22.8	)		(24.2	)

Revenues for the first six months of 2023 and 2022 were approximately $29.3 billion and $36.0 billion, respectively. For the first six months of 2023, Pilot sold approximately 9.25 billion gallons of diesel fuel, gasoline and other fuel-related products. Revenues during the first six months of 2023 have been lower than in the corresponding 2022 periods, primarily due to significantly lower fuel prices, as well as from lower fuel sales volumes. Cost of sales in 2022 included significantly higher LIFO inventory charges than in 2023, attributable to the significant increases in fuel prices during the first half of 2022. Interest expense increased $62 million in the second quarter and $115 million in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021. The decreases in earnings were primarily attributable to lower earnings from mortgage services~~2022, due to a decrease in funded volume primarily from a decline in refinancing activity and lower earnings from brokerage and settlement services from a decrease in closed units, partially offset by lower operating expenses.

Corporate interest and other after-tax earnings increased $38 million in the third quarter and was relatively unchanged for the first nine months of 2022 compared to 2021, reflecting higher federal income tax credits recognized, partially offset by higher interest ~~expense and lower earnings from non-regulated energy services in the first nine months.~~rates.

Manufacturing, Service and Retailing

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


	Third Quarter						First Nine Months						Percentage Change						Second Quarter						First Six Months						Percentage Change
	2022			2021			2022			2021			Third Quarter			First Nine Months			2023			2022			2023			2022			Second Quarter			First Six Months
Revenues
Manufacturing	$	19,000		$	17,496		$	57,193		$	50,821			8.6	%		12.5	%	$	19,102		$	19,772		$	37,391		$	38,193			(3.4	)%		(2.1	)%
Service and retailing		23,136			21,291			67,645			62,143			8.7			8.9			23,024			22,879			46,014			44,509			0.6			3.4
	$	42,136		$	38,787		$	124,838		$	112,964								$	42,126		$	42,651		$	83,405		$	82,702
Pre-tax earnings
Manufacturing	$	2,883		$	2,445		$	8,735		$	7,595			17.9	%		15.0	%	$	3,103		$	3,028		$	5,714		$	5,852			2.5	%		(2.4	)%
Service and retailing		1,314			1,102			3,806			3,413			19.2			11.5			1,391			1,275			2,725			2,492			9.1			9.3
		4,197			3,547			12,541			11,008									4,494			4,303			8,439			8,344
Income taxes and noncontrolling interests		950			841			3,020			2,679									1,105			1,054			2,068			2,070
Net earnings*	$	3,247		$	2,706		$	9,521		$	8,329								$	3,389		$	3,249		$	6,371		$	6,274
Effective income tax rate		22.1	%		22.9	%		23.6	%		23.7	%								23.9	%		24.0	%		23.8	%		24.3	%
Pre-tax earnings as a percentage of revenues		10.0	%		9.1	%		10.0	%		9.7	%								10.7	%		10.1	%		10.1	%		10.1	%

* Excludes certain acquisition accounting expenses, primarily related to the amortization of identifiable intangible assets recorded in connection with our business acquisitions. The after-tax acquisition accounting expenses excluded from earnings were ~~$161~~$174 million in the ~~third~~second quarter and ~~$484~~$352 million in the first ~~nine~~six months of ~~2022~~2023 and ~~$169~~$162 million in the ~~third~~second quarter and ~~$532~~$323 million in the first ~~nine~~six months of ~~2021.~~2022. These expenses are included in “Other” in the summary of earnings on page 2631 and in the “Other” earnings section on page ~~42.~~48.

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

Manufacturing, Service and Retailing(Continued)

Manufacturing

Our manufacturing group includes 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 Quarter

First Nine Months

2022

2021

2022

2021

Revenues

Industrial products
$
7,723

$
7,192

$
22,912

$
21,050

Building products

7,589

6,374

22,011

18,404

Consumer products

3,688

3,930

12,270

11,367

$
19,000

$
17,496

$
57,193

$
50,821

Pre-tax earnings

Industrial products
$
1,375

$
1,124

$
3,861

$
3,508

Building products

1,236

833

3,687

2,576

Consumer products

272

488

1,187

1,511

$
2,883

$
2,445

$
8,735

$
7,595

Pre-tax earnings as a percentage of revenues

Industrial products

17.8
%

15.6
%

16.9
%

16.7
%
Building products

16.3
%

13.1
%

16.8
%

14.0
%
Consumer products

7.4
%

12.4
%

9.7
%

13.3
%

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

~~Manufacturing, Service and Retailing~~ ~~(Continued)~~


	Second Quarter						First Six Months
	2023			2022			2023			2022
Revenues
Industrial products	$	8,876		$	7,714		$	17,739		$	15,189
Building products		6,693			7,710			12,703			14,422
Consumer products		3,533			4,348			6,949			8,582
	$	19,102		$	19,772		$	37,391		$	38,193
Pre-tax earnings
Industrial products	$	1,520		$	1,270		$	2,961		$	2,486
Building products		1,227			1,307			2,122			2,451
Consumer products		356			451			631			915
	$	3,103		$	3,028		$	5,714		$	5,852
Pre-tax earnings as a percentage of revenues
Industrial products		17.1	%		16.5	%		16.7	%		16.4	%
Building products		18.3	%		17.0	%		16.7	%		17.0	%
Consumer products		10.1	%		10.4	%		9.1	%		10.7	%

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 eleven groups, and includes leasing for the rail, intermodal tank container and mobile crane industries. The industrial products group also includes equipment and systems for the livestock and agricultural industries (CTB International) and a variety of industrial products for diverse markets (Scott Fetzer and LiquidPower Specialty Products). Beginning October 19, 2022, this group also includes certain of Alleghany’s businesses consisting of W&W|AFCO Steel, a structural steel fabrication products business, as well as other businesses that were combined into Marmon.

Revenues of the industrial products group increased ~~$531 million (7.4%~~$1.2 billion (15.1%) in the ~~third~~second quarter and ~~$1.9~~$2.6 billion ~~(8.8%~~(16.8%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. Pre-tax earnings increased ~~$251~~$250 million ~~(22.3%~~(19.7%) in the ~~third~~second quarter and ~~$353~~$475 million ~~(10.1%~~(19.1%) in the first ~~nine~~six months of ~~2022 compared to 2021.~~2023. Pre-tax earnings as a percentage of revenues for the group were ~~16.9%~~16.7% for the first ~~nine~~six months of ~~2022,~~2023, an increase of ~~0.2 percentage points~~0.3% compared to ~~2021.~~the first six months of 2022. Operating results of the group in the first six months of 2023 reflected the impact of business acquisitions and overall improved operating results at our pre-existing businesses. Operating results in 2022 were negatively affected by a combination of higher materials and energy costs, manufacturing inefficiencies attributable to supply chain disruptions and labor shortages and asset impairment charges, which largely offset the impacts of increased average selling prices and increased demand for certain product categories. ~~Operating results of this group’s international businesses were also negatively impacted in 2022 by the stronger U.S. Dollar.~~

PCC’s revenues were ~~$1.9~~$2.3 billion in the ~~third~~second quarter and ~~$5.5~~$4.6 billion in the first ~~nine~~six months of ~~2022,~~2023, increases of ~~17.5%~~28.7% in the ~~third~~second quarter and ~~14.5%~~28.4% in the first ~~nine~~six months compared to ~~2021.~~2022. PCC derives significant revenues and earnings from sales of aerospace products. The revenue increases in ~~2022~~2023 were primarily attributable to higher demand for aerospace ~~products.~~

~~While commercial air travel increased in both the U.S.~~products, while power/energy and international markets, traffic remains below pre-COVID-19 pandemic levels, especially for international routes. Further recovery likely will be uneven, attributable in part to travel restrictions imposed from time-to-time to control the spread of variants of COVID-19, as well as from the changes in supply chain conditions, including the availability of workers. Commercial aircraft delivery rates by original equipment manufacturers (“OEMs”) of narrow-body aircraft have rebounded since the onset of the pandemic. However, deliveries of wide-body aircraft remain relatively low, in part attributablegeneral and industrial products also contributed to the ~~pause in the Boeing 787 program, which resumed deliveries in the third quarter of 2022.~~overall revenue increases. Long-term industry forecasts continue to show growth and strong demand for air travel and aerospace products.

PCC’s pre-tax earnings ~~declined $37 million~~increased 31.5% in the ~~third~~second quarter and ~~$13 million~~27.3% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, reflecting~~2022. The improved results in 2023 reflect the ~~impacts of a year-to-date reduction~~increases in ~~pension plan income of $43 million, as well as increased costs related~~sales and improving manufacturing and operating efficiencies. We continue to ~~labor, materials and utilities and supply chain disruptions. PCC management continues to take actions~~strive to improve ~~operations,~~manufacturing efficiencies, maintain safety and prepare for ~~increased~~increasing demand for PCC’s products. ~~Growth~~Continued growth in PCC’s revenues and earnings will be predicated on the ability to successfully increase production levels to match the expected growth in aerospace ~~demand, including managing through the current supply chain and employment environments.~~products demand.

Lubrizol’s revenues were ~~approximately $1.7~~$1.6 billion in the ~~third~~second quarter and ~~$5.1~~$3.4 billion in the first ~~nine~~six months of ~~2022, increases~~2023, a decrease of ~~6.5%~~5.5% in the ~~third~~second quarter and ~~2.4%~~unchanged in the first ~~nine~~six months compared to ~~2021. The revenue increases~~2022. Revenues in the first six months of 2023 reflected ~~higher average selling prices, partially offset by~~ lower volumes and ~~adverse~~unfavorable foreign currency translation effects from the stronger U.S. ~~Dollar.~~Dollar, offset by higher average selling prices. Lower sales volumes in 2023 were attributable to general market weakness in the global economy, resulting in lower demand in certain product lines. Sales volumes through the first ~~nine months~~half of 2022 were restricted by raw material supply constraints and unplanned temporary maintenance shutdowns, ~~and raw material supply constraints,~~ which limited Lubrizol’s production capabilities. ~~The increase in average selling prices was driven by escalating prices for raw materials, including oil feedstocks, as well as for utilities, packaging, shipping and freight costs.~~

Lubrizol’s pre-tax earnings increased $251 million in the third quarter and $249 million in the first nine months of 2022 compared to 2021. The increase in earnings was driven by fire-related insurance recoveries in 2022, while earnings in 2021 were negatively impacted by significant losses related to a fire in June 2021 at a facility located in Rockton, Illinois and impairment charges in the third quarter of 2021 related to an underperforming business in the Advanced Materials product lines. Insurance recoveries related to a fire in 2019 at the Rouen, France facility and the Rockton, Illinois facility fire were $142 million in the third quarter and $242 million in the first nine months of 2022 compared to $10 million of insurance recoveries in the third quarter and $55 million in the first nine months of 2021. The fire losses related to the Rockton, Illinois fire and impairment charges in 2021 aggregated $73 million in the third quarter and $229 million in the first nine months of 2021. Earnings in 2022 were also negatively impacted by rising raw material costs, lower sales volumes, higher expenses from the unplanned temporary maintenance shutdowns and unfavorable foreign currency translation effects, partially offset by higher selling prices. Earnings in 2021 were also negatively impacted by the weather-related temporary shut-down of Additives facilities in the U.S. in the first quarter, which resulted in lost sales and various incremental and non-recurring manufacturing and other operating costs.

3743

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

Manufacturing, Service and Retailing (Continued)

Industrial products (Continued)

Lubrizol’s pre-tax earnings declined 24.6% in the second quarter and 2.8% in the first six months of 2023 compared to 2022. Earnings in the second quarter and first six months of 2023 reflect lower insurance recoveries ($89 million) in connection with fires at certain production facilities in 2021 and 2020. Excluding insurance recoveries, earnings were higher due to the favorable impacts of higher selling prices and changes in product mix, partially offset by lower sales volumes, higher raw material costs (primarily in the first quarter), higher operating expenses and unfavorable foreign currency translation effects.

Marmon’s revenues were ~~$2.7~~$3.1 billion in the ~~third~~second quarter and ~~$8.1~~$6.2 billion in the first ~~nine~~six months of ~~2022,~~2023, increases of ~~4.3%~~12.2% in the ~~third~~second quarter and ~~12.8%~~14.3% in the first ~~nine~~six months compared to ~~2021. Nearly all~~2022. Business acquisitions, including AP Emissions Technologies and three former Alleghany businesses: Kentucky Trailer, Wilbert Funeral Services, Inc. and Wilbert Plastics Services, accounted for $301 million and $595 million of ~~Marmon’s business~~comparative revenue increases in the second quarter and first six months of 2023, respectively. In addition, the Rail & Leasing and Crane Services groups generated higher revenues in ~~the first nine months of 2022, led by significant increases in the Transportation,~~2023, due to higher volumes and pricing improvements. The Electrical, Metal Services ~~Industrial~~ and ~~Electrical products groups, which contributed approximately 76% of the increase. These increases generally reflected favorable volume~~Plumbing & Refrigeration group revenues in 2023 were negatively impacted by lower steel and sales mix and higher metals prices, partially offset by unfavorable foreign currency translation effects. Metals prices in the third quarter of 2022 began to moderate and in certain instances declined. Revenues of the Rail & Leasing group in the third quarter and first nine months of 2022 declined versus 2021, due primarily to low product sales volumes and declining lease rates.copper prices.

Marmon’s pre-tax earnings increased ~~13.3%~~30.6% in the ~~third~~second quarter and ~~14.1%~~21.8% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. Earnings increases attributable to business acquisitions were $26 million in the second quarter and $42 million in the first six months of 2023. Earnings in the ~~first nine months~~second quarter of 2022 included losses of approximately $90 million in the Rail & Leasing group related to the shutdown ~~in the second quarter~~ of its business in Russia. ~~In the first nine months of 2022,~~Otherwise, comparative earnings from Marmon’s other business groups in 2023 were mixed, reflecting earnings increases in the Transportation, ~~Metal~~Water Technologies, and Crane Services ~~Plumbing,~~groups, which were primarily attributable to revenue growth, and lower earnings in the Electrical ~~Retail and Industrial Products groups contributed meaningful increases in earnings, due to a combination of higher sales volumes and margins. These increases were partially offset~~group, driven by lower ~~earnings from~~margins in the ~~Rail & Leasing group.~~building wire business.

IMC’s revenues were ~~$905 million~~$1.0 billion in the ~~third~~second quarter and ~~$2.8~~$2.0 billion in the first ~~nine~~six months of ~~2022,~~2023, increases of ~~5.0%~~10.2% in the second quarter and 7.7% in the first six months compared to ~~the same periods~~2022. The revenue increases in ~~2021. Revenues in 2022 reflected~~2023 reflect increased organic sales in ~~several geographic regions,~~North America, the impact of business acquisitions and higher interest income, partially offset by lower revenues in Asia, ~~and effects from~~unfavorable foreign currency translation from a stronger U.S. Dollar and the impact of the Russia-Ukraine conflict. IMC’s pre-tax earnings ~~decreased 1.3%~~increased 15.1% in the second quarter and 9.0% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, as~~2022. In 2023, the impact of revenue increases ~~were more than~~was partially offset by higher raw material costs, changes in sales mix and ~~unfavorable~~the adverse effects of ~~foreign currency translation and~~ the Russia-Ukraine conflict.

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 Building Brands), paint and coatings (Benjamin Moore) and residential and commercial construction and engineering products and systems (MiTek).

Revenues of the building products group ~~increased $1.2~~decreased $1.0 billion ~~(19.1%~~(13.2%) in the ~~third~~second quarter and ~~$3.6~~$1.7 billion ~~(19.6%~~(11.9%) in the first ~~nine~~six months of ~~2022 and pre-tax~~2023 compared to 2022. Pre-tax earnings ~~increased $403~~decreased $80 million ~~(48.4%~~(6.1%) in the ~~third~~second quarter and ~~$1.1 billion (43.1%~~$329 million (13.4%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. Our building products businesses have benefited in recent years from the low interest rate ~~environment. However,~~environment and strong residential and commercial construction markets. The effects of significant increases in home mortgage interest rates in the U.S. ~~increased significantly~~ over the ~~first nine months of 2022. As a result, the significant increase in home mortgage interest rates~~past year has slowed demand for our home building businesses and our other building products businesses. Such effects have been partially mitigated by new ~~home construction. As such,~~construction activity, resulting from low supplies of pre-existing homes for sale. We continue to anticipate some of our businesses will experience comparative declines in revenues and earnings inover the ~~near term will likely decline from current levels.~~remainder of 2023.

Clayton Homes’ revenues ~~increased 24.8%~~declined 16.3% to ~~$3.3~~$2.9 billion in the ~~third~~second quarter and ~~24.9%~~13.8% to ~~$9.5~~$5.4 billion in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. Revenues from home sales ~~increased $1.8 billion (30.2%~~decreased $971 million (19.0%) in the first ~~nine~~six months of ~~2022, primarily due to~~2023, reflecting lower unit sales, partially offset by slightly higher average selling ~~prices and increased volume.~~prices. New home unit sales ~~increased 9.5%~~declined 19.5% in the first ~~nine~~six months of ~~2022,~~2023, reflecting ~~a 10.5% increase in factory-built manufactured home~~lower unit sales for factory-built homes (19.2%) and ~~a 5.4% increase in~~ site-built ~~home unit sales.~~homes (21.1%). We expect unit sales ~~will likely decline in~~over the ~~near term, as a consequence~~remainder of ~~higher interest rates.~~2023 to be below 2022 levels. Financial services revenues, which include mortgage origination and services, insurance and interest income from lending activities, increased ~~4.1%~~9.9% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022, primarily due to increased interest income on higher average loan balances. Loan balances, net of allowances for credit losses, were approximately ~~$20.4~~$22.5 billion as of ~~September~~June 30, ~~2022,~~2023, an increase of ~~approximately $1.6 billion from December 31, 2021.~~12.4% since June 30, 2022.

Pre-tax earnings of Clayton Homes increased $249 million (63.8%) in the third quarter and $512 million (41.3%) in the first nine months of 2022 compared to 2021. Earnings in 2022 reflected higher home sales, gross margin rates and net interest income, as well as relatively low credit losses.

Aggregate revenues of our other building products businesses were approximately $4.3 billion in the third quarter and $12.5 billion in the first nine months of 2022, increases of $565 million (15.1%) in the third quarter and $1.7 billion (15.9%) in the first nine months versus 2021. The increases were primarily due to higher average selling prices, and to a lesser extent, from higher unit volumes in certain product lines and product mix changes.

Pre-tax earnings of our other building products businesses increased $154 million (34.9%) in the third quarter and $600 million (44.9%) in the first nine months of 2022 compared to 2021. Earnings as a percentage of revenues in the first nine months of 2022 increased 3.1 percentage points versus 2021. Earnings in 2022 benefitted from higher selling prices and strong demand in certain product categories, as well as a comparative increase in pre-tax gains from business divestitures and asset sales of $58 million in the third quarter and $169 million in the first nine months. The increase in earnings in 2022 also reflected the negative impact of severe winter storms in the first quarter of 2021, which reduced sales and increased production and other operating costs.

3844

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

Manufacturing, Service and Retailing (Continued)

Building products (Continued)

Pre-tax earnings of Clayton Homes declined $72 million (11.5%) in the second quarter and $150 million (13.5%) in the first six months of 2023 compared to 2022, primarily attributable to lower earnings from the home building businesses. Earnings from financial services also declined in the first six months of 2023 versus 2022, which were negatively affected by increased expected loan loss provisions and higher insurance claims, partially offset by higher net interest income.

Aggregate revenues of our other building products businesses were approximately $3.8 billion in the second quarter and $7.3 billion in the first six months of 2023, decreases of $459 million (10.7%) in the second quarter and $860 million (10.5%) in the first six months versus 2022. Comparative revenues were lower at all of our other building products businesses, generally due to lower sales volumes and changes in product mix, partly offset by higher average selling prices.

Pre-tax earnings of our other building products businesses declined slightly (1.2%) in the second quarter and $179 million (13.3%) in the first six months of 2023 compared to 2022. Earnings as a percentage of revenues in the second quarter increased 1.7 percentage points and in the first six months of 2023 decreased 0.5 percentage points versus 2022. The earnings of our other building products businesses in 2023 were negatively impacted by lower sales volumes and reduced manufacturing efficiencies and benefited from lower average prices for certain raw materials and energy, as well as reduced freight and shipping expenses. The earnings in 2022 benefited from higher selling prices and strong demand in certain product categories and an increase in the gains from a business divestiture and asset sales of $111 million.

Consumer products

The consumer products group includes recreational vehicles (Forest River), several apparel and footwear operations (including Fruit of the Loom, Garan, Fechheimer, H.H. Brown Shoe Group and Brooks Sports) and high-performance batteries (Duracell). This group also includes custom picture framing products (Larson-Juhl) ~~and~~, jewelry products (Richline). and beginning October 19, 2022, Jazwares, LLC (Jazwares), a global toy company acquired in connection with the Alleghany acquisition.

Consumer products group revenues decreased ~~$242~~$815 million ~~(6.2%~~(18.7%) in the ~~third~~second quarter and ~~increased $903 million (7.9%~~$1.6 billion (19.0%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~ 2022. The declines reflected lower revenues at Forest River and nearly all of our other consumer products operations, partially offset by the impact of the Jazwares acquisition, which contributed revenues of $378 million in the first six months of 2023.

Forest River’s revenues declined ~~7.2%~~34.2% in the ~~third~~second quarter and ~~increased 22.1%~~36.4% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021. Forest River’s~~2022, reflecting an overall 40.1% decline in unit sales ~~declined 27.9% in the third quarter and 5.3%~~ in the first ~~nine~~six months ~~of 2022 versus 2021. The comparative decline~~and changes in sales mix. Forest River experienced strong recreational vehicle unit ~~volume~~sales in ~~the third quarter was attributable to reduced consumer demand. Over~~recent years and through the first ~~nine months~~half of ~~2022, Forest River’s revenues reflected higher average selling prices, resulting from higher material prices~~2022. Since then, volumes have declined significantly, attributable in part to the impact of rising interest rates, inflation and ~~supply chain costs.~~other macroeconomic conditions. The sales volume declines for recreational vehicles in 2023 were partially offset by increased bus and commercial business.

Revenues of our apparel and footwear businesses declined ~~$27~~$155 million ~~(2.0%~~(12.8%) in the ~~third~~second quarter and ~~$165~~$222 million ~~(4.2%~~(9.2%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, reflecting lower~~2022. Revenues from apparel for the first six months of 2023 declined 13.5% from 2022, while revenues from footwear declined 1.8%. The decline in apparel ~~(5.6% in the third quarter and 8.5% in the first nine months), partly~~revenue was attributable to continuing sluggish customer demand, partially offset by higher ~~revenues from footwear. The declines in apparel revenues were driven by lower volumes, as retailers reduced orders in response to rising inventories.~~average selling prices and sales mix changes. Duracell’s revenues in first ~~nine~~six months of ~~2022~~2023 declined ~~6.9%~~7.8% versus ~~2021,~~2022, primarily due to lower ~~volumes~~sales volume and unfavorable foreign currency translation effects of the stronger U.S. Dollar.

Pre-tax earnings of our consumer products group declined ~~$216~~$95 million ~~(44.3%~~(21.1%) in the ~~third~~second quarter and ~~$324~~$284 million ~~(21.4%~~(31.0%) in the first ~~nine~~six months of 2023 versus 2022, ~~versus 2021.~~primarily attributable to lower earnings from Forest River and Duracell. Pre-tax earnings as a percentage of revenues for the group decreased ~~3.6~~1.6 percentage points in the first ~~nine~~six months of ~~2022~~2023 compared to 2021. The declines in earnings in 2022 reflected lower aggregate earnings from the apparel and footwear businesses and from Duracell. The comparative decline in earnings in the first nine months was partially offset by higher earnings from Forest River.

Apparel and footwear earnings declined about 75% in the third quarter and 58% in the first nine months of 2022 compared to 2021. Our apparel businesses continue to be negatively affected by lower sales volumes, reduced manufacturing efficiencies and higher input costs, including raw materials, freight, labor and other operating costs. We expect that the comparative operating earnings will likely be lower in the fourth quarter, due to low customer demand and high costs. Duracell’s earnings in 2022 declined, primarily due to lower sales, cost inflation and foreign currency translation effects.2022.

Earnings from Forest River ~~were essentially unchanged in the third quarter and higher~~declined 39.2% in the first ~~nine~~six months of 2023 compared to 2022, primarily due to the ~~increase~~decrease in unit sales, which reduced manufacturing efficiencies, partially offset by lower selling, general and administrative expenses. Apparel and footwear earnings declined 10.7% in the first ~~half~~six months of 2023 compared to 2022. Our apparel businesses were negatively affected by lower sales volumes and reduced manufacturing efficiencies. Earnings from Duracell declined in the ~~year~~second quarter and ~~higher average selling prices, partly offset by higher materials costs. We currently expect demand for recreational vehicles will continue~~first six months of 2023 compared to ~~slow~~2022, due to reduced consumer consumption and ~~Forest River’s comparative revenues~~market share losses in North America to lower priced brands and ~~earnings~~ to ~~decline over~~ the ~~remainder~~non-recurring cost and expense reductions in the second quarter of ~~2022~~2022.

Item 2. Management’s Discussion and ~~into 2023.~~Analysis of Financial Condition and Results of Operations

Manufacturing, Service and Retailing (Continued)

Service and retailing

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

Third Quarter

First Nine Months

2022

2021

2022

2021

Revenues

Service
$
4,771

$
4,131

$
14,031

$
11,718

Retailing

4,796

4,548

14,268

13,896

McLane

13,569

12,612

39,346

36,529

$
23,136

$
21,291

$
67,645

$
62,143

Pre-tax earnings

Service
$
806

$
696

$
2,286

$
2,013

Retailing

396

414

1,250

1,221

McLane

112

(8
)

270

179

$
1,314

$
1,102

$
3,806

$
3,413

Pre-tax earnings as a percentage of revenues

Service

16.9
%

16.8
%

16.3
%

17.2
%
Retailing

8.3
%

9.1
%

8.8
%

8.8
%
McLane

0.8
%

(0.1
)%

0.7
%

0.5
%

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

~~Manufacturing, Service and Retailing~~ ~~(Continued)~~


	Second Quarter						First Six Months
	2023			2022			2023			2022
Revenues
Service	$	5,181		$	4,737		$	10,500		$	9,260
Retailing		4,960			4,880			9,572			9,472
McLane		12,883			13,262			25,942			25,777
	$	23,024		$	22,879		$	46,014		$	44,509
Pre-tax earnings
Service	$	824		$	756		$	1,661		$	1,480
Retailing		438			443			822			854
McLane		129			76			242			158
	$	1,391		$	1,275		$	2,725		$	2,492
Pre-tax earnings as a percentage of revenues
Service		15.9	%		16.0	%		15.8	%		16.0	%
Retailing		8.8	%		9.1	%		8.6	%		9.0	%
McLane		1.0	%		0.6	%		0.9	%		0.6	%

Service

Our service group consists of several businesses. The largest of these businesses are NetJets and FlightSafety (aviation services), which offer shared ownership programs for general aviation aircraft and high technology training ~~products~~services and ~~services~~products to operators of aircraft, and TTI, a distributor of electronics components. 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). Beginning October 19, 2022, this group includes IPS-Integrated Project Services, LLC (IPS), a provider of various services in facilities construction management.

Service group revenues increased ~~$640~~$444 million ~~(15.5%~~(9.4%) in the ~~third~~second quarter and ~~$2.3~~$1.2 billion ~~(19.7%~~(13.4%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~ 2022. IPS had revenues of $302 million in the second quarter and $604 million in the first six months of 2023. Revenues from aviation services increased 8.2% in the second quarter and 13.2% in the first six months of 2023 compared to 2022. The revenue increases were primarily due to increases in the number of aircraft in shared aircraft ownership programs and in-flight hours across NetJets’ various programs, as well as higher average rates.

Revenues from TTI ~~increased 16.6%~~declined 1.0% in the ~~third~~second quarter and ~~20.3%~~increased 2.4% in the first ~~nine~~six months of 2023 compared to 2022. Excluding the effects of business acquisitions in 2022 and 2023 and the unfavorable foreign currency translation effects, year-to-date revenues increased 1.0% in 2023 versus 2022. TTI experienced significant revenue growth in 2021 ~~reflecting strong demand in nearly all significant markets. However, during~~and much of 2022. Since the third quarter of 2022, new orders have slowed in ~~certain~~several regions and markets, in part attributable to elevated customer inventory ~~levels within~~levels. These conditions are expected to continue and TTI may experience comparative revenue declines over the ~~supply chain. Revenues from aviation services (NetJets and FlightSafety) increased 14.2% in the third quarter and 19.9% in the first nine months~~remainder of 2022 compared to 2021. The revenue increases reflected year-to-date increases in training hours (17%), customer flight hours (14%), most of which occurred in the first half of the year, and fuel surcharges to customers due to the increase in customer flight hours and significant increases in fuel prices. These increases were partially offset by the effects from changes in sales mix.2023.

Pre-tax earnings of the service group increased ~~$110~~$68 million ~~(15.8%~~(9.0%) in the ~~third~~second quarter and ~~$273~~$181 million ~~(13.6%~~(12.2%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. Pre-tax earnings as a percentage of revenues ~~decreased 0.9~~declined 0.2 percentage points in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. The earnings ~~increase in the third quarter of 2022 was~~increases were primarily attributable to higher overall margin rates in aviation services ~~reflecting a significant comparative decline in subcontract aircraft utilization, and~~businesses, primarily due to a ~~lesser extent, increased earnings from several of our other businesses. The comparative~~17% year-to-date increase in ~~earnings~~average aircraft in the ~~first nine months reflected higher~~NetJets programs, changes in business mix and the impact of the IPS acquisition. These increases were partially offset by lower earnings from TTI ~~primarily~~(6.4% year-to-date), attributable to ~~the increases in sales~~lower gross margin rates, higher operating expenses and ~~improved operating cost leverage, partially offset by~~ unfavorable foreign currency effects in 2022 and a favorable legal settlement in 2021. Earnings from aviation services for the first nine months of 2022 decreased compared to 2021, attributable to a significant increase in subcontracted aircraft utilization due to the increase in customer flight hours in the first half of the year, and from higher equipment maintenance and other operating costs, which more than offset the increase in revenues.effects.

Retailing

Our largest retailing business is Berkshire Hathaway Automotive, Inc. (“BHA”), representing ~~66%~~67.6% of our combined retailing revenue in the first ~~nine~~six months of ~~2022.~~2023. 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 ~~20%~~18.3% of the combined retailing revenues in the first ~~nine~~six months of ~~2022.~~2023.

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

Manufacturing, Service and Retailing(Continued)

Retailing (Continued)

Other retailing businesses include three jewelry ~~retailing businesses~~retailers (Borsheims, Helzberg and Ben Bridge), See’s Candies ~~(confectionary~~(confectionery products), Pampered Chef ~~(high quality~~(high-quality kitchen tools), Oriental Trading Company (party supplies, school supplies and toys and novelties) and Detlev Louis Motorrad (“Louis”), a retailer of motorcycle accessories based in Germany.

Retailing group revenues increased ~~$248 million (5.5%)~~1.6% in the ~~third~~second quarter and ~~$372 million (2.7%)~~1.1% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021~~2022, reflecting increases at BHA, partially offset by ~~combined~~ lower revenues from our other retailers. BHA’s revenues in the ~~third~~second quarter and first ~~nine~~six months of ~~2022~~2023 increased ~~11.3%~~5.3% and ~~6.3%~~4.5%, respectively, compared to the same periods in ~~2021.~~2022. Revenues from new ~~and used~~ vehicle sales increased ~~10.9%~~12.8% in the ~~third quarter and~~first six months of 2023 compared to 2022 while revenues from pre-owned vehicle retail sales declined 8.4%. Unit sales in the first six months of 2023 increased 1.5%, reflecting an 8.9% increase in new vehicle sales, partly offset by lower pre-owned vehicles sold. While new vehicle inventory levels remain well below historical levels, vehicle supply continues to gradually rise. Revenues from BHA’s parts/service/repair operations in the first six months of 2023 increased 8.8% versus 2022. Other retailing revenues in the aggregate declined 5.4% in the first ~~nine~~six months of 2023 versus 2022, ~~compared~~primarily due to ~~2021. Revenues from vehicle~~lower sales reflected higher average vehicle transaction prices, partly offset by lower unit sales on a year-to-date comparative basis. Unit sales continue to be constrained by low new vehicle production by OEMs, attributable to the ongoing global computer chip shortages and other supply chain disruptions. Revenues from service and repair and finance and service contract revenues each increased versus 2021.at our home furnishings businesses.

Retailing group pre-tax earnings ~~decreased $18~~declined $5 million ~~(4.3%~~(1.1%) in the ~~third~~second quarter and ~~increased $29~~$32 million ~~(2.4%~~(3.7%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021.~~2022. BHA’s pre-tax earnings increased ~~24.7%~~12.7% in the ~~third~~second quarter and ~~22.7%~~21.1% in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021, primarily due to increases in~~2022. BHA’s earnings increase reflects higher earnings from parts/service/repair and finance/service contract operations and lower operating expenses, partially offset by lower vehicle ~~gross profit~~sales margins and ~~finance and service contract earnings per vehicle sold and from operating cost control efforts.~~higher floor plan interest expense. BHA’s comparative ~~new~~ vehicle gross profit margin rates, ~~began to accelerate during~~before the ~~second~~effects of LIFO, peaked in the first half of ~~2021, as a consequence of low available inventory attributable~~2022 and have since been reverting to ~~supply chain constraints impacting the OEMs.~~historical levels. Aggregate pre-tax earnings for the remainder of our retailing group ~~decreased $68~~declined $36 million ~~(32.2%~~(18.2%) in the ~~third~~second quarter and ~~$103~~$127 million ~~(15.9%~~(31.8%) in the first ~~nine~~six months of ~~2022~~2023 compared to ~~2021,~~2022, primarily due to ~~declining~~a 33.8% decrease in the first six months earnings from the ~~furniture retailers~~home furnishings businesses, and ~~Pampered Chef.~~

~~Item 2. Management’s Discussion and Analysis~~the impact of ~~Financial Condition and Results~~a gain in the first quarter of ~~Operations~~

~~Manufacturing, Service and Retailing(Continued)~~2022 related to the divestiture of certain jewelry stores.

McLane Company

McLane operates a wholesale distribution business that provides grocery and non-food consumer products to retailers and convenience stores (“grocery”) and to restaurants (“foodservice”). McLane also operates ~~businesses that are~~ wholesale distributors of distilled spirits, wine and beer (“beverage”). The grocery and foodservice distribution businesses generate high sales and very low profit ~~margins.~~margins and operate in a highly competitive environment. These businesses have several significant customers, including Walmart, 7-Eleven, Yum! Brands and others. ~~Grocery sales comprised 61% of McLane’s consolidated sales in the first nine months of 2022, with foodservice representing most of the remainder.~~ A curtailment of purchasing by any of its significant customers could have an adverse impact on McLane’s periodic revenues and earnings.

Revenues declined 2.9% in the second quarter and increased ~~$957~~0.6% in the first six months of 2023 compared to 2022. Revenues in 2023 of the grocery and the foodservice businesses were negatively affected by lower unit volumes. Grocery sales comprised 61% of McLane’s consolidated sales in the first six months of 2023, with foodservice representing most of the remainder. Pre-tax earnings increased $53 million ~~(7.6%~~(69.7%) in the ~~third~~second quarter and ~~$2.8 billion (7.7%~~$84 million (53.2%) in the first ~~nine~~six months of ~~2022~~2023 compared to 2021, reflecting year-to-date increases of 3.9% from the grocery business and 15.2% from the foodservice business. Pre-tax earnings increased $120 million in the third quarter and $91 million (50.8%) in the first nine months of 2022 compared to 2021.2022. The increases in earnings ~~reflected slightly higher~~reflects increases in the gross margin rates ~~in the grocery~~ and ~~foodservice businesses,~~lower fuel expenses, partly offset by higher personnel ~~costs, fuel expense~~expenses.

Non-Controlled Businesses

After-tax earnings of our non-controlled businesses include our proportionate share of earnings attributable to our investments in Kraft Heinz, Occidental Petroleum, Pilot (through January 31, 2023) and ~~insurance costs. McLane’s grocery~~Berkadia. After-tax earnings attributable to these businesses increased $353 million in the second quarter and ~~food service operating results continue~~$639 million in the first six months of 2023 versus 2022, primarily due to ~~be adversely affected by supply chain constraints, including~~earnings from Occidental Petroleum and increases in earnings attributable to Kraft Heinz. We adopted the ~~effects~~equity method of ~~labor~~accounting for our investment in Occidental Petroleum common stock as of August 4, 2022. As of January 31, 2023, Berkshire acquired a controlling interest in Pilot. We applied the equity method through the end of January 2023 on our pre-existing 38.6% interest and ~~truck driver shortages~~began consolidating Pilot’s financial statements in our Consolidated Financial Statements on February 1, 2023. See Notes 3 and ~~higher inventory costs. We expect~~6 to the ~~current difficult operating environment to continue for the remainder~~Consolidated Financial Statements.

Item 2. Management’s Discussion and Analysis of ~~2022.~~Financial Condition and Results of Operations

Investment and Derivative Contract ~~Gains/Losses~~Gains (Losses)

A summary of investment and derivative contract ~~gains/losses~~gains (losses) follows (dollars in millions).

Third Quarter

First Nine Months

2022

2021

2022

2021

Investment gains (losses)

$
(13,500
)

$
4,851

$
(82,089
)

$
37,235

Derivative contract gains (losses)

35

70

(273
)

780

Gains (losses) before income taxes and noncontrolling interests

(13,465
)

4,921

(82,362
)

38,015

Income taxes and noncontrolling interests

(3,016
)

1,043

(17,295
)

8,036

Net earnings (loss)

$
(10,449
)

$
3,878

$
(65,067
)

$
29,979

Effective income tax rate

20.9
%

20.7
%

20.8
%

20.9
%

~~Investment gains/losses~~


	Second Quarter						First Six Months
	2023			2022			2023			2022
Investment gains (losses)	$	33,061		$	(66,854	)	$	67,819		$	(68,589	)
Derivative contract gains (losses)		—			(65	)		—			(308	)
Gains (losses) before income taxes and noncontrolling interests		33,061			(66,919	)		67,819			(68,897	)
Income taxes and noncontrolling interests		7,192			(13,881	)		14,511			(14,279	)
Net earnings (loss)	$	25,869		$	(53,038	)	$	53,308		$	(54,618	)
Effective income tax rate		21.7	%		21.0	%		21.3	%		20.8	%

Unrealized gains and losses arising from changes in market prices of investments in equity securities are included in our reported earnings, 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 ~~that are~~ held by our ~~U.S. based~~U.S.-based subsidiaries.

Pre-tax investment ~~gains/~~gains and losses included net unrealized ~~losses~~gains of ~~$12.9~~$33.0 billion in the ~~third~~second quarter and ~~$80.5~~$63.8 billion in the first ~~nine~~six months of ~~2022 compared to~~2023 and net unrealized ~~gains~~losses of ~~$4.8~~$66.9 billion in the ~~third~~second quarter and ~~$36.2~~$68.5 billion in the first ~~nine~~six months of ~~2021~~2022 on securities we held at the end of the applicable period. Taxable ~~investment gains/~~gains and losses on equity securities sold is generally represents the difference between sales proceeds and the original cost of the securities sold. Sales of equity securities produced taxable gains of ~~$3 million~~$2.4 billion in the ~~third~~second quarter and ~~taxable losses of $660 million~~$4.6 billion in the first ~~nine~~six months of ~~2022~~2023 compared to taxable gains of ~~$0.9 billion~~$76 million in the ~~third~~second quarter and ~~$2.9 billion~~losses of $663 million in the first ~~nine~~six months of ~~2021.~~2022. Pre-tax investment gains in the first six months of 2023 included a non-cash gain of approximately $3 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 on January 31.

We believe that investment ~~gains/~~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/~~gains and losses recorded in earnings in any given period has little analytical or predictive value.

~~Derivative contract gains/losses~~

Derivative contract gains/losses include the changes in fair value of our few remaining equity index put option contract liabilities. The gains and losses from the changes in the fair values of these liabilities are recorded in earnings. As of September 30, 2022, our recorded liability at fair value was less than $1 million. Our ultimate payment obligations, if any, under these contracts will be determined as of the contract expiration dates based on the intrinsic value as defined in the contracts.

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

Other

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

Third Quarter

First Nine Months

2022

2021

2022

2021

Equity method earnings
$
362

$
310

$
874

$
665

Acquisition accounting expenses

(161
)

(169
)

(484
)

(532
)
Corporate interest expense, before foreign currency effects

(66
)

(75
)

(203
)

(232
)
Foreign currency exchange rate gains on Berkshire and BHFC
non-U.S. Dollar senior notes

858

196

2,441

676

Other

48

87

207

76

$
1,041

$
349

$
2,835

$
653


	Second Quarter						First Six Months
	2023			2022			2023			2022
Acquisition accounting expenses	$	(200	)	$	(162	)	$	(402	)	$	(323	)
Corporate interest expense, before foreign currency effects		(54	)		(67	)		(118	)		(137	)
Foreign currency exchange rate gains on Berkshire and BHFC non-U.S. Dollar senior notes		465			1,061			448			1,583
Other earnings		129			80			301			159
	$	340		$	912		$	229		$	1,282

After-tax equity method earnings include our proportionate share of earnings attributable to our investments in Kraft Heinz, Pilot, Berkadia, Electric Transmission of Texas and Iroquois Gas Transmission Systems. Equity method earnings increased $209 million in the first nine months of 2022 versus 2021, primarily due to higher earnings from Kraft Heinz and Pilot. Beginning in the fourth quarter of 2022, equity method earnings will also include Occidental Petroleum. See Note 5 to the Consolidated Financial Statements.

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. Such charges arise primarily from the amortization of intangible assets recorded in connection with those business acquisitions.

Foreign currency exchange rate gains ~~and losses~~ pertain to Berkshire’s and BHFC’s Euro, Great Britain Pound and Japanese Yen ~~denominated debt and BHFC’s 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. In 2023 and 2022, we recorded ~~significant~~ foreign currency exchange rate gains on these debt issues due to strengthening of the U.S. Dollar, which reduced the U.S Dollar carrying value of the debt. ~~These gains were largely offset by losses included in investment gains/losses, pertaining to non-U.S. Dollar denominated investments held by our U.S. based subsidiaries.~~ 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/losses~~earnings consist primarily of Berkshire parent company investment income and corporate expenses, other intercompany interest income where the interest expense is included in earnings of the operating businesses and unallocated income taxes.

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

Financial Condition

Our Consolidated Balance Sheet continues to reflect ~~very~~ significant liquidity and a very strong capital base. Our Consolidated shareholders’ equity ~~attributable to Berkshire shareholders~~ at ~~September~~June 30, ~~2022~~2023 was ~~$455.4~~$539.9 billion, ~~a decrease~~an increase of ~~$50.8~~$66.5 billion since December 31, ~~2021.~~2022. Net ~~loss~~earnings attributable to Berkshire shareholders was ~~$41.0~~$71.4 billion in the first ~~nine~~six months of ~~2022,~~2023, which included after-tax ~~losses~~gains on our investments of ~~$64.9~~$53.3 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, and Charlie Munger, Vice Chairman of the Board. The program does not specify a maximum number of shares to be repurchased and does not require any specified repurchase amount. The program is expected to continue indefinitely. We will not repurchase our stock if it reduces the total amount of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $30 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire. Berkshire paid ~~$5.2~~$5.8 billion in the first ~~nine~~six months of ~~2022~~2023 to repurchase shares of its Class A and B common stock.

At ~~September~~June 30, ~~2022,~~2023, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of ~~$105.2~~$141.9 billion, which included ~~$77.9~~$120.4 billion invested in U.S. Treasury Bills. Investments in equity and fixed maturity securities (excluding our investments in Kraft Heinz and Occidental common stock) were ~~$324.8~~$375.8 billion. During the first ~~nine~~six months of ~~2022,~~2023, we paid cash of ~~$66.2~~$7.4 billion to acquire ~~equities~~equity securities and we received proceeds of ~~$17.3~~$25.8 billion from sales of equity securities. On ~~October 19, 2022,~~January 31, 2023, we acquired ~~Alleghany Corporation~~an additional 41.4% interest in Pilot for ~~cash consideration of $11.6 billion, which was funded by existing cash balances.~~approximately $8.2 billion.

Our consolidated borrowings at ~~September~~June 30, ~~2022~~2023 were ~~$116.5~~$125.3 billion, of which over 95% were by the Berkshire parent company, BHFC, BNSF, ~~and~~ BHE and its ~~subsidiaries. In~~subsidiaries and Pilot. During the first ~~nine~~six months of ~~2022, Berkshire and certain of its subsidiaries~~2023, we issued new term debt of approximately ~~$10.2~~$4.0 billion ~~in the aggregate~~ and ~~paid approximately $3.3~~repaid $7.6 billion on maturing term debt.

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

~~Financial Condition~~ ~~(Continued)~~

Berkshire parent company outstanding debt at ~~September~~June 30, ~~2022~~2023 was ~~$19.2~~$17.7 billion, a decrease of ~~$2.2~~$3.7 billion since December 31, ~~2021. In January 2022,~~2022. Berkshire repaid ~~$600 million~~$4.3 billion of maturing senior notes and issued ¥128.5 billion (approximately $1.1 billion) of senior notes with maturity dates ranging from 2027 to 2052 and a weighted average interest rate of 0.5%. Berkshire’s borrowings decreased $2.7 billion in the first nine months of 2022 from changes in foreign currency exchange rates on its non-U.S. Dollar denominated debt. Berkshire parent company debt ~~maturities over the next twelve months approximate $4.2 billion, all of which is~~ in the first six months of 2023. In April 2023, Berkshire issued ¥164.4 billion (approximately $1.2 billion) of senior notes.

~~Berkshire’s insurance and other subsidiary outstanding borrowings were $22.3 billion at September 30, 2022, which included senior~~Senior note borrowings of BHFC, a wholly-owned financing subsidiary, ofwere approximately ~~$17.6 billion.~~$18.0 billion at June 30, 2023, substantially unchanged from December 31, 2022. 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. In March 2022, BHFC issued $4.5 billion of senior notes with maturity dates ranging from 2027 to 2052 and a weighted average interest rate of 3.4% and issued €1.25 billion of senior notes maturing in 2030 and 2034 with a weighted average interest rate of 1.8%. Aggregate maturities of BHFC debt in the first nine months of 2022 were $775 million. Berkshire guarantees BHFC’s senior notes for the full and timely payment of principal and interest.

BNSF’s outstanding debt was ~~$23.3~~$24.3 billion as of ~~September~~June 30, ~~2022,~~2023, an increase of ~~$83~~$854 million from December 31, ~~2021.~~2022. In June ~~2022,~~2023, BNSF issued ~~$1.0~~$1.6 billion of ~~4.45%~~5.2% debentures due in ~~2053.~~2054. During the first ~~nine~~six months of ~~2022,~~2023, BNSF repaid approximately ~~$900~~$700 million of term debt. Outstanding borrowings of BHE and its subsidiaries were ~~$51.7~~$53.9 billion at ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$112 million~~$1.1 billion from December 31, ~~2021.~~2022. In ~~April 2022,~~May 2023, a BHE subsidiary issued ~~$1.0~~$1.2 billion of ~~4.6% senior notes~~5.5% first mortgage bonds due in ~~2053, and during~~2054. During the first ~~nine~~six months of ~~2022,~~2023, BHE and its subsidiaries ~~issued~~repaid approximately ~~$1.3~~$1.4 billion of ~~fixed and variable rate~~ term ~~debt with a weighted average interest rate of 3.9% as of September 30, 2022 and maturity dates ranging from 2024 to 2052.~~debt. Aggregate debt maturities for BHE and BNSF over the next twelve months approximate ~~$3.6~~$4.5 billion. Borrowings of Pilot were $5.9 billion as of the January 31, 2023 acquisition date and were $5.8 billion at June 30, 2023. Berkshire does not guarantee the repayment of debt or other borrowings issued by BNSF, BHE, Pilot or any of their ~~subsidiaries.~~subsidiaries or affiliates.

In the first ~~nine~~six months of ~~2022,~~2023, our diverse group of businesses generated net operating cash flows of ~~approximately $27.0~~$21.1 billion. Our consolidated capital expenditures for property, plant and equipment and equipment held for lease were ~~$10.9~~$8.4 billion in the first ~~nine~~six months of ~~2022,~~2023, which included capital expenditures by ~~our railroad, utilities~~BNSF and ~~energy businesses (BNSF and BHE)~~BHE of ~~$7.9~~$5.7 billion. BNSF and BHE maintain very large investments in capital assets (property, plant and equipment) and will regularly make significant capital expenditures in the normal course of business. ~~Forecasted~~We forecast capital expenditures for BHE and BNSF over the remainder of ~~2022~~2023 will approximate ~~$3.7~~$8.3 billion.

On August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous provisions, including a 15% corporate alternative minimum income tax on “adjusted financial statement income”, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases. The provisions of the 2022 act ~~become~~are effective for tax years beginning after December 31, 2022. ~~We currently do~~On December 27, 2022, the IRS and Department of Treasury issued initial guidance for taxpayers subject to the corporate alternative minimum tax addressing certain, but not ~~expect a material impact on our consolidated financial statements. However, we expect future~~all, issues that need clarification. The IRS and Department of Treasury may release additional guidance ~~from~~in the ~~Treasury Department and~~future. We will continue to evaluate the impact of the ~~Act~~2022 act as more guidance becomes available. We currently do not expect that compliance with the provisions of the 2022 act will have a material impact on our Consolidated Financial Statements.

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

Financial Condition (Continued)

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

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 operating lease liabilities and shared aircraft repurchase liabilities of NetJets.

We are also obligated to pay claims arising from property and casualty insurance companies. Such liabilities, including amounts from retroactive reinsurance, were ~~$128.3~~$143.5 billion at ~~September~~June 30, ~~2022.~~2023. 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 currently 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. As of ~~September~~June 30, ~~2022,~~2023, the largest categories of our long-term contractual obligations primarily related to fuel, capacity, transmission and maintenance contracts and capital expenditure commitments of BHE and BNSF, ~~and~~ aircraft purchase commitments of ~~NetJets.~~

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

~~Contractual Obligations~~ ~~(Continued)~~

On March 20, 2022, we agreed to acquire all of the outstanding shares of Alleghany common stock for cash consideration of approximately $11.6 billion. On October 19, 2022, the acquisition of Alleghany closed. We also have an agreement to acquire an additional 41.4% of Pilot in 2023 and agreements to acquire certain non-controlling interests of consolidated subsidiaries as described in Note 26 to the Consolidated Financial Statements included in Item 8 of Berkshire’s Annual Report on Form 10-K for the year ended December 31, 2021.raw materials purchase commitments.

Except as otherwise disclosed in this Quarterly Report, our contractual obligations as of ~~September~~June 30, ~~2022~~2023 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, ~~2021.~~2022.

Critical Accounting Policies

Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the Consolidated Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts recorded in the 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 Policies” 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, ~~2021.~~2022.

Our Consolidated Balance Sheet as of ~~September~~June 30, ~~2022~~2023 includes estimated liabilities of ~~$128.3~~$143.5 billion for unpaid losses and loss adjustment expenses from property and casualty insurance and reinsurance contracts. 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~~June 30, ~~2022~~2023 included goodwill of acquired businesses of ~~$73.3~~approximately $85.9 billion, which included $10.6 billion of goodwill associated with the Alleghany and Pilot acquisitions, and indefinite-lived intangible assets of ~~$18.4~~$20.5 billion. We evaluate these assets for impairment at least annually and we conducted our most recent annual review during the fourth quarter of ~~2021.~~2022. In connection with ~~that~~the annual goodwill impairment review in the fourth quarter of 2022, the estimated fair values of ~~five~~six reporting units did not exceed our carrying values by at least 20%. The most significant of these reporting units was Precision Castparts Corp. (“PCC”). ~~The~~Our estimated fair value of PCC was approximately ~~$34.5~~$31.5 billion, exceeding our carrying value of approximately ~~$31.1~~$30.3 billion by ~~10.7%~~4.0%. Our carrying value of PCC included goodwill of approximately $7.5 billion. For the ~~four~~five other reporting units, our aggregate estimated fair value was approximately ~~$2.5~~$4.5 billion, which exceeded our aggregate carrying value of approximately ~~$2.3~~$4.1 billion by ~~9.2%~~9.9%. Our carrying value of these units included goodwill of approximately ~~$1.2~~$1.4 billion.

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

Critical Accounting Policies (Continued)

Goodwill and indefinite-lived intangible asset impairment reviews include determining the estimated fair values of our reporting units and assets. The key assumptions and inputs used in such determinations may include forecasting revenues and expenses, cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. Significant judgment by management is required in estimating the fair value of a reporting unit and in performing impairment tests. Due to the inherent subjectivity and uncertainty in forecasting future cash flows and earnings over long periods of time, actual results may vary materially from the forecasts.

As of ~~September~~June 30, ~~2022,~~2023, we concluded it is more likely than not that goodwill recorded in our Consolidated Balance Sheet was not impaired. The long-term adverse consequences of the COVID-19 pandemic, geopolitical conflicts and general changes in business conditions, as well as other unanticipated events, on certain of our reporting units may prove to be worse than we currently anticipate, and we may need to record goodwill or indefinite-lived intangible asset impairment charges in future periods. Making estimates of the fair value of reporting units ~~and judgments on goodwill impairments at this time~~ are inherently subjective and will likely continue to be significantly affected by assumptions on the severity, duration or long-term effects of adverse events on a reporting unit’s business, which we cannot reliably predict. Consequently, any fair value estimates ~~in such instances~~ can be subject to wide variations.

Information concerning new accounting pronouncements 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 fixed maturity and equity securities; losses realized from derivative contracts; the occurrence of one or more catastrophic events, such as an earthquake, hurricane, 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, ~~including COVID-19,~~ that negatively affect our operating results and restrict our access to borrowed funds through the capital markets at reasonable rates; ~~the adverse impacts from geopolitical events;~~ 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Reference is made to Berkshire’s ~~most recently issued~~ Annual Report on Form 10-K for the year ended December 31, 2022 and in particular the “Market Risk Disclosures” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of ~~September~~June 30, ~~2022,~~2023, there were no material changes in the market risks described in Berkshire’s Annual ~~Report on Form 10-K for the year ended December 31, 2021.~~Report.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer) concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. During the quarter, there have been no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, ~~2021,~~2022, to which reference is made herein. The risks and uncertainties we describe are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business or operations. Any adverse effect on our business, financial condition or operating results could result in a decline in the value of our securities and the loss of all or part of your investment.

4552

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities

Berkshire’s common stock repurchase program permits Berkshire to repurchase its Class A and Class B shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. Repurchases may be in the open market or through privately negotiated transactions. Information with respect to Berkshire’s Class A and Class B common stock repurchased during the ~~third~~second quarter of ~~2022~~2023 follows.


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program		Maximum number or value of shares that yet may be repurchased under the program	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program		Maximum number or value of shares that yet may be repurchased under the program
July
April
Class A common stock		1,302	$	424,974.96		1,302	*		177	$	472,004.70		177	*
Class B common stock		—	$	—		—	*		220,351	$	308.57		220,351	*

August
May
Class A common stock		595	$	444,401.28		595	*		238	$	493,507.36		238	*
Class B common stock		—	$	—		—	*		—	$	—		—	*

September
June
Class A common stock		519	$	424,972.62		519	*		627	$	506,476.84		627	*
Class B common stock		—	$	—		—	*		2,134,093	$	335.55		2,134,093	*

* The program does not specify a maximum number of shares to be repurchased or obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the repurchase program. Berkshire will not repurchase its common stock if the repurchases reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings to less than $30 billion.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Information regarding the Company’s mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-Q.

Item 5. Other Information

Berkshire has never adopted a Rule 10b5-1 trading arrangement (as that term is defined in Item 408(a)(1)(i) of Regulation S-K). None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the second quarter of 2023.

4653

Item 6. Exhibits


	a. Exhibits

3(i)	Restated Certificate of Incorporation Incorporated by reference to Exhibit 3(i) to Form 10-K filed on March 2, 2015.

3(ii)	Amended and Restated By-Laws Incorporated by reference to Exhibit 3(ii) to Form 8-K filed on May ~~4, 2022.~~10, 2023.

31.1	Rule 13a-14(a)/15d-14(a) Certifications

31.2	Rule 13a-14(a)/15d-14(a) Certifications

32.1	Section 1350 Certifications

32.2	Section 1350 Certifications

95	Mine Safety Disclosures

101	The following financial information from Berkshire Hathaway Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) the Cover Page (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Earnings, (iv) the Consolidated Statements of Comprehensive Income, (v) the Consolidated Statements of Changes in Shareholders’ Equity, (vi) the Consolidated Statements of Cash Flows, and (vii) the Notes to Consolidated Financial Statements, tagged in summary and detail.

104	Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

SIGNATURE

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


		BERKSHIRE HATHAWAY INC.
		(Registrant)

Date: ~~November~~August 5, ~~2022~~2023		/S/ MARC D. HAMBURG
		(Signature)
		Marc D. Hamburg,
		Senior Vice President and
		Principal Financial Officer

4754


Delaware	47-0813844
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)


Class A —	~~596,826~~575,320
Class B —	~~1,301,981,370~~1,308,070,268


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
	(Unaudited)				(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents*	$	28,869	$	85,319	$	44,611	$	32,260
Short-term investments in U.S. Treasury Bills		76,332		58,535		97,322		92,774
Investments in fixed maturity securities		18,602		16,434		22,353		25,128
Investments in equity securities		306,167		350,719		353,409		308,793
Equity method investments		28,714		17,375		27,493		28,050
Loans and finance receivables		22,094		20,751		23,530		23,208
Other receivables		40,383		35,388		45,590		43,490
Inventories		25,102		20,954		25,295		25,366
Property, plant and equipment		20,378		20,834		21,413		21,113
Equipment held for lease		15,139		14,918		16,028		15,584
Goodwill		46,822		47,117		50,982		51,522
Other intangible assets		27,738		28,486		29,819		29,187
Deferred charges - retroactive reinsurance		9,990		10,639		9,454		9,870
Other		16,753		15,854		19,917		19,657
		683,083		743,323		787,216		726,002
Railroad, Utilities and Energy:
Cash and cash equivalents*		3,757		2,865		5,444		3,551
Receivables		4,985		4,177		6,067		4,795
Property, plant and equipment		157,472		155,530		171,747		160,268
Goodwill		26,513		26,758		34,871		26,597
Regulatory assets		4,750		3,963		5,452		5,062
Other		21,736		22,168		30,776		22,190
		219,213		215,461		254,357		222,463
	$	902,296	$	958,784	$	1,041,573	$	948,465


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
	(Unaudited)						(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses	$	91,642		$	86,664		$	109,030		$	107,472
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		36,666			38,256
Unpaid losses and loss adjustment expenses - retroactive reinsurance contracts								34,421			35,415
Unearned premiums		26,878			23,512			31,173			28,657
Life, annuity and health insurance benefits		22,305			22,452			19,635			19,753
Other policyholder liabilities		9,051			9,330			10,868			11,370
Accounts payable, accruals and other liabilities		31,100			30,376			31,999			33,201
Aircraft repurchase liabilities and unearned lease revenues		6,165			5,849			7,375			6,820
Notes payable and other borrowings		41,535			39,272			41,389			46,538
		265,342			255,711			285,890			289,226
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities		16,871			15,696			20,234			16,615
Regulatory liabilities		7,220			7,214			6,719			7,369
Notes payable and other borrowings		74,961			74,990			83,958			76,206
		99,052			97,900			110,911			100,190
Income taxes, principally deferred		74,155			90,243			93,011			77,368
Total liabilities		438,549			443,854			489,812			466,784
Redeemable noncontrolling interests								3,210			—
Shareholders’ equity:
Common stock		8			8			8			8
Capital in excess of par value		35,190			35,592			35,140			35,167
Accumulated other comprehensive income		(8,234	)		(4,027	)		(4,240	)		(5,052	)
Retained earnings		493,438			534,421			582,543			511,127
Treasury stock, at cost		(64,972	)		(59,795	)		(73,568	)		(67,826	)
Berkshire Hathaway shareholders’ equity		455,430			506,199			539,883			473,424
Noncontrolling interests		8,317			8,731			8,668			8,257
Total shareholders’ equity		463,747			514,930			548,551			481,681
	$	902,296		$	958,784		$	1,041,573		$	948,465


	Third Quarter					First Nine Months					Second Quarter					First Six Months
	2022			2021		2022			2021		2023		2022			2023		2022
Revenues:
Insurance and Other:
Insurance premiums earned	$	18,810		$	17,727	$	54,389		$	51,314	$	20,561	$	18,081		$	40,357	$	35,569
Sales and service revenues		39,597			36,722		117,679			107,163		39,126		40,220			77,514		78,082
Leasing revenues		1,959			1,565		5,518			4,336		2,079		1,887			4,123		3,559
Interest, dividend and other investment income		2,378			1,795		7,101			5,544		3,846		2,861			7,075		4,723
		62,744			57,809		184,687			168,357		65,612		63,049			129,069		121,933
Railroad, Utilities and Energy:
Freight rail transportation revenues		6,663			5,761		19,219			16,917		5,808		6,612			11,809		12,556
Energy operating revenues		6,090			5,225		15,843			14,375
Utility and energy operating revenues												19,593		4,935			34,510		9,753
Service revenues and other income		1,437			1,788		4,175			4,647		1,490		1,605			2,508		2,802
		14,190			12,774		39,237			35,939		26,891		13,152			48,827		25,111
Total revenues		76,934			70,583		223,924			204,296		92,503		76,201			177,896		147,044

Investment and derivative contract gains (losses)		(13,465	)		4,921		(82,362	)		38,015		33,061		(66,919	)		67,819		(68,897	)

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		16,005			13,939		42,957			37,078		14,089		13,620			28,310		26,952
Life, annuity and health insurance benefits		1,450			1,568		4,055			4,507		1,128		1,186			1,913		2,523
Insurance underwriting expenses		2,506			3,239		7,734			9,318		3,729		2,377			7,316		4,981
Cost of sales and services		31,292			28,984		92,710			84,275		30,621		31,633			60,940		61,418
Cost of leasing		1,418			1,116		4,148			2,980		1,457		1,498			2,934		2,730
Selling, general and administrative expenses		4,068			4,889		12,081			13,844		5,005		3,762			10,607		8,013
Interest expense		297			286		863			860		314		302			642		566
		57,036			54,021		164,548			152,862		56,343		54,378			112,662		107,183
Railroad, Utilities and Energy:
Freight rail transportation expenses		4,581			3,527		12,766			10,625		4,014		4,260			8,175		8,185
Utilities and energy cost of sales and other expenses		4,295			3,497		11,730			10,306		18,159		3,844			32,005		7,435
Other expenses		1,320			1,582		4,003			4,238		1,189		1,527			2,060		2,683
Interest expense		795			770		2,350			2,322		935		785			1,825		1,555
		10,991			9,376		30,849			27,491		24,297		10,416			44,065		19,858
Total costs and expenses		68,027			63,397		195,397			180,353		80,640		64,794			156,727		127,041
Earnings (loss) before income taxes and equity method earnings		(4,558	)		12,107		(53,835	)		61,958		44,924		(55,512	)		88,988		(48,894	)
Equity method earnings		441			377		1,048			775		511		204			1,199		543
Earnings (loss) before income taxes		(4,117	)		12,484		(52,787	)		62,733		45,435		(55,308	)		90,187		(48,351	)
Income tax expense (benefit)		(1,529	)		1,840		(12,408	)		11,824		9,236		(12,066	)		18,231		(10,814	)
Net earnings (loss)		(2,588	)		10,644		(40,379	)		50,909		36,199		(43,242	)		71,956		(37,537	)
Earnings attributable to noncontrolling interests		100			300		604			760		287		379			540		504
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(2,688	)	$	10,344	$	(40,983	)	$	50,149	$	35,912	$	(43,621	)	$	71,416	$	(38,041	)
Net earnings (loss) per average equivalent Class A share	$	(1,832	)	$	6,882	$	(27,866	)	$	33,025	$	24,775	$	(29,663	)	$	49,152	$	(25,832	)
Net earnings (loss) per average equivalent Class B share*	$	(1.22	)	$	4.59	$	(18.58	)	$	22.02	$	16.52	$	(19.78	)	$	32.77	$	(17.22	)
Average equivalent Class A shares outstanding		1,466,946			1,503,013		1,470,714			1,518,513		1,449,542		1,470,577			1,452,971		1,472,628
Average equivalent Class B shares outstanding		2,200,419,462			2,254,518,838		2,206,070,294			2,277,769,582		2,174,313,670		2,205,865,262			2,179,456,816		2,208,942,539


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page No.

Part I – Financial Information		2

Item 1. Financial Statements		2
	Consolidated Balance Sheets—~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	~~2-3~~2
	Consolidated Statements of Earnings—~~Third~~Second Quarter and First ~~Nine~~Six Months ~~2022~~2023 and ~~2021~~2022	4
	Consolidated Statements of Comprehensive Income—~~Third~~Second Quarter and First ~~Nine~~Six Months ~~2022~~2023 and ~~2021~~2022	5
	Consolidated Statements of Changes in Shareholders’ Equity—~~Third~~Second Quarter and First ~~Nine~~Six Months ~~2022~~2023 and ~~2021~~2022	6
	Consolidated Statements of Cash Flows—First ~~Nine~~Six Months ~~2022~~2023 and ~~2021~~2022	7
	Notes to Consolidated Financial Statements	~~8-25~~8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~26-45~~31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4552
Item 4.	Controls and Procedures	4552

Part II – Other Information		4552

Item 1.	Legal Proceedings	4552
Item 1A.	Risk Factors	4552
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities	4653
Item 3.	Defaults Upon Senior Securities	4653
Item 4.	Mine Safety Disclosures	4653
Item 5.	Other Information	4653
Item 6.	Exhibits	4754

Signature		4754


	Berkshire Hathaway shareholders’ equity																		Berkshire Hathaway shareholders’ equity
	Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non- controlling interests			Total			Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non- controlling interests			Total
For the third quarter and first nine months of 2022
Balance at December 31, 2021	$	35,600		$	(4,027	)	$	534,421		$	(59,795	)	$	8,731		$	514,930
For the second quarter and first six months of 2023
Balance at December 31, 2022 as previously reported																			$	35,175		$	(6,591	)	$	511,602		$	(67,826	)	$	8,257		$	480,617
Adoption of ASU 2018-12																				—			1,539			(475	)		—			—			1,064
Balance at December 31, 2022 as revised																				35,175			(5,052	)		511,127			(67,826	)		8,257			481,681
Net earnings		—			—			5,460			—			125			5,585			—			—			35,504			—			253			35,757
Other comprehensive income, net		—			(401	)		—			—			(3	)		(404	)		—			76			—			—			6			82
Acquisition of common stock		—			—			—			(3,111	)		—			(3,111	)		—			—			—			(4,439	)		—			(4,439	)
Transactions with noncontrolling interests		(6	)		—			—			—			(129	)		(135	)
Transactions with noncontrolling interests and other																				(11	)		—			—			—			7			(4	)
Balance at March 31, 2023																			$	35,164		$	(4,976	)	$	546,631		$	(72,265	)	$	8,523		$	513,077
Net earnings																				—			—			35,912			—			287			36,199
Other comprehensive income, net																				—			736			—			—			21			757
Acquisition of common stock																				—			—			—			(1,303	)		—			(1,303	)
Transactions with noncontrolling interests and other																				(16	)		—			—			—			(163	)		(179	)
Balance at June 30, 2023																			$	35,148		$	(4,240	)	$	582,543		$	(73,568	)	$	8,668		$	548,551

For the second quarter and first six months of 2022
Balance at December 31, 2021 as originally reported																			$	35,600		$	(4,027	)	$	534,421		$	(59,795	)	$	8,731		$	514,930
Adoption of ASU 2018-12																				—			(4,096	)		(535	)		—			—			(4,631	)
Balance at December 31, 2021 as revised																				35,600			(8,123	)		533,886			(59,795	)		8,731			510,299
Net earnings																				—			—			5,580			—			125			5,705
Other comprehensive income, net																				—			2,019			—			—			(3	)		2,016
Acquisition of common stock																				—			—			—			(3,111	)		—			(3,111	)
Transactions with noncontrolling interests and other																				(6	)		—			—			—			(129	)		(135	)
Balance at March 31, 2022	$	35,594		$	(4,428	)	$	539,881		$	(62,906	)	$	8,724		$	516,865		$	35,594		$	(6,104	)	$	539,466		$	(62,906	)	$	8,724		$	514,774
Net earnings (loss)		—			—			(43,755	)		—			379			(43,376	)		—			—			(43,621	)		—			379			(43,242	)
Other comprehensive income, net		—			(1,747	)		—			—			(29	)		(1,776	)		—			401			—			—			(29	)		372
Acquisition of common stock		—			—			—			(1,028	)		—			(1,028	)		—			—			—			(1,028	)		—			(1,028	)
Transactions with noncontrolling interests		(382	)		—			—			—			(650	)		(1,032	)
Transactions with noncontrolling interests and other																				(382	)		—			—			—			(650	)		(1,032	)
Balance at June 30, 2022	$	35,212		$	(6,175	)	$	496,126		$	(63,934	)	$	8,424		$	469,653		$	35,212		$	(5,703	)	$	495,845		$	(63,934	)	$	8,424		$	469,844
Net earnings (loss)		—			—			(2,688	)		—			100			(2,588	)
Other comprehensive income, net		—			(2,059	)		—			—			(54	)		(2,113	)
Acquisition of common stock		—			—			—			(1,038	)		(153	)		(1,191	)
Transactions with noncontrolling interests		(14	)		—			—			—						(14	)
Balance at September 30, 2022	$	35,198		$	(8,234	)	$	493,438		$	(64,972	)	$	8,317		$	463,747

For the third quarter and first nine months of 2021
Balance at December 31, 2020	$	35,634		$	(4,243	)	$	444,626		$	(32,853	)	$	8,172		$	451,336
Net earnings		—			—			11,711			—			129			11,840
Other comprehensive income, net		—			(327	)		—			—			7			(320	)
Acquisition of common stock		—			—			—			(6,565	)		—			(6,565	)
Transactions with noncontrolling interests		4			—			—			—			(119	)		(115	)
Balance at March 31, 2021	$	35,638		$	(4,570	)	$	456,337		$	(39,418	)	$	8,189		$	456,176
Net earnings		—			—			28,094			—			331			28,425
Other comprehensive income, net		—			351			—			—			7			358
Acquisition of common stock		—			—			—			(6,028	)		—			(6,028	)
Transactions with noncontrolling interests		5			—			—			—			(136	)		(131	)
Balance at June 30, 2021	$	35,643		$	(4,219	)	$	484,431		$	(45,446	)	$	8,391		$	478,800
Net earnings		—			—			10,344			—			300			10,644
Other comprehensive income, net		—			(615	)		—			—			(12	)		(627	)
Acquisition of common stock		—			—			—			(7,626	)		—			(7,626	)
Transactions with noncontrolling interests		(32	)		—			—			—			(84	)		(116	)
Balance at September 30, 2021	$	35,611		$	(4,834	)	$	494,775		$	(53,072	)	$	8,595		$	481,075


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


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


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


	Alleghany
Cash, cash equivalents and U.S. Treasury Bills	$	3,762
Investments in fixed maturity and equity securities		15,982
Loans and other receivables		5,650
Goodwill		3,900
Other intangible assets		2,659
Other assets		3,637
Assets acquired	$	35,590
Unpaid losses and loss adjustment expenses	$	15,080
Unearned premiums		3,536
Notes payable		2,169
Other liabilities		3,300
Liabilities assumed		24,085
Net assets	$	11,505


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


	Cost Basis		Net Unrealized Gains		Fair Value		Cost Basis		Net Unrealized Gains		Fair Value
September 30, 2022*
June 30, 2023*
Banks, insurance and finance	$	32,148	$	36,817	$	68,965	$	23,547	$	43,056	$	66,603
Consumer products		41,106		116,615		157,721		36,550		169,760		206,310
Commercial, industrial and other		69,056		10,425		79,481		55,560		24,936		80,496
	$	142,310	$	163,857	$	306,167	$	115,657	$	237,752	$	353,409


	Cost Basis		Net Unrealized Gains		Fair Value		Cost Basis		Net Unrealized Gains		Fair Value
December 31, 2021*
December 31, 2022*
Banks, insurance and finance	$	26,822	$	62,236	$	89,058	$	25,893	$	43,663	$	69,556
Consumer products		36,076		154,945		191,021		40,508		112,384		152,892
Commercial, industrial and other		41,707		28,933		70,640		65,209		21,136		86,345
	$	104,605	$	246,114	$	350,719	$	131,610	$	177,183	$	308,793


	September 24, 2022		December 25, 2021
Assets	$	89,992	$	93,394
Liabilities		41,649		43,942


	Origination Year														Origination Year
	2022		2021		2020		2019		2018		Prior		Total		2023		2022		2021		2020		2019		Prior		Total
Performing	$	4,268	$	3,696	$	2,883	$	2,037	$	1,544	$	7,205	$	21,633	$	3,273	$	4,568	$	3,459	$	2,694	$	1,907	$	7,933	$	23,834
Non-performing		4		7		9		8		7		42		77		7		5		10		10		6		44		82
	$	4,272	$	3,703	$	2,892	$	2,045	$	1,551	$	7,247	$	21,710	$	3,280	$	4,573	$	3,469	$	2,704	$	1,913	$	7,977	$	23,916


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2022
June 30, 2023
U.S. Treasury, U.S. government corporations and agencies	$	9,039	$	4	$	(268	)	$	8,775	$	9,242	$	2	$	(192	)	$	9,052
Foreign governments		8,701		9		(205	)		8,505		11,571		70		(160	)		11,481
Corporate bonds		830		205		(6	)		1,029		1,333		228		(7	)		1,554
Other		275		22		(4	)		293		250		20		(4	)		266
	$	18,845	$	240	$	(483	)	$	18,602	$	22,396	$	320	$	(363	)	$	22,353
December 31, 2021
December 31, 2022
U.S. Treasury, U.S. government corporations and agencies	$	3,286	$	22	$	(5	)	$	3,303	$	10,039	$	12	$	(249	)	$	9,802
Foreign governments		10,998		29		(33	)		10,994		10,454		50		(177	)		10,327
Corporate bonds		1,363		412		(1	)		1,774		1,945		256		(6	)		2,195
Other		317		47		(1	)		363		2,735		77		(8	)		2,804
	$	15,964	$	510	$	(40	)	$	16,434	$	25,173	$	395	$	(440	)	$	25,128


	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Mortgage- backed securities		Total		Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Mortgage- backed securities		Total
Amortized cost	$	7,904	$	10,201	$	460	$	82	$	198	$	18,845	$	15,632	$	5,748	$	708	$	136	$	172	$	22,396
Fair value		7,753		9,895		654		85		215		18,602		15,452		5,654		916		145		186		22,353


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


	Equity in Earnings								Distributions Received
	Third Quarter				First Nine Months				Third Quarter				First Nine Months
	2022		2021		2022		2021		2022		2021		2022		2021
Kraft Heinz	$	114	$	194	$	391	$	337	$	131	$	131	$	391	$	391
Occidental		—		—		—		—		—		—		—		—
Other		327		183		657		438		94		55		231		1,037
	$	441	$	377	$	1,048	$	775	$	225	$	186	$	622	$	1,428


	June 30, 2022		December 31, 2021
Assets	$	74,221	$	75,036
Liabilities		46,391		54,709


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


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


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


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


	2023			2022
Balances at beginning of year:
Gross liabilities	$	107,472		$	86,664
Reinsurance recoverable on unpaid losses		(5,025	)		(2,960	)
Net liabilities		102,447			83,704
Incurred losses and loss adjustment expenses:
Current accident year		29,827			27,427
Prior accident years		(1,948	)		(887	)
Total		27,879			26,540
Paid losses and loss adjustment expenses:
Current accident year		(9,968	)		(10,085	)
Prior accident years		(16,664	)		(13,820	)
Total		(26,632	)		(23,905	)
Foreign currency effect		267			(568	)
Balances at June 30:
Net liabilities		103,961			85,771
Reinsurance recoverable on unpaid losses		5,069			2,789
Gross liabilities	$	109,030		$	88,560


	2022						2021
	Unpaid losses and loss adjustment expenses			Deferred charges - retroactive reinsurance			Unpaid losses and loss adjustment expenses			Deferred charges - retroactive reinsurance			2023			2022
Balances at beginning of year	$	38,256		$	(10,639	)	$	40,966		$	(12,441	)	$	35,415		$	37,855
Incurred losses and loss adjustment expenses:
Current year contracts		—			—			82			—			—			—
Prior years’ contracts		(23	)		649			(9	)		709			15			(14	)
Total		(23	)		649			73			709			15			(14	)
Paid losses and loss adjustment expenses		(1,567	)		—			(1,318	)		—			(1,033	)		(1,008	)
Balances at September 30	$	36,666		$	(9,990	)	$	39,721		$	(11,732	)
Incurred losses and loss adjustment expenses, net of deferred charges	$	626					$	782
Foreign currency effect														24			(157	)
Balances at June 30													$	34,421		$	36,676
Incurred losses and loss adjustment expenses above													$	15		$	(14	)
Deferred charge amortization and adjustments														416			426
Incurred losses and loss adjustment expenses included in the Consolidated Statements of Earnings													$	431		$	412


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


	Undiscounted expected future gross premiums				Discounted expected future gross premiums				Undiscounted expected future benefits
	2023		2022		2023		2022		2023		2022
Periodic payment annuities	$	—	$	—	$	—	$	—	$	31,232	$	31,084
Life and health		108,089		107,647		65,599		64,832		103,012		102,305


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


	Weighted Average Interest Rate			September 30, 2022		December 31, 2021		Weighted Average Interest Rate			June 30, 2023		December 31, 2022
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2023-2047		3.3	%	$	6,227	$	6,820
Euro denominated due 2023-2041		1.0	%		6,722		7,792
Japanese Yen denominated due 2023-2060		0.6	%		6,289		6,797
U.S. Dollar denominated due 2025-2047									3.5	%	$	3,735	$	6,231
Euro denominated due 2024-2041									1.1	%		6,069		7,344
Japanese Yen denominated due 2024-2060									0.7	%		7,850		7,818
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2027-2052		3.6	%		14,456		10,758		3.6	%		14,460		14,458
Great Britain Pound denominated due 2039-2059		2.5	%		1,920		2,325		2.5	%		2,186		2,078
Euro denominated due 2030-2034		1.8	%		1,219		—		1.8	%		1,358		1,332
Other subsidiary borrowings due 2022-2045		4.1	%		4,328		4,438
Other subsidiary borrowings due 2023-2051									4.6	%		4,908		5,967
Subsidiary short-term borrowings		4.7	%		374		342		6.6	%		823		1,310
				$	41,535	$	39,272				$	41,389	$	46,538


	Balance at beginning of year			Gains included in earnings		Acquisitions, dispositions and settlements			Transfers out of Level 3		Balance at September 30
Investments in equity securities:
2022	$	11,480		$	581	$	—		$	—	$	12,061
2021		8,978			1,713		1,100			—		11,791

Equity index put option contract liabilities:
2021		(1,065	)		780		(1	)		—		(286	)


	Unrealized appreciation of fixed maturity securities, net			Foreign currency translation			Defined benefit pension plans			Other			Accumulated other comprehensive income
First nine months of 2022
Balance at beginning of year	$	369		$	(4,092	)	$	(347	)	$	43		$	(4,027	)
Other comprehensive income, net		(767	)		(3,676	)		47			189			(4,207	)
Balance at end of period	$	(398	)	$	(7,768	)	$	(300	)	$	232		$	(8,234	)

First nine months of 2021
Balance at beginning of year	$	536		$	(3,082	)	$	(1,645	)	$	(52	)	$	(4,243	)
Other comprehensive income, net		(126	)		(619	)		112			42			(591	)
Balance at end of period	$	410		$	(3,701	)	$	(1,533	)	$	(10	)	$	(4,834	)