BERKSHIRE HATHAWAY INC.

COMBINED FINANCIAL STATEMENTS

BUSINESS GROUPS

 

Berkshire's consolidated data is rearranged in the presentations on the following six pages into four categories, corresponding to the way Mr. Buffett and Mr. Munger think about Berkshire's businesses. The presentations may be helpful to readers in making estimates of Berkshire's intrinsic value.
The presentations in this section do not conform in all respects to GAAP. Principal departures from GAAP relate to accounting treatment for assets acquired in business acquisitions, although students and practitioners of accounting will recognize others.


Opinions of Berkshire's independent auditors were not solicited for this data. The four-category presentations in no way fell within their purview.

 


 

BERKSHIRE HATHAWAY INC.

INSURANCE GROUP

     Berkshire's insurance businesses are comprised of four operating groups of subsidiaries. GEICO, through its subsidiaries, is a multiple line property and casualty insurer the principal business of which is writing private passenger automobile insurance. GEICO policies are marketed mainly by direct response methods in which customers apply for coverage directly to the company over the telephone, through the mail or via the Internet. GEICO is currently the sixth largest auto insurer in the U.S.

     The Berkshire Hathaway Reinsurance Group provides treaty and limited facultative reinsurance to other property/casualty insurers and reinsurers. Berkshire is one of the world's leading providers of catastrophe excess of loss reinsurance. In recent years, the group has generated significant premium volume from a few very sizable retroactive reinsurance contracts. Berkshire's unparalleled capital strength has enabled it to offer dollar coverages of a magnitude far in excess of its competitors.

     On December 21, 1998, Berkshire acquired General Re Corporation. General Re is a holding company for global reinsurance and related risk management operations. General Re, through its domestic subsidiaries, General Reinsurance Corporation and National Reinsurance Corporation, is one of the largest professional property/casualty reinsurance groups domiciled in the United States. General Re also owns a controlling interest in Cologne Re, a major international reinsurer.

     Berkshire's fourth group of businesses underwrite miscellaneous forms of direct insurance. National Indemnity Company and other affiliated entities underwrite multiple lines of traditional insurance for primarily commercial accounts. The "Homestate Group" companies underwrite various commercial coverages for risks in an increasing number of selected states. Cypress Insurance Company provides workers' compensation insurance to employers in California and other states. Central States Indemnity Company issues credit insurance distributed through credit card issuers nationwide, Kansas Bankers Surety Company is an insurer for primarily small and medium sized banks located in the midwest and the United States Liability Insurance Group (acquired on August 8, 2000) is a provider of excess and surplus lines of insurance.

     Combined financial statements of the Insurance Group — unaudited and not fully adjusted to conform to GAAP — are presented on the following page. These combined financial statements exclude the operating results of General Re from 1998's Statement of Earnings.

 

 

BERKSHIRE HATHAWAY INC.
INSURANCE GROUP

Balance Sheets
(dollars in millions)

 

December 31,

 

2000

1999

Assets

   

   Investments:

   

      Fixed maturities at market

$32,381

$30,217

      Equity securities and other investments at market:    
         American Express Company

8,147

8,218

         The Coca-Cola Company

12,159

11,622

         Freddie Mac

146

2,803

         The Gillette Company

3,468

3,954

         Wells Fargo & Company

2,964

2,316

         Other

   12,008

   10,256

 

71,273

69,386

      Cash and cash equivalents

4,700

2,981

      Deferred costs

3,508

2,309

      Other  12,808

   9,490

 

$92,289
======

$84,166
======

Liabilities

   
      Losses and loss adjustment expenses

$33,022

$26,802

      Unearned premiums

3,885

3,718

      Policyholder liabilities and other accruals

6,986

6,537

      Income taxes, principally deferred

   9,729

   9,430

 

 53,622

 46,487

Equity

   
      Minority shareholders’

1,157

1,337

      Berkshire shareholders’

 37,510

 36,342

 

 38,667

 37,679

 

$92,289
======

$84,166
======

Statements of Earnings
(dollars in millions)

 

2000

1999

1998

Premiums written

$19,662 

$14,667 

$5,476

Premiums earned

$19,343 

$14,306 

$5,300

Losses and loss expenses

17,326 

12,518 

3,904

Underwriting expenses

  3,602 

   3,182 

  1,131

   Total losses and expenses

 20,928 

 15,700 

  5,035

Underwriting gain (loss) — pre-tax

(1,585)

(1,394)

265

Net investment income*

2,811 

2,488 

974

Realized investment gain

  3,920 

  1,364 

  2,462

Earnings before income taxes

5,146 

2,458 

3,701

Income tax expense

  1,604 

    672 

  1,186

 

3,542 

1,786 

2,515

Minority interest

     230 

      35 

      17

Net earnings

$ 3,312 
====== 

$ 1,751 
====== 

$2,498
======

* Net investment income is summarized below:

     
   Dividends

$ 493 

$ 476 

$363 

   Interest

2,340 

2,030 

621 

   Investment expenses

   (22)

   (18)

 (10)

 

$2,811 
====== 

$2,488 
====== 

$974 
====== 

These statements do not conform to GAAP in all respects
These statements are unaudited

 

 


BERKSHIRE HATHAWAY INC.

MANUFACTURING, RETAILING AND SERVICES BUSINESSES

     Combined financial statements of Berkshire's Manufacturing, Retailing and Services businesses - unaudited and not fully adjusted to conform to GAAP - are presented on the following page. The operations whose data have been combined in these presentations include the following:


Operation

Product/Service/Activity

Acme Building Brands

Face brick and other building materials

Adalet

Electrical enclosure systems and cable accessories

Ben Bridge Jeweler

Retailing fine jewelry

Benjamin Moore

Architectural and industrial coatings

Blue Chip Stamps

Marketing motivational services

Borsheim's

Retailing fine jewelry

Buffalo News

Daily and Sunday newspaper

Campbell Hausfeld

Air compressors and tools, painting systems, pressure washers, welders and generators

Carefree

Comfort and convenience products for the recreational vehicle industry

Cleveland Wood Products

Vacuum cleaner brushes and bags

CORT Business Services

Provider of rental furniture, accessories and related services

Dexter Shoe Company

Dress, casual and athletic shoes

Douglas Products

Specialty and cordless vacuum cleaners

Executive Jet

Fractional ownership programs for general aviation aircraft

Fechheimer Bros. Co.

Uniforms and accessories

FlightSafety

High technology training to operators of aircraft and ships

France

Sign transformers including components and battery chargers

H. H. Brown Shoe Co.

Work shoes, boots and casual footwear

Halex

Zinc die cast conduit fittings and other electrical construction materials

Helzberg's Diamond Shops

Retailing fine jewelry

International Dairy Queen

Licensing and servicing Dairy Queen Stores

Jordan’s Furniture

Retailing home furnishings

Justin Brands

Western footwear

Kingston

Appliance controls and actuators

Kirby

Home cleaning systems

Lowell Shoe, Inc.

Women's and nurses' shoes

Meriam

Pressure and flow measurement devices

MidAmerican Energy

Production, supply and distribution of energy

Nebraska Furniture Mart

Retailing home furnishings

Northland

Fractional horsepower electric motors

Powerwinch

Marine and general purpose winches, windlasses, and hoists

Precision Steel Products

Steel service center

Quikut

Cutlery for the home and sporting goods markets

ScottCare

Cardiopulmonary rehabilitation and monitoring equipment

Scot Labs

Cleaning compounds and solutions

See's Candies

Boxed chocolates and other confectionery products

Stahl

Truck equipment including service flatbed and dump bodies, cranes, tool boxes, and hoists

Star Furniture Company

Retailing home furnishings

Wayne Combustion Systems

Oil and gas burners for residential and commercial appliances and equipment

Wayne Water Systems

Sump, utility, sewage and well pumps

Western Enterprises

Medical and industrial compressed gas fittings and regulators

Western Plastics

Molded plastic components

R.C. Willey Home Furnishings

Retailing home furnishings

World Book

Printed and multimedia encyclopedias and other educational materials

 

 

BERKSHIRE HATHAWAY INC.

MANUFACTURING, RETAILING AND SERVICES BUSINESSES

Balance Sheets
(dollars in millions)

 

December 31,

 

2000

1999

Assets

   
   Cash and cash equivalents

$  400

$  370

   Accounts receivable

1,226

923

   Inventories

1,215

806

   Investments in MidAmerican Energy Holdings Company

1,719

¾

   Properties and equipment

2,250

1,509

   Other

    921

    388

 

$7,731
======

$3,996
======

Liabilities

   
   Accounts payable, accruals and other

$1,674

$  908

   Income taxes

187

196

   Term debt and other borrowings

  1,213

    740

 

  3,074

  1,844

Equity

   
   Minority shareholders’

59

75

   Berkshire shareholders’

  4,598

  2,077

 

  4,657

  2,152

 

$7,731
======

$3,996
======

Statements of Earnings
(dollars in millions)

 

2000

1999

1998

Revenues:

     
  Sales and service revenues

$7,326

$5,918

$4,675

  Income from MidAmerican Energy Holdings Company

197

¾

¾

  Interest income

      18

      11

       8

 

 7,541

 5,929

 4,683

Cost and expenses:

     
  Cost of products and services sold

4,893

4,061

3,010

  Selling, general and administrative expenses

1,657

1,126

1,014

  Interest on debt

     85

     31

     19

 

 6,635

 5,218

 4,043

  Earnings from operations before income taxes

906

711

640

  Income tax expense

   334

   267

   234

 

572

444

406

  Minority interest

    21

     5

     5

  Net earnings

$  551
====

$  439
====

$  401
====


This presentation reflects the results of operations of recent business acquisitions from their respective dates of acquisition; (International Dairy Queen — January 7, 1998; Executive Jet — August 7, 1998; Jordan’s Furniture — November 13, 1999; CORT Business Services — February 18, 2000; MidAmerican Energy — March 14, 2000 (accounted for on the equity method); Ben Bridge Jeweler — July 3, 2000; Acme Building Brands and Justin Brands — August 1, 2000; Benjamin Moore — December 18, 2000).

Purchase-accounting adjustments, including goodwill, arising from Berkshire's business acquisitions are not reflected in these statements, but instead are reflected in the statements of non-operating activities at page 73.

These statements do not conform to GAAP in all respects
These statements are unaudited

 

 


BERKSHIRE HATHAWAY INC.

FINANCE AND FINANCIAL PRODUCTS BUSINESSES

Scott Fetzer Financial Group, Inc., Berkshire Hathaway Life Insurance Co. of Nebraska, Berkshire Hathaway Credit Corporation, BH Finance and Gen Re Securities Holdings Limited ("GRS") (formerly General Re Financial Products) make up Berkshire's finance and financial products businesses.

Balance Sheets
(dollars in millions)

 

2000

1999

Assets

   

Cash and cash equivalents

$ 341

$ 623

Investment in securities with fixed maturities:

  Held-to-maturity, at cost (fair value $1,897 in 2000; $1,930 in 1999)

1,826

2,002

  Trading, at fair value (cost $5,277 in 2000; $11,330 in 1999)

5,327

11,277

  Available-for-sale, at fair value (cost $880 in 2000; $997 in 1999)

880

999

Trading account assets

5,429

5,881

Securities purchased under agreements to resell

680

1,171

Other

   2,346

   2,276

 

$16,829
======

$24,229
======

Liabilities

   

Annuity reserves and policyholder liabilities

$ 868

$ 843

Securities sold under agreements to repurchase

3,386

10,216

Securities sold but not yet purchased

715

1,174

Trading account liabilities

4,974

5,930

Notes payable and other borrowings

2,116

1,998

Other

  3,004

  2,304

 

  15,063

  22,465

Equity

   

  Berkshire shareholders’

  1,766

  1,764

 

$16,829
======

$24,229
======


Statements of Earnings
(dollars in millions)

 

2000

1999

1998

Revenues:

     

   Interest income

$ 910

$ 740

$ 131

   Other revenues

   595

   247

   257

 

1,505

   987

   388

Expenses:

     

   Interest expense

798

596

27

   Annuity benefits and underwriting expenses

55

54

146

   General and administrative

   123

   228

    16

 

   976

   878

   189

   Earnings from operations before income taxes

529

109

199

   Income tax expense

   187

    32

    70

   Net earnings

$ 342
=====

$ 77
====

$ 129
=====


     GRS was acquired in connection with the acquisition of General Re Corporation on December 21, 1998. These statements reflect GRS’s operating results for the years ended December 31, 2000 and 1999.


These statements do not conform to GAAP in all respects
These statements are unaudited

 

 


BERKSHIRE HATHAWAY INC.

NON-OPERATING ACTIVITIES

     These statements reflect the consolidated financial statement values for assets, liabilities, shareholders' equity, revenues and expenses that were not assigned to any Berkshire operating group in the unaudited, and not fully GAAP - adjusted group financial statements heretofore presented (pages 67 to 72).

Statements of Net Assets
(dollars in millions)

 

December 31,

 

2000

1999

Assets

   

  Cash and cash equivalents

$ 163

$ 484

  Investments:

   
    Fixed maturities

184

2

    Equity securities

365

339

  Unamortized goodwill and other purchase-accounting adjustments *

18,831

18,489

  Deferred tax assets

62

80

  Other

       69

       50

 

$19,674
======

$19,444
======

Liabilities

   

  Accounts payable, accruals and other

$   163

$    76

  Income taxes

236

86

  Borrowings under investment agreements and other debt

  1,372

  1,693

 

  1,771

  1,855

Equity

   

  Minority shareholders’

53

11

  Berkshire shareholders’

 17,850

 17,578

 

 17,903

 17,589

 

$19,674
======

$19,444
======


Statements of Earnings
(dollars in millions)

 

2000

1999

1998

Revenues:

     

  Interest, dividend and other income

$ 35 

$ 39 

$ 63 

  Realized investment gain

     35 

        1 

     40 

 

     70 

     40 

   103 

Expenses:

     

  Corporate administration

  Shareholder-designated contributions

17 

17 

17 

  Amortization of goodwill and purchase-accounting adjustments *

876 

739 

210 

  Interest on debt

      98 

    106 

     96 

 

    997 

    868 

   329 

  Loss before income taxes

(927)

(828)

(226)

  Income tax benefit

    (55)

  (119)

    (33)

 

(872)

(709)

(193)

  Minority interest

        5 

        1 

        5 

  Net loss

$(877)
======

$(710)
======

$(198)
======

* Purchase-accounting adjustments and goodwill arose in accounting for business acquisitions.


These statements do not conform to GAAP in all respects
These statements are unaudited