BERKSHIRE HATHAWAY INC.

2017
ANNUAL REPORTBERKSHIRE HATHAWAY INC.
2017 ANNUAL REPORTTABLE OF CONTENTS

Berkshire’s Performance vs. the S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Chairman’s Letter* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3-17

Owner’s Manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18-23

Acquisition Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23“The Bet” (or how your money finds its way to Wall Street) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24-26

Form 10-K –Business Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Report on Internal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-1
K-22
K-25
K-30
K-31
K-32
K-60
K-61
K-62
K-67

Appendices –Operating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real Estate Brokerage Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobile Dealerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daily Newspapers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A-1
A-2
A-2/A-3
A-4
A-5

Directors and Officers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

*Copyright© 2018 By Warren E. Buffett
All Rights Reserved

Inside Back CoverBerkshire’s Performance vs. the S&P 500
Annual Percentage ChangeYear1965 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1966 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1967 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1968 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1969 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1971 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1975 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compounded Annual Gain – 1965-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overall Gain – 1964-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

in Per-ShareBook Value ofBerkshirein Per-Share
Market Value ofBerkshirein S&P 500
with Dividends
Included

23.8
20.3
11.0
19.0
16.2
12.0
16.4
21.7
4.7
5.5
21.9
59.3
31.9
24.0
35.7
19.3
31.4
40.0
32.3
13.6
48.2
26.1
19.5
20.1
44.4
7.4
39.6
20.3
14.3
13.9
43.1
31.8
34.1
48.3
0.5
6.5
(6.2)
10.0
21.0
10.5
6.4
18.4
11.0
(9.6)
19.8
13.0
4.6
14.4
18.2
8.3
6.4
10.7
23.0
19.1%
1,088,029%

49.5
(3.4)
13.3
77.8
19.4
(4.6)
80.5
8.1
(2.5)
(48.7)
2.5
129.3
46.8
14.5
102.5
32.8
31.8
38.4
69.0
(2.7)
93.7
14.2
4.6
59.3
84.6
(23.1)
35.6
29.8
38.9
25.0
57.4
6.2
34.9
52.2
(19.9)
26.6
6.5
(3.8)
15.8
4.3
0.8
24.1
28.7
(31.8)
2.7
21.4
(4.7)
16.8
32.7
27.0
(12.5)
23.4
21.9
20.9%
2,404,748%

10.0(11.7)
30.9
11.0
(8.4)
3.9
14.6
18.9
(14.8)(26.4)
37.2
23.6
(7.4)
6.4
18.2
32.3
(5.0)
21.4
22.4
6.1
31.6
18.6
5.1
16.6
31.7
(3.1)
30.5
7.6
10.1
1.3
37.6
23.0
33.4
28.6
21.0
(9.1)
(11.9)(22.1)
28.7
10.9
4.9
15.8
5.5
(37.0)
26.5
15.1
2.1
16.0
32.4
13.7
1.4
12.0
21.8
9.9%
15,508%

Note: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31. Starting in 1979, accounting
rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously
the requirement. In this table, Berkshire’s results through 1978 have been restated to conform to the changed rules. In all other respects, the results arecalculated using the numbers originally reported. The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporationsuch as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years
when that index showed a positive return, but would have exceeded the S&P 500 in years when the index showed a negative return. Over the years,
the tax costs would have caused the aggregate lag to be substantial.

2

BERKSHIRE HATHAWAY INC.

To the Shareholders of Berkshire Hathaway Inc.:
Berkshire’s gain in net worth during 2017 was $65.3 billion, which increased the per-share book value ofboth our Class A and Class B stock by 23%. Over the last 53 years (that is, since present management took over), pershare book value has grown from $19 to $211,750, a rate of 19.1% compounded annually.*
The format of that opening paragraph has been standard for 30 years. But 2017 was far from standard: Alarge portion of our gain did not come from anything we accomplished at Berkshire.
The $65 billion gain is nonetheless real – rest assured of that. But only $36 billion came from Berkshire’s
operations. The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code.
(Details of Berkshire’s tax-related gain appear on page K-32 and pages K-89 – K-90.)
After stating those fiscal facts, I would prefer to turn immediately to discussing Berkshire’s operations. But,
in still another interruption, I must first tell you about a new accounting rule – a generally accepted accounting
principle (GAAP) – that in future quarterly and annual reports will severely distort Berkshire’s net income figures andvery often mislead commentators and investors.
The new rule says that the net change in unrealized investment gains and losses in stocks we hold must be
included in all net income figures we report to you. That requirement will produce some truly wild and capricious
swings in our GAAP bottom-line. Berkshire owns $170 billion of marketable stocks (not including our shares of Kraft
Heinz), and the value of these holdings can easily swing by $10 billion or more within a quarterly reporting period.
Including gyrations of that magnitude in reported net income will swamp the truly important numbers that describe ouroperating performance. For analytical purposes, Berkshire’s “bottom-line” will be useless.
The new rule compounds the communication problems we have long had in dealing with the realized gains(or losses) that accounting rules compel us to include in our net income. In past quarterly and annual press releases,
we have regularly warned you not to pay attention to these realized gains, because they – just like our unrealized gains– fluctuate randomly.
That’s largely because we sell securities when that seems the intelligent thing to do, not because we are trying
to influence earnings in any way. As a result, we sometimes have reported substantial realized gains for a period when
our portfolio, overall, performed poorly (or the converse).

*All per-share figures used in this report apply to Berkshire’s A shares. Figures for the B shares are 1/1500th of thoseshown for the A shares.

3With the new rule about unrealized gains exacerbating the distortion caused by the existing rules applying torealized gains, we will take pains every quarter to explain the adjustments you need in order to make sense of ournumbers. But televised commentary on earnings releases is often instantaneous with their receipt, and newspaper
headlines almost always focus on the year-over-year change in GAAP net income. Consequently, media reports
sometimes highlight figures that unnecessarily frighten or encourage many readers or viewers.
We will attempt to alleviate this problem by continuing our practice of publishing financial reports late on
Friday, well after the markets close, or early on Saturday morning. That will allow you maximum time for analysis
and give investment professionals the opportunity to deliver informed commentary before markets open on Monday.
Nevertheless, I expect considerable confusion among shareholders for whom accounting is a foreign language.
At Berkshire what counts most are increases in our normalized per-share earning power. That metric is what
Charlie Munger, my long-time partner, and I focus on – and we hope that you do, too. Our scorecard for 2017 follows.
Acquisitions
There are four building blocks that add value to Berkshire: (1) sizable stand-alone acquisitions; (2) bolt-on
acquisitions that fit with businesses we already own; (3) internal sales growth and margin improvement at our manyand varied businesses; and (4) investment earnings from our huge portfolio of stocks and bonds. In this section, we
will review 2017 acquisition activity.
In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths;
able and high-grade management; good returns on the net tangible assets required to operate the business;
opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.
That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far
from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic
purchasers.
Why the purchasing frenzy? In part, it’s because the CEO job self-selects for “can-do” types. If Wall Street
analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening
teenager to be sure to have a normal sex life.
Once a CEO hungers for a deal, he or she will never lack for forecasts that justify the purchase. Subordinates
will be cheering, envisioning enlarged domains and the compensation levels that typically increase with corporate
size. Investment bankers, smelling huge fees, will be applauding as well. (Don’t ask the barber whether you need ahaircut.) If the historical performance of the target falls short of validating its acquisition, large “synergies” will beforecast. Spreadsheets never disappoint.
The ample availability of extraordinarily cheap debt in 2017 further fueled purchase activity. After all, evena high-priced deal will usually boost per-share earnings if it is debt-financed. At Berkshire, in contrast, we evaluateacquisitions on an all-equity basis, knowing that our taste for overall debt is very low and that to assign a large portionof our debt to any individual business would generally be fallacious (leaving aside certain exceptions, such as debt
dedicated to Clayton’s lending portfolio or to the fixed-asset commitments at our regulated utilities). We also neverfactor in, nor do we often find, synergies.
Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us
believe it is insane to risk what you have and need in order to obtain what you don’t need. We held this view 50 years
ago when we each ran an investment partnership, funded by a few friends and relatives who trusted us. We also holdit today after a million or so “partners” have joined us at Berkshire.

4Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will haveopportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less theprudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.
************
We were able to make one sensible stand-alone purchase last year, a 38.6% partnership interest in Pilot Flying
J (“PFJ”). With about $20 billion in annual volume, the company is far and away the nation’s leading travel-center
operator.
PFJ has been run from the get-go by the remarkable Haslam family. “Big Jim” Haslam began with a dream
and a gas station 60 years ago. Now his son, Jimmy, manages 27,000 associates at about 750 locations throughout
North America. Berkshire has a contractual agreement to increase its partnership interest in PFJ to 80% in 2023;
Haslam family members will then own the remaining 20%. Berkshire is delighted to be their partner.
When driving on the Interstate, drop in. PFJ sells gasoline as well as diesel fuel, and the food is good. If it’s
been a long day, remember, too, that our properties have 5,200 showers.
************
Let’s move now to bolt-on acquisitions. Some of these were small transactions that I will not detail. Here isan account, however, of a few larger purchases whose closings stretched between late 2016 and early 2018.
Clayton Homes acquired two builders of conventional homes during 2017, a move that more than doubled
our presence in a field we entered only three years ago. With these additions – Oakwood Homes in Colorado andHarris Doyle in Birmingham – I expect our 2018 site built volume will exceed $1 billion.
ŠClayton’s emphasis, nonetheless, remains manufactured homes, both their construction and their financing.
In 2017 Clayton sold 19,168 units through its own retail operation and wholesaled another 26,706 units to independent
retailers. All told, Clayton accounted for 49% of the manufactured-home market last year. That industry-leading share– about three times what our nearest competitor did – is a far cry from the 13% Clayton achieved in 2003, the year it
joined Berkshire.
Both Clayton Homes and PFJ are based in Knoxville, where the Clayton and Haslam families have long been
friends. Kevin Clayton’s comments to the Haslams about the advantages of a Berkshire affiliation, and his admiring
comments about the Haslam family to me, helped cement the PFJ deal.
Near the end of 2016, Shaw Industries, our floor coverings business, acquired U.S. Floors (“USF”), a rapidly
growing distributor of luxury vinyl tile. USF’s managers, Piet Dossche and Philippe Erramuzpe, came out of the gate
fast, delivering a 40% increase in sales in 2017, during which their operation was integrated with Shaw’s. It’s clearthat we acquired both great human assets and business assets in making the USF purchase.
Š

Vance Bell, Shaw’s CEO, originated, negotiated and completed this acquisition, which increased Shaw’s
sales to $5.7 billion in 2017 and its employment to 22,000. With the purchase of USF, Shaw has substantiallystrengthened its position as an important and durable source of earnings for Berkshire.
I have told you several times about HomeServices, our growing real estate brokerage operation. Berkshire
backed into this business in 2000 when we acquired a majority interest in MidAmerican Energy (now named Berkshire
Hathaway Energy). MidAmerican’s activities were then largely in the electric utility field, and I originally paid little
attention to HomeServices.
Š5

But, year-by-year, the company added brokers and, by the end of 2016, HomeServices was the second-largest
brokerage operation in the country – still ranking, though, far behind the leader, Realogy. In 2017, however,
HomeServices’ growth exploded. We acquired the industry’s third-largest operator, Long and Foster; number 12,
Houlihan Lawrence; and Gloria Nilson.
With those purchases we added 12,300 agents, raising our total to 40,950. HomeServices is now close toleading the country in home sales, having participated (including our three acquisitions pro-forma) in $127 billion of“sides” during 2017. To explain that term, there are two “sides” to every transaction; if we represent both buyer andseller, the dollar value of the transaction is counted twice.
Despite its recent acquisitions, HomeServices is on track to do only about 3% of the country’s homebrokerage business in 2018. That leaves 97% to go. Given sensible prices, we will keep adding brokers in this mostfundamental of businesses.
Finally, Precision Castparts, a company built through acquisitions, bought Wilhelm Schulz GmbH, a
German maker of corrosion resistant fittings, piping systems and components. Please allow me to skip a further
explanation. I don’t understand manufacturing operations as well as I do the activities of real estate brokers, homebuilders or truck stops.
ŠFortunately, I don’t need in this instance to bring knowledge to the table: Mark Donegan, CEO of Precision,is an extraordinary manufacturing executive, and any business in his domain is slated to do well. Betting on people
can sometimes be more certain than betting on physical assets.
Let’s now move on to operations, beginning with property-casualty (“p/c”) insurance, a business I do
understand and the engine that for 51 years has powered Berkshire’s growth.
Insurance
Before I discuss our 2017 insurance results, let me remind you of how and why we entered the field. We
began by purchasing National Indemnity and a smaller sister company for $8.6 million in early 1967. With ourpurchase we received $6.7 million of tangible net worth that, by the nature of the insurance business, we were able todeploy in marketable securities. It was easy to rearrange the portfolio into securities we would otherwise have owned at
Berkshire itself. In effect, we were “trading dollars” for the net worth portion of the cost.
The $1.9 million premium over net worth that Berkshire paid brought us an insurance business that usually
delivered an underwriting profit. Even more important, the insurance operation carried with it $19.4 million of “float”– money that belonged to others but was held by our two insurers.
Ever since, float has been of great importance to Berkshire. When we invest these funds, all dividends,
interest and gains from their deployment belong to Berkshire. (If we experience investment losses, those, of course,
are on our tab as well.)Float materializes at p/c insurers in several ways: (1) Premiums are generally paid to the company upfront
whereas losses occur over the life of the policy, usually a six-month or one-year period; (2) Though some losses, suchas car repairs, are quickly paid, others – such as the harm caused by exposure to asbestos – may take many years tosurface and even longer to evaluate and settle; (3) Loss payments are sometimes spread over decades in cases, say, ofa person employed by one of our workers’ compensation policyholders being permanently injured and thereafter
requiring expensive lifetime care.

6

Float generally grows as premium volume increases. Additionally, certain p/c insurers specialize in lines ofbusiness such as medical malpractice or product liability – business labeled “long-tail” in industry jargon – thatgenerate far more float than, say, auto collision and homeowner policies, which require insurers to almost immediately
make payments to claimants for needed repairs.
Berkshire has been a leader in long-tail business for many years. In particular, we have specialized in jumbo
reinsurance policies that leave us assuming long-tail losses already incurred by other p/c insurers. As a result of ouremphasizing that sort of business, Berkshire’s growth in float has been extraordinary. We are now the country’s second
largest p/c company measured by premium volume and its leader, by far, in float.
Here’s the record:(in $ millions)
Year
1970
1980
1990
2000
2010
2017

Premium Volume
$

39
185
582
19,34330,74960,597

Float
$

39
237
1,632
27,871
65,832
114,500

Our 2017 volume was boosted by a huge deal in which we reinsured up to $20 billion of long-tail losses that
AIG had incurred. Our premium for this policy was $10.2 billion, a world’s record and one we won’t come close torepeating. Premium volume will therefore fall somewhat in 2018.
Float will probably increase slowly for at least a few years. When we eventually experience a decline, it will
be modest – at most 3% or so in any single year. Unlike bank deposits or life insurance policies containing surrender
options, p/c float can’t be withdrawn. This means that p/c companies can’t experience massive “runs” in times ofwidespread financial stress, a characteristic of prime importance to Berkshire that we factor into our investment
decisions.
Charlie and I never will operate Berkshire in a manner that depends on the kindness of strangers – or eventhat of friends who may be facing liquidity problems of their own. During the 2008-2009 crisis, we liked having
Treasury Bills – loads of Treasury Bills – that protected us from having to rely on funding sources such as bank lines
or commercial paper. We have intentionally constructed Berkshire in a manner that will allow it to comfortably
withstand economic discontinuities, including such extremes as extended market closures.
************The downside of float is that it comes with risk, sometimes oceans of risk. What looks predictable in insurance
can be anything but. Take the famous Lloyds insurance market, which produced decent results for three centuries. In
the 1980’s, though, huge latent problems from a few long-tail lines of insurance surfaced at Lloyds and, for a time,
threatened to destroy its storied operation. (It has, I should add, fully recovered.)Berkshire’s insurance managers are conservative and careful underwriters, who operate in a culture that haslong prioritized those qualities. That disciplined behavior has produced underwriting profits in most years, and in such
instances, our cost of float was less than zero. In effect, we got paid then for holding the huge sums tallied in theearlier table.
I have warned you, however, that we have been fortunate in recent years and that the catastrophe-light period
the industry was experiencing was not a new norm. Last September drove home that point, as three significant
hurricanes hit Texas, Florida and Puerto Rico.

7

My guess at this time is that the insured losses arising from the hurricanes are $100 billion or so. That figure,however, could be far off the mark. The pattern with most mega-catastrophes has been that initial loss estimates ran
low. As well-known analyst V.J. Dowling has pointed out, the loss reserves of an insurer are similar to a self-gradedexam. Ignorance, wishful thinking or, occasionally, downright fraud can deliver inaccurate figures about an insurer’s
financial condition for a very long time.
We currently estimate Berkshire’s losses from the three hurricanes to be $3 billion (or about $2 billion aftertax). If both that estimate and my industry estimate of $100 billion are close to accurate, our share of the industry loss
was about 3%. I believe that percentage is also what we may reasonably expect to be our share of losses in future
American mega-cats.
It’s worth noting that the $2 billion net cost from the three hurricanes reduced Berkshire’s GAAP net worth
by less than 1%. Elsewhere in the reinsurance industry there were many companies that suffered losses in net worth
ranging from 7% to more than 15%. The damage to them could have been far worse: Had Hurricane Irma followed apath through Florida only a bit to the east, insured losses might well have been an additional $100 billion.
We believe that the annual probability of a U.S. mega-catastrophe causing $400 billion or more of insured
losses is about 2%. No one, of course, knows the correct probability. We do know, however, that the risk increases
over time because of growth in both the number and value of structures located in catastrophe-vulnerable areas.
No company comes close to Berkshire in being financially prepared for a $400 billion mega-cat. Our shareof such a loss might be $12 billion or so, an amount far below the annual earnings we expect from our non-insurance
activities. Concurrently, much – indeed, perhaps most – of the p/c world would be out of business. Our unparalleledfinancial strength explains why other p/c insurers come to Berkshire – and only Berkshire – when they, themselves,need to purchase huge reinsurance coverages for large payments they may have to make in the far future.
Prior to 2017, Berkshire had recorded 14 consecutive years of underwriting profits, which totaled $28.3
billion pre-tax. I have regularly told you that I expect Berkshire to attain an underwriting profit in a majority of years,
but also to experience losses from time to time. My warning became fact in 2017, as we lost $3.2 billion pre-tax fromunderwriting.
A large amount of additional information about our various insurance operations is included in the 10-K at
the back of this report. The only point I will add here is that you have some extraordinary managers working for you
at our various p/c operations. This is a business in which there are no trade secrets, patents, or locational advantages.
What counts are brains and capital. The managers of our various insurance companies supply the brains and Berkshire
provides the capital.
************For many years, this letter has described the activities of Berkshire’s many other businesses. That discussion
has become both repetitious and partially duplicative of information regularly included in the 10-K that follows theletter. Consequently, this year I will give you a simple summary of our dozens of non-insurance businesses. Additional
details can be found on pages K-5 – K-22 and pages K-40 – K-50.
Viewed as a group – and excluding investment income – our operations other than insurance delivered pretax income of $20 billion in 2017, an increase of $950 million over 2016. About 44% of the 2017 profit came from two
subsidiaries. BNSF, our railroad, and Berkshire Hathaway Energy (of which we own 90.2%). You can read more
about these businesses on pages K-5 – K-10 and pages K-40 – K-44.
Proceeding down Berkshire’s long list of subsidiaries, our next five non-insurance businesses, as ranked byearnings (but presented here alphabetically) Clayton Homes, International Metalworking Companies, Lubrizol,
Marmon and Precision Castparts had aggregate pre-tax income in 2017 of $5.5 billion, little changed from the $5.4
billion these companies earned in 2016.
The next five, similarly ranked and listed (Forest River, Johns Manville, MiTek, Shaw and TTI) earned $2.1
billion last year, up from $1.7 billion in 2016.

8

The remaining businesses that Berkshire owns – and there are many – recorded little change in pre-tax
income, which was $3.7 billion in 2017 versus $3.5 billion in 2016.
Depreciation charges for all of these non-insurance operations totaled $7.6 billion; capital expenditures were$11.5 billion. Berkshire is always looking for ways to expand its businesses and regularly incurs capital expendituresthat far exceed its depreciation charge. Almost 90% of our investments are made in the United States. America’s
economic soil remains fertile.
Amortization charges were an additional $1.3 billion. I believe that in large part this item is not a true
economic cost. Partially offsetting this good news is the fact that BNSF (like all other railroads) records depreciation
charges that fall well short of the sums regularly needed to keep the railroad in first-class shape.
Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we
will need to make one or more huge acquisitions. We certainly have the resources to do so. At yearend Berkshire held
$116.0 billion in cash and U.S. Treasury Bills (whose average maturity was 88 days), up from $86.4 billion at yearend
2016. This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire tohave. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets.
Investments
Below we list our fifteen common stock investments that at yearend had the largest market value. We exclude
our Kraft Heinz holding – 325,442,152 shares – because Berkshire is part of a control group and therefore mustaccount for this investment on the “equity” method. On its balance sheet, Berkshire carries its Kraft Heinz holding at
a GAAP figure of $17.6 billion. The shares had a yearend market value of $25.3 billion, and a cost basis of $9.8 billion.
12/31/17
Shares*Percentage ofCompany
Owned

Company

Cost**

Market(in millions)
151,610,700 American Express Company . . . . . . . . . . . . . . . . . .
166,713,209 Apple Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700,000,000 Bank of America Corporation . . . . . . . . . . . . . . . . .
53,307,534 The Bank of New York Mellon Corporation . . . . . .
225,000,000 BYD Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . .
6,789,054 Charter Communications, Inc. . . . . . . . . . . . . . . . . .
400,000,000 The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . .
53,110,395 Delta Airlines Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
44,527,147 General Motors Company . . . . . . . . . . . . . . . . . . . .
11,390,582 The Goldman Sachs Group, Inc. . . . . . . . . . . . . . . .
24,669,778 Moody’s Corporation . . . . . . . . . . . . . . . . . . . . . . . .
74,587,892 Phillips 66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,659,456 Southwest Airlines Co. . . . . . . . . . . . . . . . . . . . . . . .
103,855,045 U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
482,544,468 Wells Fargo & Company . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Common Stocks Carried at Market . . . . . . . . .
*
**

17.6
3.3
6.8
5.3
8.2
2.8
9.4
7.4
3.2
3.0
12.9
14.9
8.1
6.3
9.9

$

1,287
20,961
5,007
2,230
232
1,210
1,299
2,219
1,343
654
248
5,841
1,997
3,343
11,837
14,968$ 74,676$

15,05628,213
20,664
2,871
1,961
2,281
18,352
2,974
1,825
2,902
3,642
7,545
3,119
5,565
29,27624,294$ 170,540

Excludes shares held by pension funds of Berkshire subsidiaries.
This is our actual purchase price and also our tax basis; GAAP “cost” differs in a few cases because ofwrite-downs that have been required under GAAP rules.

9Some of the stocks in the table are the responsibility of either Todd Combs or Ted Weschler, who work withme in managing Berkshire’s investments. Each, independently of me, manages more than $12 billion; I usually learn
about decisions they have made by looking at monthly portfolio summaries. Included in the $25 billion that the two
manage is more than $8 billion of pension trust assets of certain Berkshire subsidiaries. As noted, pension investments
are not included in the preceding tabulation of Berkshire holdings.
************Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker
symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media
pundits. Instead, we simply believe that if the businesses of the investees are successful (as we believe most will be)
our investments will be successful as well. Sometimes the payoffs to us will be modest; occasionally the cash register
will ring loudly. And sometimes I will make expensive mistakes. Overall – and over time – we should get decent
results. In America, equity investors have the wind at their back.
From our stock portfolio – call our holdings “minority interests” in a diversified group of publicly-owned
businesses – Berkshire received $3.7 billion of dividends in 2017. That’s the number included in our GAAP figures,
as well as in the “operating earnings” we reference in our quarterly and annual reports.
That dividend figure, however, far understates the “true” earnings emanating from our stock holdings. For
decades, we have stated in Principle 6 of our “Owner-Related Business Principles” (page 19) that we expect
undistributed earnings of our investees to deliver us at least equivalent earnings by way of subsequent capital gains.
Our recognition of capital gains (and losses) will be lumpy, particularly as we conform with the new GAAP
rule requiring us to constantly record unrealized gains or losses in our earnings. I feel confident, however, that theearnings retained by our investees will over time, and with our investees viewed as a group, translate into
commensurate capital gains for Berkshire.
The connection of value-building to retained earnings that I’ve just described will be impossible to detect inthe short term. Stocks surge and swoon, seemingly untethered to any year-to-year buildup in their underlying value.
Over time, however, Ben Graham’s oft-quoted maxim proves true: “In the short run, the market is a voting machine;in the long run, however, it becomes a weighing machine.”************
Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure longterm growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting
compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four
truly major dips. Here are the gory details:
PeriodHigh

Low

Percentage Decrease

March 1973-January 1975
10/2/87-10/27/87
6/19/98-3/10/2000
9/19/08-3/5/09

93
4,250
80,900147,000

38
2,675
41,30072,400(59.1%)(37.1%)(48.9%)(50.7%)

This table offers the strongest argument I can muster against ever using borrowed money to own stocks.
There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and yourpositions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines
and breathless commentary. And an unsettled mind will not make good decisions.

10In the next 53 years our shares (and others) will experience declines resembling those in the table. No one
can tell you when these will happen. The light can at any time go from green to red without pausing at yellow.
When major declines occur, however, they offer extraordinary opportunities to those who are not handicappedby debt. That’s the time to heed these lines from Kipling’s If:“If you can keep your head when all about you are losing theirs . . .
If you can wait and not be tired by waiting . . .
If you can think – and not make thoughts your aim . . .
If you can trust yourself when all men doubt you . . .
Yours is the Earth and everything that’s in it.”
“The Bet” is Over and Has Delivered an Unforeseen Investment Lesson
Last year, at the 90% mark, I gave you a detailed report on a ten-year bet I had made on December 19, 2007.
(The full discussion from last year’s annual report is reprinted on pages 24 – 26.) Now I have the final tally – and, inseveral respects, it’s an eye-opener.
I made the bet for two reasons: (1) to leverage my outlay of $318,250 into a disproportionately larger sum
that – if things turned out as I expected – would be distributed in early 2018 to Girls Inc. of Omaha; and (2) topublicize my conviction that my pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would,
over time, deliver better results than those achieved by most investment professionals, however well-regarded andincentivized those “helpers” may be.
Addressing this question is of enormous importance. American investors pay staggering sums annually toadvisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s
worth? Indeed, again in the aggregate, do investors get anything for their outlays?
Protégé Partners, my counterparty to the bet, picked five “funds-of-funds” that it expected to overperformthe S&P 500. That was not a small sample. Those five funds-of-funds in turn owned interests in more than 200 hedge
funds.
Essentially, Protégé, an advisory firm that knew its way around Wall Street, selected five investment experts
who, in turn, employed several hundred other investment experts, each managing his or her own hedge fund. This
assemblage was an elite crew, loaded with brains, adrenaline and confidence.
The managers of the five funds-of-funds possessed a further advantage: They could – and did – rearrange
their portfolios of hedge funds during the ten years, investing with new “stars” while exiting their positions in hedge
funds whose managers had lost their touch.
Every actor on Protégé’s side was highly incentivized: Both the fund-of-funds managers and the hedge-fundmanagers they selected significantly shared in gains, even those achieved simply because the market generally moves
upwards. (In 100% of the 43 ten-year periods since we took control of Berkshire, years with gains by the S&P 500
exceeded loss years.)Those performance incentives, it should be emphasized, were frosting on a huge and tasty cake: Even if thefunds lost money for their investors during the decade, their managers could grow very rich. That would occur because
fixed fees averaging a staggering 2 1⁄ 2% of assets or so were paid every year by the fund-of-funds’ investors, with partof these fees going to the managers at the five funds-of-funds and the balance going to the 200-plus managers of theunderlying hedge funds.

11Here’s the final scorecard for the bet:

Year

Fund-ofFunds A

Fund-ofFunds B

Fund-ofFunds C

Fund-ofFunds D

Fund-ofFunds E

S&P
Index Fund

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

-16.5%
11.3%
5.9%
-6.3%
3.4%
10.5%
4.7%
1.6%
-3.2%
12.2%

-22.3%
14.5%
6.8%
-1.3%
9.6%
15.2%
4.0%
2.5%
1.9%
10.6%

-21.3%
21.4%
13.3%
5.9%
5.7%
8.8%
18.9%
5.4%
-1.7%
15.6%

-29.3%
16.5%
4.9%
-6.3%
6.2%
14.2%
0.7%
1.4%
2.5%
N/A

-30.1%
16.8%
11.9%
-2.8%
9.1%
14.4%
-2.1%
-5.0%
4.4%
18.0%

-37.0%
26.6%
15.1%
2.1%
16.0%
32.3%
13.6%
1.4%
11.9%
21.8%

Final Gain
AverageAnnual Gain

21.7%

42.3%

87.7%

2.8%

27.0%

125.8%

2.0%

3.6%

6.5%

0.3%

2.4%

8.5%

Footnote:

Under my agreement with Protégé Partners, the names of these funds-of-funds have never been publicly
disclosed. I, however, have received their annual audits from Protégé. The 2016 figures for funds A, B
and C were revised slightly from those originally reported last year. Fund D was liquidated in 2017; its
average annual gain is calculated for the nine years of its operation.

The five funds-of-funds got off to a fast start, each beating the index fund in 2008. Then the roof fell in. In
every one of the nine years that followed, the funds-of-funds as a whole trailed the index fund.
Let me emphasize that there was nothing aberrational about stock-market behavior over the ten-year stretch.
If a poll of investment “experts” had been asked late in 2007 for a forecast of long-term common-stock returns, theirguesses would have likely averaged close to the 8.5% actually delivered by the S&P 500. Making money in thatenvironment should have been easy. Indeed, Wall Street “helpers” earned staggering sums. While this groupprospered, however, many of their investors experienced a lost decade.
Performance comes, performance goes. Fees never falter.
************The bet illuminated another important investment lesson: Though markets are generally rational, theyoccasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in
economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is anability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look
unimaginative for a sustained period – or even to look foolish – is also essential.
Originally, Protégé and I each funded our portion of the ultimate $1 million prize by purchasing $500,000
face amount of zero-coupon U.S. Treasury bonds (sometimes called “strips”). These bonds cost each of us $318,250 –a bit less than 64¢ on the dollar – with the $500,000 payable in ten years.
As the name implies, the bonds we acquired paid no interest, but (because of the discount at which they werepurchased) delivered a 4.56% annual return if held to maturity. Protégé and I originally intended to do no more thantally the annual returns and distribute $1 million to the winning charity when the bonds matured late in 2017.

12

After our purchase, however, some very strange things took place in the bond market. By November 2012,
our bonds – now with about five years to go before they matured – were selling for 95.7% of their face value. At thatprice, their annual yield to maturity was less than 1%. Or, to be precise, .88%.
Given that pathetic return, our bonds had become a dumb – a really dumb – investment compared toAmerican equities. Over time, the S&P 500 – which mirrors a huge cross-section of American business, appropriately
weighted by market value – has earned far more than 10% annually on shareholders’ equity (net worth).
In November 2012, as we were considering all this, the cash return from dividends on the S&P 500 was 2 1⁄ 2%
annually, about triple the yield on our U.S. Treasury bond. These dividend payments were almost certain to grow.
Beyond that, huge sums were being retained by the companies comprising the 500. These businesses would use theirretained earnings to expand their operations and, frequently, to repurchase their shares as well. Either course would,
over time, substantially increase earnings-per-share. And – as has been the case since 1776 – whatever its problems ofthe minute, the American economy was going to move forward.
Presented late in 2012 with the extraordinary valuation mismatch between bonds and equities, Protégé andI agreed to sell the bonds we had bought five years earlier and use the proceeds to buy 11,200 Berkshire “B” shares.
The result: Girls Inc. of Omaha found itself receiving $2,222,279 last month rather than the $1 million it had originally
hoped for.
Berkshire, it should be emphasized, has not performed brilliantly since the 2012 substitution. But brilliancewasn’t needed: After all, Berkshire’s gain only had to beat that annual .88% bond bogey – hardly a Herculeanachievement.
The only risk in the bonds-to-Berkshire switch was that yearend 2017 would coincide with an exceptionally
weak stock market. Protégé and I felt this possibility (which always exists) was very low. Two factors dictated thisconclusion: The reasonable price of Berkshire in late 2012, and the large asset build-up that was almost certain to occur
at Berkshire during the five years that remained before the bet would be settled. Even so, to eliminate all risk to thecharities from the switch, I agreed to make up any shortfall if sales of the 11,200 Berkshire shares at yearend 2017
didn’t produce at least $1 million.
************
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption
at a later date. “Risk” is the possibility that this objective won’t be attained.
By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a longterm investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would
have decreased the purchasing-power of the government bond that Protégé and I sold.
I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – farriskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolioof U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible
multiple of earnings relative to then-prevailing interest rates.
It is a terrible mistake for investors with long-term horizons – among them, pension funds, college
endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds
to stocks. Often, high-grade bonds in an investment portfolio increase its risk.
************
A final lesson from our bet: Stick with big, “easy” decisions and eschew activity. During the ten-year bet,
the 200-plus hedge-fund managers that were involved almost certainly made tens of thousands of buy and selldecisions. Most of those managers undoubtedly thought hard about their decisions, each of which they believed would
prove advantageous. In the process of investing, they studied 10-Ks, interviewed managements, read trade journals
and conferred with Wall Street analysts.

13

Protégé and I, meanwhile, leaning neither on research, insights nor brilliance, made only one investment
decision during the ten years. We simply decided to sell our bond investment at a price of more than 100 times earnings(95.7 sale price/.88 yield), those being “earnings” that could not increase during the ensuing five years.
We made the sale in order to move our money into a single security – Berkshire – that, in turn, owned adiversified group of solid businesses. Fueled by retained earnings, Berkshire’s growth in value was unlikely to be lessthan 8% annually, even if we were to experience a so-so economy.
After that kindergarten-like analysis, Protégé and I made the switch and relaxed, confident that, over time, 8%
was certain to beat .88%. By a lot.
The Annual Meeting
The annual meeting falls on May 5th and will again be webcast by Yahoo!, whose web address ishttps://finance.yahoo.com/brklivestream. The webcast will go live at 8:45 a.m. Central Daylight Time. Yahoo! willinterview directors, managers, stockholders and celebrities before the meeting and during the lunch break. Both theinterviews and meeting will be translated simultaneously into Mandarin.
Our partnership with Yahoo! began in 2016 and shareholders have responded enthusiastically. Last year,
real-time viewership increased 72% to about 3.1 million and replays of short segments totaled 17.1 million.
For those attending the meeting in person, the doors at the CenturyLink will open at 7:00 a.m. on Saturday
to facilitate shopping prior to our shareholder movie, which begins at 8:30. The question-and-answer period will startat 9:15 and run until 3:30, with a one-hour lunch break at noon. Finally, at 3:45 we will begin the formal shareholder
meeting, which usually runs from 15 to 45 minutes. Shopping will end at 4:30.
On Friday, May 4th, our Berkshire exhibitors at CenturyLink will be open from noon until 5 p.m. We addedthat extra shopping time in 2015, and serious shoppers love it. Last year about 12,000 people came through the doors
in the five hours we were open on Friday.
Your venue for shopping will be the 194,300-square-foot hall that adjoins the meeting and in which
products from dozens of our subsidiaries will be for sale. (Your Chairman discourages freebies.) Say hello to the many
Berkshire managers who will be captaining their exhibits. And be sure to view the terrific BNSF railroad layout thatsalutes all of our companies.
Brooks, our running-shoe company, will again have a special commemorative shoe to offer at the meeting.
After you purchase a pair, wear them on Sunday at our sixth annual “Berkshire 5K,” an 8 a.m. race starting at theCenturyLink. Full details for participating will be included in the Visitor’s Guide that will be sent to you with yourmeeting credentials. Entrants in the race will find themselves running alongside many of Berkshire’s managers,
directors and associates. (Charlie and I, however, will sleep in; even with Brooks running shoes, our times would beembarrassing.) Participation in the 5K grows every year. Help us set another record.
A GEICO booth in the shopping area will be staffed by a number of the company’s top counselors fromaround the country. At last year’s meeting, we set a record for policy sales, up 43% from 2016.
So stop by for a quote. In most cases, GEICO will be able to give you a shareholder discount (usually 8%).
This special offer is permitted by 44 of the 51 jurisdictions in which we operate. (One supplemental point: The discountis not additive if you qualify for another discount, such as that available to certain groups.) Bring the details of yourexisting insurance and check out our price. We can save many of you real money. Spend the savings on other Berkshire
products.
Be sure to visit the Bookworm. This Omaha-based retailer will carry more than 40 books and DVDs, among
them a couple of new titles. Berkshire shareholders are a bookseller’s dream: When Poor Charlie’s Almanack (yes,our Charlie) made its debut some years ago, we sold 3,500 copies at the meeting. The book weighed 4.85 pounds. Do
the math: Our shareholders left the building that day carrying about 8 1⁄ 2 tons of Charlie’s wisdom.

14

An attachment to the proxy material that is enclosed with this report explains how you can obtain thecredential you will need for admission to both the meeting and other events. Keep in mind that most airlines
substantially increase prices for the Berkshire weekend. If you are coming from far away, compare the cost of flying
to Kansas City vs. Omaha. The drive between the two cities is about 2 1⁄ 2 hours, and it may be that Kansas City cansave you significant money. The savings for a couple could run to $1,000 or more. Spend that money with us.
At Nebraska Furniture Mart, located on a 77-acre site on 72nd Street between Dodge and Pacific, we willagain be having “Berkshire Weekend” discount pricing. To obtain the Berkshire discount at NFM, you must makeyour purchases between Tuesday, May 1st and Monday, May 7th inclusive, and must also present your meeting
credential. Last year, the one-week volume for the store was a staggering $44.6 million. Bricks and mortar are alive
and well at NFM.
The period’s special pricing will even apply to the products of several prestigious manufacturers that
normally have ironclad rules against discounting but which, in the spirit of our shareholder weekend, have made an
exception for you. We appreciate their cooperation. During “Berkshire Weekend,” NFM will be open from 10 a.m. to
9 p.m. Monday through Saturday and 11 a.m. to 8 p.m. on Sunday. From 5:30 p.m. to 8 p.m. on Saturday, NFM is
hosting a picnic to which you are all invited.
NFM will again extend its shareholder’s discount offerings to our Kansas City and Dallas stores. From May
1st through May 7th, shareholders who present meeting credentials or other evidence of their Berkshire ownership (suchas brokerage statements) to those NFM stores will receive the same discounts enjoyed by those visiting the Omaha
store.
At Borsheims, we will again have two shareholder-only events. The first will be a cocktail reception from
6 p.m. to 9 p.m. on Friday, May 4th. The second, the main gala, will be held on Sunday, May 6th, from 9 a.m. to 4 p.m.
On Saturday, we will remain open until 6 p.m. Remember, the more you buy, the more you save (or so my daughter
tells me when we visit the store).
We will have huge crowds at Borsheims throughout the weekend. For your convenience, therefore,shareholder prices will be available from Monday, April 30th through Saturday, May 12th. During that period, please
identify yourself as a shareholder either by presenting your meeting credential or a brokerage statement showing you
own our stock.
On Sunday afternoon, on the upper level above Borsheims, we will have Bob Hamman and Sharon Osberg,
two of the world’s top bridge experts, available to play with our shareholders. If they suggest wagering on the game,change the subject. Ajit, Charlie, Bill Gates and I will likely drop by as well.
My friend, Ariel Hsing, will be in the mall as well on Sunday, taking on challengers at table tennis. I met
Ariel when she was nine, and even then I was unable to score a point against her. Ariel represented the United Statesin the 2012 Olympics. If you don’t mind embarrassing yourself, test your skills against her, beginning at 1 p.m. Bill
Gates did pretty well playing Ariel last year, so he may be ready to again challenge her. (My advice: Bet on Ariel.) I
will participate on an advisory basis only.
Gorat’s will be open exclusively for Berkshire shareholders on Sunday, May 6th, serving from 12 p.m. until
10 p.m. To make a reservation at Gorat’s, call 402-551-3733 on April 2nd (but not before). Show you are a sophisticateddiner by ordering the T-bone with hash browns.
We will have the same three financial journalists lead the question-and-answer period at the meeting, asking
Charlie and me questions that shareholders have submitted to them by e-mail. The journalists and their e-mailaddresses are: Carol Loomis, the preeminent business journalist of her time, who may be e-mailed atloomisbrk@gmail.com; Becky Quick, of CNBC, at BerkshireQuestions@cnbc.com; and Andrew Ross Sorkin, of the
New York Times, at arsorkin@nytimes.com.

15

From the questions submitted, each journalist will choose the six he or she decides are the most interestingand important to shareholders. The journalists have told me your question has the best chance of being selected if you
keep it concise, avoid sending it in at the last moment, make it Berkshire-related and include no more than twoquestions in any e-mail you send them. (In your e-mail, let the journalist know if you would like your name mentioned
if your question is asked.)
An accompanying set of questions will be asked by three analysts who follow Berkshire. This year the
insurance specialist will be Gary Ransom of Dowling & Partners. Questions that deal with our non-insurance
operations will come from Jonathan Brandt of Ruane, Cunniff & Goldfarb and Gregg Warren of Morningstar. Since
what we will be conducting is a shareholders’ meeting, our hope is that the analysts and journalists will ask questions
that add to our owners’ understanding and knowledge of their investment.
Neither Charlie nor I will get so much as a clue about the questions headed our way. Some will be tough,for sure, and that’s the way we like it. Multi-part questions aren’t allowed; we want to give as many questioners as
possible a shot at us. Our goal is for you to leave the meeting knowing more about Berkshire than when you came andfor you to have a good time while in Omaha.
All told, we expect at least 54 questions, which will allow for six from each analyst and journalist and for
18 from the audience. After the 54th, all questions come from the audience. Charlie and I have often tackled more than
60 by 3:30.
The questioners from the audience will be chosen by means of 11 drawings that will take place at 8:15 a.m.
on the morning of the annual meeting. Each of the 11 microphones installed in the arena and main overflow room will
host, so to speak, a drawing.
While I’m on the subject of our owners’ gaining knowledge, let me remind you that Charlie and I believe
all shareholders should simultaneously have access to new information that Berkshire releases and, if possible, should
also have adequate time to digest and analyze that information before any trading takes place. That’s why we try to
issue financial data late on Fridays or early on Saturdays and why our annual meeting is always held on a Saturday (aday that also eases traffic and parking problems).
We do not follow the common practice of talking one-on-one with large institutional investors or analysts,
treating them instead as we do all other shareholders. There is no one more important to us than the shareholder oflimited means who trusts us with a substantial portion of his or her savings. As I run the company day-to-day – andas I write this letter – that is the shareholder whose image is in my mind.
************For good reason, I regularly extol the accomplishments of our operating managers. They are truly All-Stars
who run their businesses as if they were the only asset owned by their families. I also believe the mindset of ourmanagers to be as shareholder-oriented as can be found in the universe of large publicly-owned companies. Most of
our managers have no financial need to work. The joy of hitting business “home runs” means as much to them as theirpaycheck.
If managers (or directors) own Berkshire shares – and many do – it’s from open-market purchases they
have made or because they received shares when they sold their businesses to us. None, however, gets the upside ofownership without risking the downside. Our directors and managers stand in your shoes.
We continue to have a wonderful group at headquarters. This team efficiently deals with a multitude of
SEC and other regulatory requirements, files a 32,700-page Federal income tax return, oversees the filing of 3,935
state tax returns, responds to countless shareholder and media inquiries, gets out the annual report, prepares for thecountry’s largest annual meeting, coordinates the Board’s activities, fact-checks this letter – and the list goes on andon.

16They handle all of these business tasks cheerfully and with unbelievable efficiency, making my life easy
and pleasant. Their efforts go beyond activities strictly related to Berkshire: Last year, for example, they dealt withthe 40 universities (selected from 200 applicants) who sent students to Omaha for a Q&A day with me. They also
handle all kinds of requests that I receive, arrange my travel, and even get me hamburgers and French fries (smotheredin Heinz ketchup, of course) for lunch. In addition, they cheerfully pitch in to help at the annual meeting in whatever
way they are needed. They are proud to work for Berkshire, and I am proud of them.
************
I’ve saved the best for last. Early in 2018, Berkshire’s board elected Ajit Jain and Greg Abel as directorsof Berkshire and also designated each as Vice Chairman. Ajit is now responsible for insurance operations, and Greg
oversees the rest of our businesses. Charlie and I will focus on investments and capital allocation.
You and I are lucky to have Ajit and Greg working for us. Each has been with Berkshire for decades, andBerkshire’s blood flows through their veins. The character of each man matches his talents. And that says it all.
Come to Omaha – the cradle of capitalism – on May 5th and meet the Berkshire Bunch. All of us lookforward to your visit.

February 24, 2018

Warren E. Buffett
Chairman of the Board

17

In June 1996, Berkshire’s Chairman, Warren E. Buffett, issued a booklet entitled “An Owner’s Manual*” to Berkshire’s Class A andClass B shareholders. The purpose of the manual was to explain Berkshire’s broad economic principles of operation. An updated
version is reproduced on this and the following pages.
OWNER-RELATED BUSINESS PRINCIPLESAt the time of the Blue Chip merger in 1983, I set down 13 owner-related business principles that I thought would help newshareholders understand our managerial approach. As is appropriate for “principles,” all 13 remain alive and well today, and they arestated here in italics.
1.
Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as ownerpartners, and of ourselves as managing partners. (Because of the size of our shareholdings we are also, for better or worse,
controlling partners.) We do not view the company itself as the ultimate owner of our business assets but instead view thecompany as a conduit through which our shareholders own the assets.
Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around daily andthat is a candidate for sale when some economic or political event makes you nervous. We hope you instead visualize yourself
as a part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment
house in partnership with members of your family. For our part, we do not view Berkshire shareholders as faceless membersof an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us for what may well turn out to be theremainder of their lives.
The evidence suggests that most Berkshire shareholders have indeed embraced this long-term partnership concept. The annual
percentage turnover in Berkshire’s shares is a fraction of that occurring in the stocks of other major American corporations,even when the shares I own are excluded from the calculation.
In effect, our shareholders behave in respect to their Berkshire stock much as Berkshire itself behaves in respect to companies
in which it has an investment. As owners of, say, Coca-Cola or American Express shares, we think of Berkshire as being a
non-managing partner in two extraordinary businesses, in which we measure our success by the long-term progress of thecompanies rather than by the month-to-month movements of their stocks. In fact, we would not care in the least if several
years went by in which there was no trading, or quotation of prices, in the stocks of those companies. If we have good longterm expectations, short-term price changes are meaningless for us except to the extent they offer us an opportunity toincrease our ownership at an attractive price.
2.
In line with Berkshire’s owner-orientation, most of our directors have a significant portion of their net worth invested in thecompany. We eat our own cooking.
Charlie’s family has the majority of its net worth in Berkshire shares; I have more than 98%. In addition, many of my relatives– my sisters and cousins, for example – keep a huge portion of their net worth in Berkshire stock.
Charlie and I feel totally comfortable with this eggs-in-one-basket situation because Berkshire itself owns a wide variety of
truly extraordinary businesses. Indeed, we believe that Berkshire is close to being unique in the quality and diversity of thebusinesses in which it owns either a controlling interest or a minority interest of significance.
Charlie and I cannot promise you results. But we can guarantee that your financial fortunes will move in lockstep with ours
for whatever period of time you elect to be our partner. We have no interest in large salaries or options or other means ofgaining an “edge” over you. We want to make money only when our partners do and in exactly the same proportion.
Moreover, when I do something dumb, I want you to be able to derive some solace from the fact that my financial suffering is
proportional to yours.
3.
Our long-term economic goal (subject to some qualifications mentioned later) is to maximize Berkshire’s average annual rateof gain in intrinsic business value on a per-share basis. We do not measure the economic significance or performance ofBerkshire by its size; we measure by per-share progress. We are certain that the rate of per-share progress will diminish in
the future – a greatly enlarged capital base will see to that. But we will be disappointed if our rate does not exceed that of theaverage large American corporation.
4.
Our preference would be to reach our goal by directly owning a diversified group of businesses that generate cash andconsistently earn above-average returns on capital. Our second choice is to own parts of similar businesses, attained
primarily through purchases of marketable common stocks by our insurance subsidiaries. The price and availability ofbusinesses and the need for insurance capital determine any given year’s capital allocation.
* Copyright © 1996 By Warren E. Buffett
All Rights Reserved

18

5.

6.

7.

In recent years we have made a number of acquisitions. Though there will be dry years, we expect to make many more in thedecades to come, and our hope is that they will be large. If these purchases approach the quality of those we have made in thepast, Berkshire will be well served.
The challenge for us is to generate ideas as rapidly as we generate cash. In this respect, a depressed stock market is likely topresent us with significant advantages. For one thing, it tends to reduce the prices at which entire companies become available
for purchase. Second, a depressed market makes it easier for our insurance companies to buy small pieces of wonderfulbusinesses – including additional pieces of businesses we already own – at attractive prices. And third, some of those same
wonderful businesses are consistent buyers of their own shares, which means that they, and we, gain from the cheaper prices
at which they can buy.
Overall, Berkshire and its long-term shareholders benefit from a sinking stock market much as a regular purchaser of foodbenefits from declining food prices. So when the market plummets – as it will from time to time – neither panic nor mourn.
It’s good news for Berkshire.
Because of our two-pronged approach to business ownership and because of the limitations of conventional accounting,consolidated reported earnings may reveal relatively little about our true economic performance. Charlie and I, both asowners and managers, virtually ignore such consolidated numbers. However, we will also report to you the earnings of eachmajor business we control, numbers we consider of great importance. These figures, along with other information we will
supply about the individual businesses, should generally aid you in making judgments about them.
To state things simply, we try to give you in the annual report the numbers and other information that really matter. Charlie
and I pay a great deal of attention to how well our businesses are doing, and we also work to understand the environment inwhich each business is operating. For example, is one of our businesses enjoying an industry tailwind or is it facing aheadwind? Charlie and I need to know exactly which situation prevails and to adjust our expectations accordingly. We will
also pass along our conclusions to you.
Over time, the large majority of our businesses have exceeded our expectations. But sometimes we have disappointments, andwe will try to be as candid in informing you about those as we are in describing the happier experiences. When we use
unconventional measures to chart our progress – for instance, you will be reading in our annual reports about insurance “float”– we will try to explain these concepts and why we regard them as important. In other words, we believe in telling you how
we think so that you can evaluate not only Berkshire’s businesses but also assess our approach to management and capital
allocation.
Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar,
we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase$1 of earnings that is reportable. This is precisely the choice that often faces us since entire businesses (whose earnings will
be fully reportable) frequently sell for double the pro-rata price of small portions (whose earnings will be largely
unreportable). In aggregate and over time, we expect the unreported earnings to be fully reflected in our intrinsic businessvalue through capital gains.
We have found over time that the undistributed earnings of our investees, in aggregate, have been fully as beneficial toBerkshire as if they had been distributed to us (and therefore had been included in the earnings we officially report). This
pleasant result has occurred because most of our investees are engaged in truly outstanding businesses that can often employ
incremental capital to great advantage, either by putting it to work in their businesses or by repurchasing their shares.
Obviously, every capital decision that our investees have made has not benefitted us as shareholders, but overall we havegarnered far more than a dollar of value for each dollar they have retained. We consequently regard look-through earnings asrealistically portraying our yearly gain from operations.
We use debt sparingly. We will reject interesting opportunities rather than over-leverage our balance sheet. Thisconservatism has penalized our results but it is the only behavior that leaves us comfortable, considering our fiduciary
obligations to policyholders, lenders and the many equity holders who have committed unusually large portions of their net
worth to our care. (As one of the Indianapolis “500” winners said: “To finish first, you must first finish.”)The financial calculus that Charlie and I employ would never permit our trading a good night’s sleep for a shot at a few extra
percentage points of return. I’ve never believed in risking what my family and friends have and need in order to pursue what
they don’t have and don’t need.

19

8.

9.

10.

11.

Besides, Berkshire has access to two low-cost, non-perilous sources of leverage that allow us to safely own far more assets
than our equity capital alone would permit: deferred taxes and “float,” the funds of others that our insurance business holds
because it receives premiums before needing to pay out losses. Both of these funding sources have grown rapidly and now
total about $170 billion.
Better yet, this funding to date has often been cost-free. Deferred tax liabilities bear no interest. And as long as we can breakeven in our insurance underwriting the cost of the float developed from that operation is zero. Neither item, of course, isequity; these are real liabilities. But they are liabilities without covenants or due dates attached to them. In effect, they give us
the benefit of debt – an ability to have more assets working for us – but saddle us with none of its drawbacks.
Of course, there is no guarantee that we can obtain our float in the future at no cost. But we feel our chances of attaining thatgoal are as good as those of anyone in the insurance business. Not only have we reached the goal in the past (despite a numberof important mistakes by your Chairman), our 1996 acquisition of GEICO, materially improved our prospects for getting there
in the future.
In our present configuration we expect additional borrowings to be concentrated in our utilities and railroad businesses, loansthat are non-recourse to Berkshire. Here, we will favor long-term, fixed-rate loans.
A managerial “wish list” will not be filled at shareholder expense. We will not diversify by purchasing entire businesses atcontrol prices that ignore long-term economic consequences to our shareholders. We will only do with your money what wewould do with our own, weighing fully the values you can obtain by diversifying your own portfolios through direct purchasesin the stock market.
Charlie and I are interested only in acquisitions that we believe will raise the per-share intrinsic value of Berkshire’s stock.
The size of our paychecks or our offices will never be related to the size of Berkshire’s balance sheet.
We feel noble intentions should be checked periodically against results. We test the wisdom of retaining earnings by assessing
whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained. To date, this test has been
met. We will continue to apply it on a five-year rolling basis. As our net worth grows, it is more difficult to use retained
earnings wisely.
I should have written the “five-year rolling basis” sentence differently, an error I didn’t realize until I received a question
about this subject at the 2009 annual meeting.
When the stock market has declined sharply over a five-year stretch, our market-price premium to book value has sometimes
shrunk. And when that happens, we fail the test as I improperly formulated it. In fact, we fell far short as early as 1971-75,
well before I wrote this principle in 1983.
The five-year test should be: (1) during the period did our book-value gain exceed the performance of the S&P; and (2) did
our stock consistently sell at a premium to book, meaning that every $1 of retained earnings was always worth more than $1?
If these tests are met, retaining earnings has made sense.
We will issue common stock only when we receive as much in business value as we give. This rule applies to all forms ofissuance – not only mergers or public stock offerings, but stock-for-debt swaps, stock options, and convertible securities aswell. We will not sell small portions of your company – and that is what the issuance of shares amounts to – on a basis
inconsistent with the value of the entire enterprise.
When we sold the Class B shares in 1996, we stated that Berkshire stock was not undervalued – and some people found thatshocking. That reaction was not well-founded. Shock should have registered instead had we issued shares when our stock wasundervalued. Managements that say or imply during a public offering that their stock is undervalued are usually being
economical with the truth or uneconomical with their existing shareholders’ money: Owners unfairly lose if their managers
deliberately sell assets for 80¢ that in fact are worth $1. We didn’t commit that kind of crime in our offering of Class B sharesand we never will. (We did not, however, say at the time of the sale that our stock was overvalued, though many media havereported that we did.)You should be fully aware of one attitude Charlie and I share that hurts our financial performance: Regardless of price, wehave no interest at all in selling any good businesses that Berkshire owns. We are also very reluctant to sell sub-par
businesses as long as we expect them to generate at least some cash and as long as we feel good about their managers andlabor relations. We hope not to repeat the capital-allocation mistakes that led us into such sub-par businesses. And we reactwith great caution to suggestions that our poor businesses can be restored to satisfactory profitability by major capital
expenditures. (The projections will be dazzling and the advocates sincere, but, in the end, major additional investment in aterrible industry usually is about as rewarding as struggling in quicksand.) Nevertheless, gin rummy managerial behavior(discard your least promising business at each turn) is not our style. We would rather have our overall results penalized a bit
than engage in that kind of behavior.

20

12.

13.

We continue to avoid gin rummy behavior. True, we closed our textile business in the mid-1980’s after 20 years of struggling
with it, but only because we felt it was doomed to run never-ending operating losses. We have not, however, given thought toselling operations that would command very fancy prices nor have we dumped our laggards, though we focus hard on curing
the problems that cause them to lag. To clean up some confusion voiced in 2016, we emphasize that the comments here refer
to businesses we control, not to marketable securities.
We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Ourguideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.
Moreover, as a company with a major communications business, it would be inexcusable for us to apply lesser standards ofaccuracy, balance and incisiveness when reporting on ourselves than we would expect our news people to apply whenreporting on others. We also believe candor benefits us as managers: The CEO who misleads others in public may eventually
mislead himself in private.
At Berkshire you will find no “big bath” accounting maneuvers or restructurings nor any “smoothing” of quarterly or annual
results. We will always tell you how many strokes we have taken on each hole and never play around with the scorecard.
When the numbers are a very rough “guesstimate,” as they necessarily must be in insurance reserving, we will try to be bothconsistent and conservative in our approach.
We will be communicating with you in several ways. Through the annual report, I try to give all shareholders as much valuedefining information as can be conveyed in a document kept to reasonable length. We also try to convey a liberal quantity ofcondensed but important information in the quarterly reports we post on the internet, though I don’t write those (one recital ayear is enough). Still another important occasion for communication is our Annual Meeting, at which Charlie and I are
delighted to spend five hours or more answering questions about Berkshire. But there is one way we can’t communicate: on a
one-on-one basis. That isn’t feasible given Berkshire’s many thousands of owners.
In all of our communications, we try to make sure that no single shareholder gets an edge: We do not follow the usual practiceof giving earnings “guidance” or other information of value to analysts or large shareholders. Our goal is to have all of ourowners updated at the same time.
Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good
investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition
ideas are. Therefore we normally will not talk about our investment ideas. This ban extends even to securities we have sold(because we may purchase them again) and to stocks we are incorrectly rumored to be buying. If we deny those reports but
say “no comment” on other occasions, the no-comments become confirmation.
Though we continue to be unwilling to talk about specific stocks, we freely discuss our business and investment philosophy. I
benefitted enormously from the intellectual generosity of Ben Graham, the greatest teacher in the history of finance, and I
believe it appropriate to pass along what I learned from him, even if that creates new and able investment competitors forBerkshire just as Ben’s teachings did for him.

TWO ADDED PRINCIPLES
14.
To the extent possible, we would like each Berkshire shareholder to record a gain or loss in market value during his period ofownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during that holding
period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would
need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire’s stock price at afair level than a high level. Obviously, Charlie and I can’t control Berkshire’s price. But by our policies and communications,
we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational.
Our it’s-as-bad-to-be-overvalued-as-to-be-undervalued approach may disappoint some shareholders. We believe, however,that it affords Berkshire the best prospect of attracting long-term investors who seek to profit from the progress of thecompany rather than from the investment mistakes of their partners.
15.
We regularly compare the gain in Berkshire’s per-share book value to the performance of the S&P 500. Over time, we hope to
outpace this yardstick. Otherwise, why do our investors need us? The measurement, however, has certain shortcomings thatare described in the next section. Moreover, it now is less meaningful on a year-to-year basis than was formerly the case. Thatis because our equity holdings, whose value tends to move with the S&P 500, are a far smaller portion of our net worth thanthey were in earlier years. Additionally, gains in the S&P stocks are counted in full in calculating that index, whereas gains in
Berkshire’s equity holdings are counted at 79% because of the federal tax we incur. We, therefore, expect to outperform the
S&P in lackluster years for the stock market and underperform when the market has a strong year.

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INTRINSIC VALUE
Now let’s focus on a term that I mentioned earlier and that you will encounter in future annual reports.
Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness ofinvestments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of abusiness during its remaining life.
The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather thana precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows arerevised. Two people looking at the same set of facts, moreover – and this would apply even to Charlie and me – will almost inevitably
come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value.
What our annual reports do supply, though, are the facts that we ourselves use to calculate this value.
Meanwhile, we regularly report our per-share book value, an easily calculable number, though one of limited use. The
limitations do not arise from our holdings of marketable securities, which are carried on our books at their current prices. Rather the
inadequacies of book value have to do with the companies we control, whose values as stated on our books may be far different fromtheir intrinsic values.
The disparity can go in either direction. For example, in 1964 we could state with certitude that Berkshire’s per-share bookvalue was $19.46. However, that figure considerably overstated the company’s intrinsic value, since all of the company’s resourceswere tied up in a sub-profitable textile business. Our textile assets had neither going-concern nor liquidation values equal to theircarrying values. Today, however, Berkshire’s situation is reversed: Now, our book value far understates Berkshire’s intrinsic value, apoint true because many of the businesses we control are worth much more than their carrying value.
Inadequate though they are in telling the story, we give you Berkshire’s book-value figures because they today serve as arough, albeit significantly understated, tracking measure for Berkshire’s intrinsic value. In other words, the percentage change in bookvalue in any given year is likely to be reasonably close to that year’s change in intrinsic value.
You can gain some insight into the differences between book value and intrinsic value by looking at one form of investment, acollege education. Think of the education’s cost as its “book value.” If this cost is to be accurate, it should include the earnings thatwere foregone by the student because he chose college rather than a job.
For this exercise, we will ignore the important non-economic benefits of an education and focus strictly on its economic value.
First, we must estimate the earnings that the graduate will receive over his lifetime and subtract from that figure an estimate of what hewould have earned had he lacked his education. That gives us an excess earnings figure, which must then be discounted, at an
appropriate interest rate, back to graduation day. The dollar result equals the intrinsic economic value of the education.
Some graduates will find that the book value of their education exceeds its intrinsic value, which means that whoever paid forthe education didn’t get his money’s worth. In other cases, the intrinsic value of an education will far exceed its book value, a resultthat proves capital was wisely deployed. In all cases, what is clear is that book value is meaningless as an indicator of intrinsic value.
THE MANAGING OF BERKSHIRE
I think it’s appropriate that I conclude with a discussion of Berkshire’s management, today and in the future. As our firstowner-related principle tells you, Charlie and I are the managing partners of Berkshire. But we subcontract all of the heavy lifting inthis business to the managers of our subsidiaries. In fact, we delegate almost to the point of abdication: Though Berkshire has about
377,000 employees, only 26 of these are at headquarters.
Charlie and I mainly attend to capital allocation and the care and feeding of our key managers. Most of these managers arehappiest when they are left alone to run their businesses, and that is customarily just how we leave them. That puts them in charge of
all operating decisions and of dispatching the excess cash they generate to headquarters. By sending it to us, they don’t get diverted by
the various enticements that would come their way were they responsible for deploying the cash their businesses throw off.
Furthermore, Charlie and I are exposed to a much wider range of possibilities for investing these funds than any of our managers could
find in his or her own industry.
Most of our managers are independently wealthy, and it’s therefore up to us to create a climate that encourages them tochoose working with Berkshire over golfing or fishing. This leaves us needing to treat them fairly and in the manner that we would
wish to be treated if our positions were reversed.

22

As for the allocation of capital, that’s an activity both Charlie and I enjoy and in which we have acquired some usefulexperience. In a general sense, grey hair doesn’t hurt on this playing field: You don’t need good hand-eye coordination or well-toned
muscles to push money around (thank heavens). As long as our minds continue to function effectively, Charlie and I can keep on doing
our jobs pretty much as we have in the past.
On my death, Berkshire’s ownership picture will change but not in a disruptive way: None of my stock will have to be sold totake care of the cash bequests I have made or for taxes. Other assets of mine will take care of these requirements. All Berkshire shares
will be left to foundations that will likely receive the stock in roughly equal installments over a dozen or so years.
At my death, the Buffett family will not be involved in managing the business but, as very substantial shareholders, will help
in picking and overseeing the managers who do. Just who those managers will be, of course, depends on the date of my death. But I
can anticipate what the management structure will be: Essentially my job will be split into two parts. One executive will become CEO
and responsible for operations. The responsibility for investments will be given to one or more executives. If the acquisition of new
businesses is in prospect, these executives will cooperate in making the decisions needed, subject, of course, to board approval. We
will continue to have an extraordinarily shareholder-minded board, one whose interests are solidly aligned with yours.
Were we to need the management structure I have just described on an immediate basis, our directors know myrecommendations for both posts. All candidates currently work for or are available to Berkshire and are people in whom I have total
confidence. Our managerial roster has never been stronger.
I will continue to keep the directors posted on the succession issue. Since Berkshire stock will make up virtually my entire
estate and will account for a similar portion of the assets of various foundations for a considerable period after my death, you can be
sure that the directors and I have thought through the succession question carefully and that we are well prepared. You can be equallysure that the principles we have employed to date in running Berkshire will continue to guide the managers who succeed me and that
our unusually strong and well-defined culture will remain intact. As an added assurance that this will be the case, I believe it would be
wise when I am no longer CEO to have a member of the Buffett family serve as the non-paid, non-executive Chairman of the Board.
That decision, however, will be the responsibility of the then Board of Directors.
Lest we end on a morbid note, I also want to assure you that I have never felt better. I love running Berkshire, and if enjoying
life promotes longevity, Methuselah’s record is in jeopardy.
Warren E. Buffett
Chairman

BERKSHIRE HATHAWAY INC.
ACQUISITION CRITERIA
We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:
(1)
(2)
(3)
(4)
(5)
(6)

Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing
units),
Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround”
situations),
Businesses earning good returns on equity while employing little or no debt,
Management in place (we can’t supply it),
Simple businesses (if there’s lots of technology, we won’t understand it),
An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about atransaction when price is unknown).

The larger the company, the greater will be our interest: We would like to make an acquisition in the $5-20 billion range. We
are not interested, however, in receiving suggestions about purchases we might make in the general stock market.
We will not engage in unfriendly takeovers. We can promise complete confidentiality and a very fast answer – customarily
within five minutes – as to whether we’re interested. We prefer to buy for cash, but will consider issuing stock when we receive as
much in intrinsic business value as we give. We don’t participate in auctions.
Charlie and I frequently get approached about acquisitions that don’t come close to meeting our tests: We’ve found that if
you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels. A line from a country song
expresses our feeling about new ventures, turnarounds, or auction-like sales: “When the phone don’t ring, you’ll know it’s me.”23

BERKSHIRE HATHAWAY INC.
“The Bet” (or how your money finds its way to Wall Street) *In this section, you will encounter, early on, the story of an investment bet I made nine years ago and, next, some strong
opinions I have about investing. As a starter, though, I want to briefly describe Long Bets, a unique establishment that played a role inthe bet.
Long Bets was seeded by Amazon’s Jeff Bezos and operates as a non-profit organization that administers just what you’dguess: long-term bets. To participate, “proposers” post a proposition at Longbets.org that will be proved right or wrong at a distantdate. They then wait for a contrary-minded party to take the other side of the bet. When a “doubter” steps forward, each side names acharity that will be the beneficiary if its side wins; parks its wager with Long Bets; and posts a short essay defending its position on theLong Bets website. When the bet is concluded, Long Bets pays off the winning charity.
Here are examples of what you will find on Long Bets’ very interesting site:
In 2002, entrepreneur Mitch Kapor asserted that “By 2029 no computer – or ‘machine intelligence’ – will have passed theTuring Test,” which deals with whether a computer can successfully impersonate a human being. Inventor Ray Kurzweil took the
opposing view. Each backed up his opinion with $10,000. I don’t know who will win this bet, but I will confidently wager that nocomputer will ever replicate Charlie.
That same year, Craig Mundie of Microsoft asserted that pilotless planes would routinely fly passengers by 2030, while Eric
Schmidt of Google argued otherwise. The stakes were $1,000 each. To ease any heartburn Eric might be experiencing from his
outsized exposure, I recently offered to take a piece of his action. He promptly laid off $500 with me. (I like his assumption that I’ll bearound in 2030 to contribute my payment, should we lose.)
Now, to my bet and its history. In Berkshire’s 2005 annual report, I argued that active investment management byprofessionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I
explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if theamateurs simply invested in an unmanaged low-cost index fund. (See pages 114 – 115 for a reprint of the argument as I originallystated it in the 2005 report.)
Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds –wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged
S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I
then sat back and waited expectantly for a parade of fund managers – who could include their own fund as one of the five – to come
forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting
a little of their own money on the line?
What followed was the sound of silence. Though there are thousands of professional investment managers who haveamassed staggering fortunes by touting their stock-selecting prowess, only one man – Ted Seides – stepped up to my challenge. Ted
was a co-manager of Protégé Partners, an asset manager that had raised money from limited partners to form a fund-of-funds – in otherwords, a fund that invests in multiple hedge funds.
I hadn’t known Ted before our wager, but I like him and admire his willingness to put his money where his mouth was. He
has been both straight-forward with me and meticulous in supplying all the data that both he and I have needed to monitor the bet.
For Protégé Partners’ side of our ten-year bet, Ted picked five funds-of-funds whose results were to be averaged andcompared against my Vanguard S&P index fund. The five he selected had invested their money in more than 100 hedge funds, whichmeant that the overall performance of the funds-of-funds would not be distorted by the good or poor results of a single manager.
Each fund-of-funds, of course, operated with a layer of fees that sat above the fees charged by the hedge funds in which it
had invested. In this doubling-up arrangement, the larger fees were levied by the underlying hedge funds; each of the fund-of-funds
imposed an additional fee for its presumed skills in selecting hedge-fund managers.
*

Reproduced from Berkshire Hathaway Inc. 2016 Annual Report.

24

Here are the results for the first nine years of the bet – figures leaving no doubt that Girls Inc. of Omaha, the charitablebeneficiary I designated to get any bet winnings I earned, will be the organization eagerly opening the mail next January.
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
Gain to
Date

Fund ofFunds A

Fund ofFunds B

Fund ofFunds C

Fund ofFunds D

Fund ofFunds E

S&P
Index Fund-16.5%
11.3%
5.9%
-6.3%
3.4%
10.5%
4.7%
1.6%
-2.9%

-22.3%
14.5%
6.8%
-1.3%
9.6%
15.2%
4.0%
2.5%
1.7%

-21.3%
21.4%
13.3%
5.9%
5.7%
8.8%
18.9%
5.4%
-1.4%

-29.3%
16.5%
4.9%
-6.3%
6.2%
14.2%
0.7%
1.4%
2.5%

-30.1%
16.8%
11.9%
-2.8%
9.1%
14.4%
-2.1%
-5.0%
4.4%

-37.0%
26.6%
15.1%
2.1%
16.0%
32.3%
13.6%
1.4%
11.9%

8.7%

28.3%

62.8%

2.9%

7.5%

85.4%

Footnote: Under my agreement with Protégé Partners, the names of these funds-of-funds have never been publicly disclosed.
I, however, see their annual audits.
The compounded annual increase to date for the index fund is 7.1%, which is a return that could easily prove typical for thestock market over time. That’s an important fact: A particularly weak nine years for the market over the lifetime of this bet would haveprobably helped the relative performance of the hedge funds, because many hold large “short” positions. Conversely, nine years of
exceptionally high returns from stocks would have provided a tailwind for index funds.
Instead we operated in what I would call a “neutral” environment. In it, the five funds-of-funds delivered, through 2016, anaverage of only 2.2%, compounded annually. That means $1 million invested in those funds would have gained $220,000. The index
fund would meanwhile have gained $854,000.
Bear in mind that every one of the 100-plus managers of the underlying hedge funds had a huge financial incentive to do his
or her best. Moreover, the five funds-of-funds managers that Ted selected were similarly incentivized to select the best hedge-fundmanagers possible because the five were entitled to performance fees based on the results of the underlying funds.
I’m certain that in almost all cases the managers at both levels were honest and intelligent people. But the results for theirinvestors were dismal – really dismal. And, alas, the huge fixed fees charged by all of the funds and funds-of-funds involved – fees thatwere totally unwarranted by performance – were such that their managers were showered with compensation over the nine years thathave passed. As Gordon Gekko might have put it: “Fees never sleep.”
The underlying hedge-fund managers in our bet received payments from their limited partners that likely averaged a bit
under the prevailing hedge-fund standard of “2 and 20,” meaning a 2% annual fixed fee, payable even when losses are huge, and 20%of profits with no clawback (if good years were followed by bad ones). Under this lopsided arrangement, a hedge fund operator’sability to simply pile up assets under management has made many of these managers extraordinarily rich, even as their investments
have performed poorly.
Still, we’re not through with fees. Remember, there were the fund-of-funds managers to be fed as well. These managers
received an additional fixed amount that was usually set at 1% of assets. Then, despite the terrible overall record of the five
funds-of-funds, some experienced a few good years and collected “performance” fees. Consequently, I estimate that over the nine-year
period roughly 60% – gulp! – of all gains achieved by the five funds-of-funds were diverted to the two levels of managers. That was
their misbegotten reward for accomplishing something far short of what their many hundreds of limited partners could have effortlessly– and with virtually no cost – achieved on their own.
In my opinion, the disappointing results for hedge-fund investors that this bet exposed are almost certain to recur in the
future. I laid out my reasons for that belief in a statement that was posted on the Long Bets website when the bet commenced (and thatis still posted there). Here is what I asserted:
Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500
will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees,
costs and expenses.
A lot of very smart people set out to do better than average in securities markets. Call them active investors.

25

Their opposites, passive investors, will by definition do about average. In aggregate their positions willmore or less approximate those of an index fund. Therefore, the balance of the universe—the active
investors—must do about average as well. However, these investors will incur far greater costs. So, onbalance, their aggregate results after these costs will be worse than those of the passive investors.
Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to theactive investor’s equation. Funds of hedge funds accentuate this cost problem because their fees aresuperimposed on the large fees charged by the hedge funds in which the funds of funds are invested.
A number of smart people are involved in running hedge funds. But to a great extent their efforts are selfneutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average andover time, will do better with a low-cost index fund than with a group of funds of funds.
So that was my argument – and now let me put it into a simple equation. If Group A (active investors) and Group B(do-nothing investors) comprise the total investing universe, and B is destined to achieve average results before costs, so, too, must A.
Whichever group has the lower costs will win. (The academic in me requires me to mention that there is a very minor point – not worth
detailing – that slightly modifies this formulation.) And if Group A has exorbitant costs, its shortfall will be substantial.
There are, of course, some skilled individuals who are highly likely to out-perform the S&P over long stretches. In my
lifetime, though, I’ve identified – early on – only ten or so professionals that I expected would accomplish this feat.
There are no doubt many hundreds of people – perhaps thousands – whom I have never met and whose abilities would equal
those of the people I’ve identified. The job, after all, is not impossible. The problem simply is that the great majority of managers who
attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who
does well. Bill Ruane – a truly wonderful human being and a man whom I identified 60 years ago as almost certain to deliver superior
investment returns over the long haul – said it well: “In investment management, the progression is from the innovators to the imitators
to the swarming incompetents.”
Further complicating the search for the rare high-fee manager who is worth his or her pay is the fact that some investment
professionals, just as some amateurs, will be lucky over short periods. If 1,000 managers make a market prediction at the beginning ofa year, it’s very likely that the calls of at least one will be correct for nine consecutive years. Of course, 1,000 monkeys would be justas likely to produce a seemingly all-wise prophet. But there would remain a difference: The lucky monkey would not find people
standing in line to invest with him.
Finally, there are three connected realities that cause investing success to breed failure. First, a good record quickly attracts atorrent of money. Second, huge sums invariably act as an anchor on investment performance: What is easy with millions, struggles
with billions (sob!). Third, most managers will nevertheless seek new money because of their personal equation – namely, the more
funds they have under management, the more their fees.
These three points are hardly new ground for me: In January 1966, when I was managing $44 million, I wrote my limited
partners: “I feel substantially greater size is more likely to harm future results than to help them. This might not be true for my own
personal results, but it is likely to be true for your results. Therefore, . . . I intend to admit no additional partners to BPL. I have notified
Susie that if we have any more children, it is up to her to find some other partnership for them.”
The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers
who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

26

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
Commission file number 001-14905

BERKSHIRE HATHAWAY INC.
(Exact name of Registrant as specified in its charter)

Delaware47-0813844

State or other jurisdiction ofincorporation or organization(I.R.S. Employer
Identification Number)

3555 Farnam Street, Omaha, Nebraska

68131(Address of principal executive office)(Zip Code)Registrant’s telephone number, including area code (402) 346-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered

Class A common stock, $5.00 Par ValueClass B common stock, $0.0033 Par ValueNew York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í
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, and (2) has been subject to such filing requirements for the past 90
days. Yes Í No ‘
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12months. Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K. ‘
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.: Large accelerated filer Í Accelerated filer ‘
Non-accelerated filer ‘ Smaller reporting company ‘ Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying 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).

Yes ‘ No Í

State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2017: $327,898,000,000*
Indicate number of shares outstanding of each of the Registrant’s classes of common stock:
February 13, 2018—Class A common stock, $5 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 13, 2018—Class B common stock, $0.0033 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

748,745 shares
1,344,332,039 shares

DOCUMENTS INCORPORATED BY REFERENCE
Document

Proxy Statement for Registrant’s Annual Meeting to be held May 5, 2018

Incorporated In

Part III* This aggregate value is computed at the last sale price of the common stock on June 30, 2017. It does not include the value ofClass A common stock (312,306 shares) and Class B common stock (64,664,309 shares) held by Directors and Executive Officersof the Registrant and members of their immediate families, some of whom may not constitute “affiliates” for purpose of the
Securities Exchange Act of 1934.

Table of Contents
Page No.

Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-1
K-22
K-25
K-25
K-29
K-29

Part II
Item 5.

Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases ofEquity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets—
December 31, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Earnings—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income—Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Shareholders’ Equity—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-30
K-31
K-32
K-60
K-61
K-62
K-64
K-65
K-65
K-66
K-67
K-104
K-104
K-104

Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . .
Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Part IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Item 15.

Part I
Item 1.

Business Description

Berkshire Hathaway Inc. (“Berkshire,” “Company” or “Registrant”) is a holding company owning subsidiaries engaged in a
number of diverse business activities. The most important of these are insurance businesses conducted on both a primary basis and areinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses.
Berkshire also owns and operates a large number of other businesses engaged in a variety of activities, as identified herein. Berkshire is
domiciled in the state of Delaware, and its corporate headquarters are located in Omaha, Nebraska.
Berkshire’s operating businesses are managed on an unusually decentralized basis. There are essentially no centralized or
integrated business functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by
Berkshire’s corporate headquarters in the day-to-day business activities of the operating businesses. Berkshire’s corporate senior
management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and theselection of the Chief Executive to head each of the operating businesses. It also is responsible for establishing and monitoring
Berkshire’s corporate governance practices, including, but not limited to, communicating the appropriate “tone at the top” messages to
its employees and associates, monitoring governance efforts, including those at the operating businesses, and participating in the
resolution of governance-related issues as needed.
Berkshire and its consolidated subsidiaries employ approximately 377,000 people worldwide.
Insurance and Reinsurance Businesses
Berkshire’s insurance and reinsurance business activities are conducted through numerous domestic and foreign-based insurance
entities. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks and also reinsure life,
accident and health risks worldwide.
In direct or primary insurance activities, the insurer assumes the risk of loss from persons or organizations that are directly
subject to the risks. Such risks may relate to property, casualty (or liability), life, accident, health, financial or other perils that may
arise from an insurable event. In reinsurance activities, the reinsurer assumes defined portions of risks that other direct insurers orreinsurers have assumed in their own insuring activities.
Reinsurance contracts are normally classified as treaty or facultative contracts. Treaty reinsurance refers to reinsurance coverage
for all or a portion of a specified group or class of risks ceded by the direct insurer, while facultative reinsurance involves coverage of
specific individual underlying risks. Reinsurance contracts are further classified as quota-share or excess. Under quota-share(proportional or pro-rata) reinsurance, the reinsurer shares proportionally in the original premiums and losses of the direct insurer orreinsurer. Excess (or non-proportional) reinsurance provides for the indemnification of the direct insurer or reinsurer for all or a portionof the loss in excess of an agreed upon amount or “retention.” Both quota-share and excess reinsurance contracts may provide foraggregate limits of indemnification.
Insurance and reinsurance are generally subject to regulatory oversight throughout the world. Except for regulatory
considerations, there are virtually no barriers to entry into the insurance and reinsurance industry. Competitors may be domestic or
foreign, as well as licensed or unlicensed. The number of competitors within the industry is not known. Insurers and reinsurers compete
on the basis of reliability, financial strength and stability, financial ratings, underwriting consistency, service, business ethics, price,performance, capacity, policy terms and coverage conditions.
Insurers based in the United States (“U.S.”) are subject to regulation by their states of domicile and by those states in which they
are licensed to write policies on an admitted basis. The primary focus of regulation is to assure that insurers are financially solvent andthat policyholder interests are otherwise protected. States establish minimum capital levels for insurance companies and establish
guidelines for permissible business and investment activities. States have the authority to suspend or revoke a company’s authority to
do business as conditions warrant. States regulate the payment of dividends by insurance companies to their shareholders and othertransactions with affiliates. Dividends, capital distributions and other transactions of extraordinary amounts are subject to priorregulatory approval.
Insurers may market, sell and service insurance policies in the states where they are licensed. These insurers are referred to asadmitted insurers. Admitted insurers are generally required to obtain regulatory approval of their policy forms and premium rates.
Non-admitted insurance markets have developed to provide insurance that is otherwise unavailable through admitted insurers.
Non-admitted insurance, often referred to as “excess and surplus” lines, is procured by either state-licensed surplus lines brokers whoplace risks with insurers not licensed in that state or by the insured party’s direct procurement from non-admitted insurers.
Non-admitted insurance is subject to considerably less regulation with respect to policy rates and forms. Reinsurers are normally not
required to obtain regulatory approval of premium rates or reinsurance contracts.

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The insurance regulators of every state participate in the National Association of Insurance Commissioners (“NAIC”). The NAIC
adopts forms, instructions and accounting procedures for use by U.S. insurers and reinsurers in preparing and filing annual statutoryfinancial statements. However, an insurer’s state of domicile has ultimate authority over these matters. In addition to its activities
relating to the annual statement, the NAIC develops or adopts statutory accounting principles, model laws, regulations and programs
for use by its members. Such matters deal with regulatory oversight of solvency, risk management, compliance with financial
regulation standards and risk-based capital reporting requirements.
Berkshire’s insurance companies maintain capital strength at exceptionally high levels, which differentiates them from theircompetitors. Collectively, the combined statutory surplus of Berkshire’s U.S. based insurers was approximately $170 billion at
December 31, 2017. Berkshire’s major insurance subsidiaries are rated AA+ by Standard & Poor’s and A++ (superior) by A.M. Best
with respect to their financial condition and claims paying ability.
The Terrorism Risk Insurance Act of 2002 established within the Department of the Treasury a Terrorism Insurance Program(“Program”) for commercial property and casualty insurers by providing federal reinsurance of insured terrorism losses. The Program
currently extends to December 31, 2020 through other Acts, most recently the Terrorism Risk Insurance Program Reauthorization Act
of 2015 (the “2015 TRIA Reauthorization”). Hereinafter these Acts are collectively referred to as TRIA. Under TRIA, the Departmentof the Treasury is charged with certifying “acts of terrorism.” During 2018, coverage under TRIA will occur if the industry insured loss
for certified events occurring during the calendar year exceeds $160 million. Under the 2015 TRIA Reauthorization, the level of
insured losses for certified events occurring during the calendar year required to trigger coverage under TRIA will increase annually by$20 million per year until the level of insured losses required to trigger coverage reaches $200 million in 2020. To be eligible forfederal reinsurance, insurers must make available insurance coverage for acts of terrorism, by providing policyholders with clear andconspicuous notice of the amount of premium that will be charged for this coverage and of the federal share of any insured losses
resulting from any act of terrorism. Assumed reinsurance is specifically excluded from TRIA participation. TRIA currently also
excludes certain forms of direct insurance (such as personal and commercial auto, burglary, theft, surety and certain professional
liability lines). Reinsurers are not required to offer terrorism coverage and are not eligible for federal reinsurance of terrorism losses.
During 2018, in the event of a certified act of terrorism, the federal government will reimburse insurers (conditioned on theirsatisfaction of policyholder notification requirements) for 82% of their insured losses in excess of an insurance group’s deductible.
Under the 2015 TRIA Reauthorization, the federal government’s reimbursement obligation will be reduced annually by 1% per year
until the level of reimbursement is reduced to 80% in 2020. Under the Program, the deductible is 20% of the aggregate direct subject
earned premium for relevant commercial lines of business in the immediately preceding calendar year. The aggregate deductible in2018 for Berkshire’s insurance group is expected to approximate $1.1 billion. There is also an aggregate limit of $100 billion on theamount of the federal government coverage for each TRIA year.
Regulation of the insurance industry outside of the United States is subject to the laws and regulations of each country in which
an insurer has operations or writes premiums. Some jurisdictions impose comprehensive regulatory requirements on insurance
businesses, such as in the United Kingdom, where insurers are subject to regulation by the Prudential Regulation Authority and the
Financial Conduct Authority and in Germany where insurers are subject to regulation by the Federal Financial Supervisory Authority(BaFin). Other jurisdictions may impose fewer requirements. In certain foreign countries, reinsurers are also required to be licensed bygovernmental authorities. These licenses may be subject to modification, suspension or revocation dependent on such factors as
amount and types of insurance liabilities and minimum capital and solvency tests. The violation of regulatory requirements may resultin fines, censures and/or criminal sanctions in various jurisdictions.
Berkshire’s insurance underwriting operations include the following groups: (1) GEICO, (2) Berkshire Hathaway ReinsuranceGroup and (3) Berkshire Hathaway Primary Group. Except for retroactive reinsurance and periodic payment annuity products thatgenerate significant amounts of up-front premiums along with estimated claims expected to be paid over very long periods of time(creating “float,” see Investments section below), Berkshire expects to achieve a net underwriting profit over time and to reject
inadequately priced risks. Underwriting profit is defined as earned premiums less associated incurred losses, loss adjustment expenses
and underwriting and policy acquisition expenses. Underwriting profit does not include investment income earned from investments.
Berkshire’s insurance businesses employ approximately 47,000 people. Additional information related to each of Berkshire’s
underwriting groups follows.
GEICO—GEICO is headquartered in Chevy Chase, Maryland and its insurance subsidiaries consist of: Government Employees
Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, GEICO Casualty Company, GEICO Advantage
Insurance Company, GEICO Choice Insurance Company, GEICO Secure Insurance Company, GEICO County Mutual Insurance
Company and GEICO Marine Insurance Company. These companies primarily offer private passenger automobile insurance toindividuals in all 50 states and the District of Columbia. In addition, GEICO insures motorcycles, all-terrain vehicles, recreational
vehicles, boats and small commercial fleets and acts as an agent for other insurers who offer homeowners, renters, boat, life and identityK-2

management insurance to individuals who desire insurance coverages other than those offered by GEICO. GEICO markets its policies
primarily through direct response methods in which applications for insurance are submitted directly to the companies via the Internet
or by telephone.
The automobile insurance business is highly competitive in the areas of price and service. Some insurance companies may
exacerbate price competition by selling their products for a period of time at less than adequate rates. GEICO will not knowingly
follow that strategy. GEICO competes for private passenger automobile insurance customers in the preferred, standard andnon-standard risk markets with other companies that sell directly to the customer as well as with companies that use agency sales
forces, including State Farm, Allstate (including Esurance), Progressive and USAA. As a result of an aggressive advertising campaign
and competitive rates, voluntary policies-in-force have increased about 41% over the past five years. According to most recently
published A.M. Best data for 2016, the five largest automobile insurers had a combined market share in 2016 of approximately 55%,
with GEICO’s market share being second largest at approximately 11.9%. Since the publication of that data, management estimatesthat GEICO’s current market share has grown to approximately 12.8%. Seasonal variations in GEICO’s insurance business are notsignificant. However, extraordinary weather conditions or other factors may have a significant effect upon the frequency or severity of
automobile claims.
Private passenger auto insurance is strictly regulated by state insurance departments. As a result, it is difficult for insurancecompanies to differentiate their products. Competition for private passenger automobile insurance, which is substantial, tends to focus
on price and level of customer service provided. GEICO’s cost-efficient direct response marketing methods and emphasis on customer
satisfaction enable it to offer competitive rates and value to its customers. GEICO primarily uses its own claims staff to manage andsettle claims. The name and reputation of GEICO is a material asset and management protects it and other service marks throughappropriate registrations.
Berkshire Hathaway Reinsurance Group—Berkshire’s combined global reinsurance business, referred to as the Berkshire
Hathaway Reinsurance Group (“BHRG”), offers a wide range of coverages on property, casualty, life and health risks to insurers andreinsurers worldwide. Reinsurance business is written through National Indemnity Company (“NICO”), domiciled in Nebraska, its
subsidiaries and various other insurance subsidiaries wholly owned by Berkshire (collectively, the “NICO Group”) and General
Reinsurance Corporation (“GRC”), domiciled in Delaware, and its subsidiaries (collectively the “General Re Group”). BHRG’s
underwriting operations in the U.S. are headquartered in Stamford, Connecticut and it also conducts business activities globally in 23
countries.
The type and volume of business written is dependent on market conditions, including prevailing premium rates and coverageterms. The level of underwriting activities often fluctuates significantly from year to year depending on the perceived level of priceadequacy in specific insurance and reinsurance markets as well as from the timing of particularly large reinsurance transactions.
Property/casualty
The NICO Group offers traditional property/casualty reinsurance on both an excess-of-loss and a quota-share basis, catastrophe
excess-of-loss treaty and facultative reinsurance, and primary insurance on an excess-of-loss basis for large or unusual risks for clientsworldwide. The NICO Group periodically participates in underwriting placements with major brokers in the London Market throughBerkshire Hathaway Insurance International, Ltd., based in Great Britain. Business is written through intermediary brokers or directlywith the insured or reinsured. NICO also occasionally writes retroactive reinsurance contracts, which cover past loss events arisingfrom property and casualty contracts written by ceding insurers and reinsurers.
The type and volume of business written by the NICO Group may vary significantly from period to period resulting fromchanges in perceived premium rate adequacy and from unique or large transactions. A significant portion of NICO Group’s annual
reinsurance premium volume currently derives from a 10-year, 20% quota-share agreement with Insurance Australia Group Limited(“IAG”) that became effective July 1, 2015. IAG is a multi-line insurer in Australia, New Zealand and other Asia Pacific countries.
The General Re Group conducts a global property and casualty reinsurance business. Contracts are written on both a quota-shareand excess basis for multiple lines of business. Contracts are primarily in the form of treaties, and to a lesser degree, on a facultativebasis.
General Re Group’s business in North America is primarily conducted through GRC, which is licensed in the District ofColumbia and all states, except Hawaii, where it is an accredited reinsurer. Operations in North America are conducted from its
headquarters in Stamford, Connecticut and through 13 branch offices in the U.S. and Canada. Reinsurance activities are primarily
marketed directly to clients without involving a broker or intermediary.

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In North America, the General Re Group also includes General Star National Insurance Company, General Star Indemnity
Company and Genesis Insurance Company, which underwrite a broad array of specialty and surplus lines and property, casualty andprofessional liability coverages through a select group of wholesale brokers, manage general underwriters and program administrators,
and offer solutions for the unique needs of public entity, commercial and captive customers.
General Re Group’s international reinsurance business is conducted on a direct basis through General Reinsurance AG(“GRAG”) and through several other subsidiaries and branches in 17 countries. International business is also written through brokers,
primarily via Faraday, a wholly-owned subsidiary. Faraday owns the managing agent of Syndicate 435 at Lloyd’s and provides
capacity and participates in 100% of the results of Syndicate 435.
Retroactive reinsurance
Retroactive reinsurance contracts indemnify ceding companies against the adverse development of claims arising from loss
events that have already occurred under property and casualty policies issued in prior years. Coverages under such contracts areprovided on an excess basis (above a stated retention) or for losses payable immediately after the inception of the contract. Contracts
are normally subject to aggregate limits of indemnification and are occasionally exceptionally large in amount. Significant amounts ofasbestos, environmental and latent injury claims may arise under these contracts.
For instance, in January 2017, NICO entered into a retroactive reinsurance agreement with various subsidiaries of American
International Group, Inc. (collectively, “AIG”). Under the agreement, NICO agreed to indemnify AIG for 80% of up to $25 billion inexcess of $25 billion retained by AIG, of losses and allocated loss adjustment expenses with respect to certain commercial insurance
loss events occurring in years prior to 2016.
In 2014, NICO entered into a reinsurance contract with Liberty Mutual Insurance Company (“LMIC”). Under the agreement,
NICO reinsures substantially all of LMIC’s unpaid losses and allocated loss adjustment expense liabilities related to (a) asbestos andenvironmental claims from policies incepting prior to January 1, 2005, and (b) workers’ compensation claims occurrences arising prior
to January 1, 2014, subject to an aggregate retention of approximately $12.5 billion and subject to an aggregate limit of $6.5 billion.
The concept of time-value-of-money is an important element in establishing retroactive reinsurance contract prices and terms,
since the payment of losses are often expected to occur over decades. Expected ultimate losses payable under these policies arenormally expected to exceed premiums, thus producing underwriting losses. This business is accepted, in part, because of the large
amounts of policyholder funds generated for investment, the economic benefit of which will be reflected through investment results infuture periods.
Life/health
The General Re Group also conducts a global life and health reinsurance business. In the U.S. and internationally, the General Re
Group writes life, disability, supplemental health, critical illness and long-term care coverages. The life/health business is marketed ona direct basis. In 2017, approximately 33% of life/health net premiums were written in the United States, 23% in Western Europe andthe remaining 44% throughout the rest of the world.
Additionally, Berkshire Hathaway Life Insurance Company of Nebraska (“BHLN”), a subsidiary of NICO, writes reinsurance
covering various forms of traditional life insurance exposures. BHLN and its affiliates have also periodically reinsured certain
guaranteed minimum death, income, and similar benefit coverages on closed-blocks of variable annuity reinsurance contracts.
Periodic payment annuity
BHLN writes periodic payment annuity insurance policies and reinsures existing annuity-like obligations. Under these policies,
BHLN receives upfront premiums and agrees in the future to make periodic payments that often extend for decades. These policies,
generally relate to the settlement of underlying personal injury or workers’ compensation cases of other insurers, and are known as
structured settlements. Similar to retroactive reinsurance contracts, time-value-of-money concepts are an important factor inestablishing such premiums and underwriting losses are expected from the periodic accretion of time-value discounted liabilities.
Berkshire Hathaway Primary Group—The Berkshire Hathaway Primary Group (“BH Primary”) is a collection of
independently managed primary insurers that provide a wide variety of insurance coverages to policyholders located principally in the
United States. These various operations are discussed below.
NICO and certain affiliates (“NICO Primary”) underwrite motor vehicle and general liability insurance to commercial enterprises
on both an admitted and excess and surplus basis. This business is written nationwide primarily through insurance agents and brokers
and is based in Omaha, Nebraska.

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The “Berkshire Hathaway Homestate Companies” (“BHHC”) is a group of insurers offering workers’ compensation, commercial
auto and commercial property coverages. BHHC has developed a national reach, with the ability to provide first-dollar and small tolarge deductible workers’ compensation coverage to employers in all states, except those where coverage is available only throughstate-operated workers’ compensation funds. BHHC serves a diverse client base. The BHHC business is generated primarily throughindependent agents and brokers.
Berkshire Hathaway Specialty Insurance (“BH Specialty”) was formed in April 2013. BH Specialty provides primary and excess
commercial property, casualty, healthcare professional liability, executive and professional lines, surety and travel insurance and otherinsurance. BH Specialty writes business on both an excess and surplus lines basis and an admitted basis in the U.S., and on a locallyadmitted basis outside the U.S. BH Specialty is based in Boston, Massachusetts, with regional offices currently in several cities in the
U.S. and international offices in Australia, New Zealand, Hong Kong, Singapore, Canada, Germany, United Kingdom and Macau. BH
Specialty currently intends to further expand its operations. BH Specialty writes business through wholesale and retail insurance
brokers, as well as managing general agents.
MedPro Group (“MedPro”) is a national leader in offering customized healthcare liability insurance, claims, patient safety andrisk solutions to physicians, surgeons, dentists and other healthcare professionals, as well as hospitals, senior care and other healthcare
facilities. MedPro has provided insurance coverage to protect healthcare providers against losses since 1899. Its insurance policies are
distributed primarily through a nationwide network of appointed agents and brokers. MedPro recently began offering coverage options
to healthcare providers in the United Kingdom, France and Singapore, as well as insurance and reinsurance options related to student
health insurance programs.
U.S. Investment Corporation (“USIC”) and its subsidiaries are specialty insurers that underwrite commercial, professional andpersonal lines insurance on an admitted and excess and surplus basis. Policies are marketed in all 50 states and the District of Columbia
through wholesale and retail insurance agents. USIC companies also underwrite and market a wide variety of specialty insurance
products.
Applied Underwriters, Inc. (“Applied”) is a provider of payroll and insurance services to small and mid-sized employers.
Applied, through its subsidiaries principally markets a product that bundles workers’ compensation and other employment related
insurance coverages and business services into a seamless package that is designed to remove the burden of administrative andregulatory requirements faced by small to mid-sized employers.
The Berkshire Hathaway GUARD Insurance Companies provide commercial property and casualty insurance coverage to small
and mid-sized businesses and are based in Wilkes-Barre, Pennsylvania. Policies are offered through independent agents. Central States
Indemnity Company of Omaha, based in Omaha, Nebraska, primarily writes Medicare Supplement insurance and credit insurance.
Investments of insurance businesses—Berkshire’s insurance subsidiaries hold significant levels of invested assets. Invested
assets derive from shareholder capital as well as funds provided from policyholders through insurance and reinsurance business(“float”). Float is the approximate amount of net policyholder funds generated through underwriting activities that is available forinvestment. The major components of float are unpaid losses and loss adjustment expenses, life, annuity and health benefit liabilities,
unearned premiums and other policyholder liabilities less premium and reinsurance receivables, deferred policy acquisition costs anddeferred charges on reinsurance contracts. On a consolidated basis, float has grown from approximately $70 billion at the end of 2011
to approximately $114 billion at the end of 2017, primarily through internal growth. From 2013 through 2016, Berkshire’s cost of float
was negative, as its insurance businesses produced net underwriting gains. The cost of average float was approximately 3% in 2017,
primarily attributable to sizable catastrophe losses and foreign currency exchange rate losses relating to non-U.S. Dollar denominatedreinsurance liabilities.
Investments of insurance subsidiaries include a very large portfolio of publicly-traded equity securities, which are concentrated
in relatively few issuers, as well as fixed maturity securities and cash and short-term investments. Investment portfolios are primarily
managed by Berkshire’s corporate senior management group. Generally, there are no targeted allocations by investment type or
attempts to match investment asset and insurance liability durations. However, investment portfolios have historically included a muchgreater proportion of equity securities than is customary in the insurance industry.
Railroad Business—Burlington Northern Santa Fe
Burlington Northern Santa Fe, LLC (“BNSF”) is based in Fort Worth, Texas, and through BNSF Railway Company operates oneof the largest railroad systems in North America. BNSF had approximately 41,000 employees at the end of 2017.

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In serving the Midwest, Pacific Northwest, Western, Southwestern and Southeastern regions and ports of the United States,
BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Over
half of freight revenues are covered by contractual agreements of varying durations, while the balance is subject to common carrier
published prices or quotations offered by BNSF. BNSF’s financial performance is influenced by, among other things, general andindustry economic conditions at the international, national and regional levels. BNSF’s primary routes, including trackage rights, allow
it to access major cities and ports in the western and southern United States as well as parts of Canada and Mexico. In addition to major
cities and ports, BNSF efficiently serves many smaller markets by working closely with approximately 200 shortline railroads. BNSF
has also entered into marketing agreements with other rail carriers, expanding the marketing reach for each railroad and theircustomers. For the year ending December 31, 2017, approximately 35% of freight revenues were derived from consumer products,
25% from industrial products, 21% from agricultural products and 19% from coal.
Regulatory Matters
BNSF is subject to federal, state and local laws and regulations generally applicable to all of its businesses. Rail operations are
subject to the regulatory jurisdiction of the Surface Transportation Board (“STB”) of the United States Department of Transportation(“DOT”), the Federal Railroad Administration of the DOT, the Occupational Safety and Health Administration (“OSHA”), as well asother federal and state regulatory agencies and Canadian regulatory agencies for operations in Canada. The STB has jurisdiction overdisputes and complaints involving certain rates, routes and services, the sale or abandonment of rail lines, applications for line
extensions and construction, and the merger with or acquisition of control of rail common carriers. The outcome of STB proceedings
can affect the profitability of BNSF’s business.
The DOT and OSHA have jurisdiction under several federal statutes over a number of safety and health aspects of rail
operations, including the transportation of hazardous materials. State agencies regulate some aspects of rail operations with respect tohealth and safety in areas not otherwise preempted by federal law. BNSF Railway is required to transport these materials to the extent
of its common carrier obligation.
Environmental Matters
BNSF’s rail operations, as well as those of its competitors, are also subject to extensive federal, state and local environmental
regulation covering discharges to water, air emissions, toxic substances and the generation, handling, storage, transportation anddisposal of waste and hazardous materials. Such regulations effectively increase the costs and liabilities associated with rail operations.
Environmental risks are also inherent in rail operations, which frequently involve transporting chemicals and other hazardous
materials.
Many of BNSF’s land holdings are or were used for industrial or transportation-related purposes or leased to commercial orindustrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF is subject to, and will fromtime to time continue to be subject to, environmental cleanup and enforcement actions. In particular, the federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the Superfund law, generally imposes joint
and several liabilities for the cleanup and enforcement costs on current and former owners and operators of a site, without regard tofault or the legality of the original conduct. Accordingly, BNSF may be responsible under CERCLA and other federal and state statutes
for all or part of the costs to clean up sites at which certain substances may have been released by BNSF, its current lessees, former
owners or lessees of properties, or other third parties. BNSF may also be subject to claims by third parties for investigation, cleanup,
restoration or other environmental costs under environmental statutes or common law with respect to properties they own that havebeen impacted by BNSF operations.
Competition
The business environment in which BNSF operates is highly competitive. Depending on the specific market, deregulated motor
carriers and other railroads, as well as river barges, ships and pipelines in certain markets, may exert pressure on price and service
levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty
mileage continues to affect the market for non-bulk, time-sensitive freight. The potential expansion of longer combination vehicles
could further encroach upon markets traditionally served by railroads. In order to remain competitive, BNSF and other railroads seek todevelop and implement operating efficiencies to improve productivity.
As railroads streamline, rationalize and otherwise enhance their franchises, competition among rail carriers intensifies. BNSF’s
primary rail competitor in the Western region of the United States is the Union Pacific Railroad Company. Other Class I railroads andnumerous regional railroads and motor carriers also operate in parts of the same territories served by BNSF. Based on weekly reportingby the Association of American Railroads, BNSF’s share of the western United States rail traffic in 2017 was approximately 50.9%.

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Utilities and Energy Businesses—Berkshire Hathaway Energy
Berkshire currently owns 90.2% of the outstanding common stock of Berkshire Hathaway Energy Company (“BHE”). BHE is a
global energy company with subsidiaries that generate, transmit, store, distribute and supply energy. BHE’s locally managed
businesses are organized as separate operating units. BHE’s domestic regulated energy interests are comprised of four regulated utility
companies serving approximately 4.9 million retail customers, two interstate natural gas pipeline companies with approximately
16,400 miles of pipeline and a design capacity of approximately 8.1 billion cubic feet of natural gas per day and ownership interests inelectricity transmission businesses. BHE’s Great Britain electricity distribution subsidiaries serve about 3.9 million electricity
end-users and its electricity transmission-only business in Alberta, Canada serves approximately 85% of Alberta, Canada’s population.
BHE’s interests also include a diversified portfolio of independent power projects, the second-largest residential real estate brokeragefirm in the United States, and one of the largest residential real estate brokerage franchise networks in the United States. BHE employs
approximately 23,000 people in connection with its various operations.
General Matters
PacifiCorp is a regulated electric utility company headquartered in Oregon, serving electric customers in portions of Utah,
Oregon, Wyoming, Washington, Idaho and California. The combined service territory’s diverse regional economy ranges from rural,agricultural and mining areas to urban, manufacturing and government service centers. No single segment of the economy dominates
the combined service territory, which helps mitigate PacifiCorp’s exposure to economic fluctuations. In addition to retail sales(electricity sold to end-use customers), PacifiCorp sells electricity on a wholesale basis to other electricity retailers and wholesalers.
MidAmerican Energy Company (“MEC”) is a regulated electric and natural gas utility company headquartered in Iowa, serving
electric and natural gas customers primarily in Iowa and also in portions of Illinois, South Dakota and Nebraska. MEC has a diverse
retail customer base consisting of urban and rural residential customers and a variety of commercial and industrial customers. In
addition to retail sales and natural gas transportation, MEC sells electricity principally to markets operated by regional transmission
organizations and natural gas on a wholesale basis.
NV Energy, Inc. (“NV Energy”), acquired by BHE on December 19, 2013, is an energy holding company headquartered in
Nevada, primarily consisting of two regulated utility subsidiaries, Nevada Power Company (“Nevada Power”) and Sierra PacificPower Company (“Sierra Pacific”) (collectively, the “Nevada Utilities”). Nevada Power serves retail electric customers in southern
Nevada and Sierra Pacific serves retail electric and natural gas customers in northern Nevada. The Nevada Utilities’ combined service
territory’s economy includes gaming, mining, recreation, warehousing, manufacturing and governmental services. In addition to retailsales and natural gas transportation, the Nevada Utilities sell electricity and natural gas on a wholesale basis.
As vertically integrated utilities, BHE’s domestic utilities own approximately 27,500 net megawatts of generation capacity inoperation and under construction. There are seasonal variations in these businesses that are principally related to the use of electricity
for air conditioning and natural gas for heating. Typically, regulated electric revenues are higher in the summer months, whileregulated natural gas revenues are higher in the winter months.
The Great Britain distribution companies consist of Northern Powergrid (Northeast) Limited and Northern Powergrid(Yorkshire) plc, which own a substantial electricity distribution network that delivers electricity to end-users in northeast England in anarea covering approximately 10,000 square miles. The distribution companies primarily charge supply companies regulated tariffs forthe use of their distribution systems.
BHE acquired AltaLink L.P. (“AltaLink”) on December 1, 2014. AltaLink is a regulated electric transmission-only utility
company headquartered in Calgary, Alberta. AltaLink connects generation plants to major load centers, cities and large industrial
plants throughout its 87,000 square mile service territory.
The natural gas pipelines consist of Northern Natural Gas Company (“Northern Natural”) and Kern River Gas Transmission
Company (“Kern River”). Northern Natural, based in Nebraska, owns the largest interstate natural gas pipeline system in the UnitedStates, as measured by pipeline miles, reaching from west Texas to Michigan’s Upper Peninsula. Northern Natural’s pipeline system
consists of approximately 14,700 miles of natural gas pipelines. Northern Natural’s extensive pipeline system, which is interconnectedwith many interstate and intrastate pipelines in the national grid system, has access to supplies from multiple major supply basins andprovides transportation services to utilities and numerous other customers. Northern Natural also operates three underground natural
gas storage facilities and two liquefied natural gas storage peaking units. Northern Natural’s pipeline system experiences significant
seasonal swings in demand and revenue, with the highest demand typically occurring during the months of November through March.

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Kern River, based in Utah, owns an interstate natural gas pipeline system that consists of approximately 1,700 miles and extends
from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River transports natural gas forelectric and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electric generatingcompanies, energy marketing and trading companies, and financial institutions.
BHE Renewables is based in Iowa and owns interests in independent power projects having approximately 4,300 net megawattsof generation capacity that are in service or under construction in California, Illinois, Texas, Nebraska, New York, Arizona, Minnesota,
Kansas, Hawaii and the Philippines. These independent power projects sell power generated primarily from solar, wind, geothermaland hydro sources under long-term contracts. Additionally, BHE Renewables has invested approximately $1 billion in seven windprojects sponsored by third parties, commonly referred to as tax equity investments.
Regulatory Matters
PacifiCorp, MEC and the Nevada Utilities are subject to comprehensive regulation by various federal, state and local agencies.
The Federal Energy Regulatory Commission (“FERC”) is an independent agency with broad authority to implement provisions of theFederal Power Act, the Natural Gas Act, the Energy Policy Act of 2005 and other federal statutes. The FERC regulates rates forwholesale sales of electricity; transmission of electricity, including pricing and regional planning for the expansion of transmission
systems; electric system reliability; utility holding companies; accounting and records retention; securities issuances; construction andoperation of hydroelectric facilities; and other matters. The FERC also has the enforcement authority to assess civil penalties of up to$1.2 million per day per violation of rules, regulations and orders issued under the Federal Power Act. MEC is also subject toregulation by the Nuclear Regulatory Commission pursuant to the Atomic Energy Act of 1954, as amended, with respect to its 25%
ownership of the Quad Cities Nuclear Station.
With certain limited exceptions, BHE’s domestic utilities have an exclusive right to serve retail customers within their service
territories and, in turn, have an obligation to provide service to those customers. In some jurisdictions, certain classes of customers may
choose to purchase all or a portion of their energy from alternative energy suppliers, and in some jurisdictions retail customers cangenerate all or a portion of their own energy. Historically, state regulatory commissions have established retail electric and natural gas
rates on a cost-of-service basis, which are designed to allow a utility an opportunity to recover what each state regulatory commission
deems to be the utility’s reasonable costs of providing services, including a fair opportunity to earn a reasonable return on its
investments based on its cost of debt and equity. The retail electric rates of PacifiCorp, MEC and the Nevada Utilities are generally
based on the cost of providing traditional bundled services, including generation, transmission and distribution services.
Northern Powergrid (Northeast) and Northern Powergrid (Yorkshire) each charge fees for the use of their distribution systems
that are controlled by a formula prescribed by the British electricity regulatory body, the Gas and Electricity Markets Authority. The
current eight-year price control period runs from April 1, 2015 through March 31, 2023.
AltaLink is regulated by the Alberta Utilities Commission (“AUC”), pursuant to the Electric Utilities Act (Alberta), the Public
Utilities Act (Alberta), the Alberta Utilities Commission Act (Alberta) and the Hydro and Electric Energy Act (Alberta). The AUC isan independent quasi-judicial agency with broad authority that may impact many of AltaLink’s activities, including its tariffs, rates,
construction, operations and financing. Under the Electric Utilities Act, AltaLink prepares and files applications with the AUC for
approval of tariffs to be paid by the Alberta Electric System Operator (“AESO”) for the use of its transmission facilities, and the terms
and conditions governing the use of those facilities. The AESO is the independent system operator in Alberta, Canada that oversees
Alberta’s integrated electrical system (“AIES”) and wholesale electricity market. The AESO is responsible for directing the safe,
reliable and economic operation of the AIES, including long-term transmission system planning.
The natural gas pipelines are subject to regulation by various federal, state and local agencies. The natural gas pipeline andstorage operations of Northern Natural and Kern River are regulated by the FERC pursuant to the Natural Gas Act and the Natural Gas
Policy Act of 1978. Under this authority, the FERC regulates, among other items, (a) rates, charges, terms and conditions of serviceand (b) the construction and operation of interstate pipelines, storage and related facilities, including the extension, expansion or
abandonment of such facilities. Interstate natural gas pipeline companies are also subject to regulations administered by the Office ofPipeline Safety within the Pipeline and Hazardous Materials Safety Administration, an agency within the DOT. Federal pipeline safety
regulations are issued pursuant to the Natural Gas Pipeline Safety Act of 1968, as amended, which establishes safety requirements inthe design, construction, operation and maintenance of interstate natural gas pipeline facilities.

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Environmental Matters
BHE and its energy businesses are subject to federal, state, local and foreign laws and regulations regarding air and water quality,
renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous andsolid waste disposal, protected species and other environmental matters that have the potential to impact current and future operations.
In addition to imposing continuing compliance obligations, these laws and regulations, such as the Federal Clean Air Act, provide
regulators with the authority to levy substantial penalties for noncompliance, including fines, injunctive relief and other sanctions.
The Federal Clean Air Act, as well as state laws and regulations impacting air emissions, provides a framework for protecting
and improving the nation’s air quality and controlling sources of air emissions. These laws and regulations continue to be promulgatedand implemented and will impact the operation of BHE’s generating facilities and require them to reduce emissions at those facilities
to comply with the requirements.
Renewable portfolio standards have been established by certain state governments and generally require electricity providers to
obtain a minimum percentage of their power from renewable energy resources by a certain date. Utah, Oregon, Washington, California,
Iowa and Nevada have adopted renewable portfolio standards. In addition, the potential adoption of state or federal clean energy
standards, which include low-carbon, non-carbon and renewable electricity generating resources, may also impact electricity generatorsand natural gas providers.
In December 2015, an international agreement was negotiated by 195 nations to create a universal framework for coordinatedaction on climate change in what is referred to as the Paris Agreement. The Paris Agreement reaffirms the goal of limiting global
temperature increase well below 2 degrees Celsius, while urging efforts to limit the increase to 1.5 degrees Celsius; establishescommitments by all parties to make nationally determined contributions and pursue domestic measures aimed at achieving thecommitments; commits all countries to submit emissions inventories and report regularly on their emissions and progress made in
implementing and achieving their nationally determined commitments; and commits all countries to submit new commitments every
five years, with the expectation that the commitments will get more aggressive. In the context of the Paris Agreement, the UnitedStates agreed to reduce greenhouse gas emissions 26% to 28% by 2025 from 2005 levels. The Paris Agreement formally entered into
force November 4, 2016.
Supporting the United States’ commitment under the Paris Agreement was the Clean Power Plan, which was finalized by the
U.S. Environmental Protection Agency (“EPA”) in August 2015. The Clean Power Plan established the Best System of Emission
Reduction for fossil-fueled power plants to include: (a) heat rate improvements; (b) increased utilization of existing combined-cycle
natural gas-fueled generating facilities; and (c) increased deployment of new and incremental non-carbon generation placed in service
after 2012. The final Clean Power Plan compliance obligations were scheduled to begin in 2022, and extend through 2030, when fully
implemented, the rule was intended to achieve an overall reduction in carbon dioxide emissions from existing fossil-fueled electric
generating units of 32% below 2005 levels.
On June 1, 2017, President Trump announced that the United States would begin the process of withdrawing from the Paris
Agreement. Under the terms of the Paris Agreement, withdrawal cannot occur until four years after entry into force, making the UnitedStates withdrawal effective in November 2020. The EPA issued a proposal to repeal the Clean Power Plan on October 10, 2017, which
has not yet been finalized. On December 28, 2017, the EPA issued an Advance Notice of Proposed Rulemaking regarding the Clean
Power Plan to solicit comment from the public as the agency considers proposing a future rule establishing emission guidelines forgreenhouse gas emissions from existing electric generating units. The full impacts of the EPA’s recent efforts to repeal the Clean
Power Plan are not expected to have a material impact on BHE and its energy subsidiaries. Increasingly, states are adopting legislation
and regulations to reduce greenhouse gas emissions, and local governments and consumers are seeking increasing amounts of clean
and renewable energy.
BHE and its energy subsidiaries continue to focus on delivering reliable, affordable, safe and clean energy to its customers andon actions to mitigate greenhouse gas emissions. For example, as of December 31, 2017, BHE has invested $21 billion in solar, wind,geothermal and biomass generation.
Non-Energy Businesses
HomeServices of America, Inc. (“HomeServices”) is the second-largest residential real estate brokerage firm in the UnitedStates. In addition to providing traditional residential real estate brokerage services, HomeServices offers other integrated real estateservices, including mortgage originations and mortgage banking, title and closing services, property and casualty insurance, homewarranties, relocation services and other home-related services. It operates under 42 brand names with nearly 41,000 real estate agentsin nearly 840 brokerage offices in 30 states and the District of Columbia.

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In October 2012, HomeServices acquired a 66.7% interest in one of the largest residential real estate brokerage franchise
networks in the United States, which offers and sells independently owned and operated residential real estate brokerage franchises.
HomeServices’ franchise network currently includes over 365 franchisees in over 1,500 brokerage offices in 47 states with over 48,000
real estate agents under three brand names. In exchange for certain fees, HomeServices provides the right to use the Berkshire
Hathaway HomeServices, Prudential or Real Living brand names and other related service marks, as well as providing orientation
programs, training and consultation services, advertising programs and other services.
HomeServices’ principal sources of revenue are dependent on residential real estate sales, which are generally higher in thesecond and third quarters of each year. This business is highly competitive and subject to the general real estate market conditions.
Manufacturing Businesses
Berkshire’s numerous and diverse manufacturing businesses are grouped into three categories: (1) industrial products,(2) building products and (3) consumer products. Berkshire’s industrial products businesses manufacture specialty chemicals, metal
cutting tools, components for aerospace and power generation applications and a variety of other products primarily for industrial use.
The building products group produces flooring products, insulation, roofing and engineered products, building and engineered
components, paint and coatings and bricks and masonry products that are primarily used in building and construction applications. The
consumer products group manufactures recreational vehicles, alkaline batteries, various apparel products, jewelry and custom picture
framing products. Information concerning the major activities of these three groups follows.
Industrial products
Lubrizol Corporation
The Lubrizol Corporation (“Lubrizol”) is a specialty chemical company that produces and supplies technologies for the global
transportation, industrial and consumer markets. Lubrizol currently operates in two business sectors: (1) Lubrizol Additives, which
includes engine additives, driveline additives and industrial specialties products; and (2) Lubrizol Advanced Materials, which includes
personal and home care, engineered polymers, performance coatings and life science solutions.
Lubrizol Additives products are used in a broad range of applications including engine oils, transmission fluids, gear oils,
specialty driveline lubricants, fuel additives, metalworking fluids, compressor lubricants and greases for transportation and industrial
applications. Lubrizol’s Advanced Materials products are used in several different types of applications including over-the-counter
pharmaceutical products, performance coatings, personal care products, sporting goods and plumbing and fire sprinkler systems.
Lubrizol is an industry leader in many of the markets in which it competes. Lubrizol’s principal lubricant additives competitors are
Infineum International Ltd., Chevron Oronite Company and Afton Chemical Corporation. The advanced materials industry is highly
fragmented with a variety of competitors in each product line.
From a base of approximately 3,200 patents, Lubrizol uses its technological leadership position in product development andformulation expertise to improve the quality, value and performance of its products, as well as to help minimize the environmental
impact of those products. Lubrizol uses many specialty and commodity chemical raw materials in its manufacturing processes and usesbase oil in processing and blending additives. Raw materials are primarily feedstocks derived from petroleum and petrochemicals and,generally, are obtainable from several sources. The materials that Lubrizol chooses to purchase from a single source typically are
subject to long-term supply contracts to ensure supply reliability. Lubrizol operates facilities in 31 countries (including production
facilities in 17 countries and laboratories in 14 countries).
Lubrizol markets its products worldwide through a direct sales organization and sales agents and distributors. Lubrizol’s
customers principally consist of major global and regional oil companies and industrial and consumer products companies that arelocated in more than 120 countries. Some of its largest customers also may be suppliers. In 2017, no single customer accounted formore than 10% of Lubrizol’s consolidated revenues. Lubrizol continues to implement a multi-year phased investment plan to upgrade
operations, ensure compliance with health, safety and environmental requirements and increase global manufacturing capacity.
Lubrizol is subject to foreign, federal, state and local laws to protect the environment and limit manufacturing waste andemissions. The company believes that its policies, practices and procedures are designed to limit the risk of environmental damage andconsequent financial liability. Nevertheless, the operation of manufacturing plants entails ongoing environmental risks, and significant
costs or liabilities could be incurred in the future.

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IMC International Metalworking Companies
IMC International Metalworking Companies (“IMC”) is one of the world’s three largest multinational manufacturers ofconsumable precision carbide metal cutting tools for applications in a broad range of industrial end markets. IMC’s principal brandnames include ISCAR®, TaeguTec®, Ingersoll®, Tungaloy®, Unitac®, UOP®, It.te.di®, Tool—Flo® and Outiltec®. IMC’s principal
manufacturing facilities are located in Israel, United States, Germany, Italy, France, Switzerland, South Korea, China, India, Japan andBrazil.
IMC has five primary product lines: milling tools, gripping tools, turning/thread tools, drilling tools and tooling. The main
products are split within each product line between consumable cemented tungsten carbide inserts and steel tool holders. Inserts
comprise the vast majority of sales and earnings. Metal cutting inserts are used by industrial manufacturers to cut metals and are
consumed during their use in cutting applications. IMC manufactures hundreds of types of highly engineered inserts within eachproduct line that are tailored to maximize productivity and meet the technical requirements of customers. IMC’s staff of scientists andengineers continuously develop and innovate products that address end user needs and requirements.
IMC’s global sales and marketing network operates in virtually every major manufacturing center around the world staffed withhighly skilled engineers and technical personnel. IMC’s customer base is very diverse, with its primary customers being large,
multinational businesses in the automotive, aerospace, engineering and machinery industries. IMC operates a regional central
warehouse system with locations in Israel, United States, Belgium, Korea, Japan and Brazil. Additional small quantities of products aremaintained at local IMC offices in order to provide on-time customer support and inventory management.
IMC competes in the metal cutting tools segment of the global metalworking tools market. The segment includes hundreds ofparticipants who range from small, private manufacturers of specialized products for niche applications and markets to larger, global
multinational businesses (such as Sandvik and Kennametal, Inc.) with a wide assortment of products and extensive distribution
networks. Other manufacturing companies such as Kyocera, Mitsubishi, Sumitomo, Ceratizit and Korloy also play a significant role inthe cutting tool market.
Precision Castparts
Berkshire acquired Precision Castparts Corp. (“PCC”) on January 29, 2016. PCC manufactures complex metal components andproducts, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace andpower and energy applications. PCC also provides seamless pipe for coal-fired, industrial gas turbine (“IGT”) and nuclear power
plants; downhole casing and tubing, fittings and various mill forms in a variety of nickel and steel alloys for severe-service oil and gas
environments; investment castings and forgings for general industrial, armament, medical and other applications; nickel and titanium
alloys in all standard mill forms from large ingots and billets to plate, foil, sheet, strip, tubing, bar, rod, extruded shapes, rod-in-coil,wire and welding consumables, as well as cobalt alloys, for the aerospace, chemical processing, oil and gas, pollution control and otherindustries; revert management solutions; fasteners for automotive and general industrial markets; specialty alloys for the investment
casting and forging industries; heat treating and destructive testing services for the investment cast products and forging industries;
refiner plates and other products for the pulp and paper industry; grinder pumps and affiliated components for low-pressure sewer
systems; critical auxiliary equipment and gas monitoring systems for the power generation industry; and metalworking tools for the
fastener market and other applications.
Investment casting technology involves a multi-step process that uses ceramic molds in the manufacture of metal components
with more complex shapes, closer tolerances and finer surface finishes than parts manufactured using other methods. PCC uses thisprocess to manufacture products for aircraft engines, IGT’s and other aeroderivative engines, airframes, medical implants, armament,
unmanned aerial vehicles and other industrial applications. PCC also manufactures high temperature carbon and ceramic composite
components, including ceramic matrix composites, for use in next-generation aerospace engines.
PCC uses forging processes to manufacture components for the aerospace and power generation markets, including seamlesspipe for coal-fired, industrial gas turbine and nuclear power plants, and downhole casings and tubing pipe for severe service oil and gas
markets. PCC manufactures high-performance, nickel-based alloys used to produce forged components for aerospace andnon-aerospace applications in such markets as oil and gas, chemical processing and pollution control. The titanium products are used to
manufacture components for the commercial and military aerospace, power generation, energy, and industrial end markets.
PCC is also a leading developer and manufacturer of highly engineered fasteners, fastener systems, aerostructures and precisioncomponents, primarily for critical aerospace applications. These products are produced for the aerospace and power and energy
markets, as well as for construction, automotive, heavy truck, farm machinery, mining and construction equipment, shipbuilding,machine tools, medical equipment, appliances and recreation markets.

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The majority of sales are generated from purchase orders or demand schedules pursuant to long-term agreements. Contractual
terms may provide for termination by the customer subject to payment for work performed. PCC typically does not experiencesignificant order cancellations, although periodically it receives requests for delays in delivery schedules.
PCC is subject to substantial competition in all of its markets. Components and similar products may be produced by competitors
using either the same types of manufacturing processes or other forms of manufacturing. Although PCC believes its manufacturing
processes, technology and experience provide advantages to its customers, such as high quality, competitive prices and physicalproperties that often meet more stringent demands, alternative forms of manufacturing can be used to produce many of the same
components and products. Despite intense competition, PCC is a leading supplier in most of its principal markets. Several factors,
including long-standing customer relationships, technical expertise, state-of-the-art facilities and dedicated employees, aid PCC inmaintaining competitive advantages.
A number of raw materials in its products, including certain metals such as nickel, titanium, cobalt, tantalum and molybdenum,
are found in only a few parts of the world. These metals are required for the alloys used in manufactured products. The availability andcosts of these metals may be influenced by private or governmental cartels, changes in world politics, labor relations between the metal
producers and their work forces, and/or unstable governments in exporting nations and inflation.
Marmon Holdings
Berkshire currently owns 99.75% of Marmon Holdings, Inc. (“Marmon”), a holding company comprised of three autonomouscompanies consisting of Marmon Engineered Components Company (“Engineered Components”), Marmon Retail Technologies
Company (“Retail Technologies”) and Marmon Energy Services Company (“Energy Services”). Energy Services includes thetransportation equipment manufacturing, repair, and leasing businesses (UTLX Company), which is discussed in the Finance andFinancial Products businesses section of this Item. Engineered Components, Retail Technologies and the Engineered Wire and Cable
sector of Energy Services comprise “Marmon manufacturing”. Marmon manufacturing operates approximately 400 manufacturing,
distribution, and service facilities, which are located primarily in the United States as well as in 23 other countries worldwide.
Engineered Components:
Plumbing, Industrial & Automotive Components supplies copper, aluminum, and stainless steel tubing and fittings for theplumbing, HVAC/R, and aerospace markets, aluminum and brass forgings for many commercial and industrial applications, adhesives
primarily for automotive and aerospace applications, clutches, engine mounts, and related components for the light-duty vehicle
aftermarket; and precision molded plastic components for safety, electrical, and fluid transfer applications in the automotive market.
Electrical Products produces electrical building wire for residential, commercial, and industrial buildings, portable lighting
equipment for mining and safety markets and overhead electrification equipment for mass transit systems.
Metal Services provides specialty metal pipe, tubing, beams and related value-added services to a broad range of industries.
Construction Fasteners & Safety Products supplies fasteners and hand and arm protective wear to the construction, industrial andother markets.
Highway Technologies serves the heavy-duty highway transportation industry with trailers, truck and trailer components
including fifth wheel coupling solutions, wheel-end products, undercarriage products, and fenders, as well as truck modification
services.
Retail Technologies:
Retail Food Technologies and Restaurant & Catering Technologies supplies commercial food preparation and holding
equipment for restaurants, fast food chains, hotels and caterers.
Beverage Technologies produces beverage dispensing and cooling equipment for foodservice retailers as well as on-shelf
management systems for single-serve beverages and pre-tooled stock solutions for in-store applications.
Water Technologies manufactures and markets residential water softening, purification, and refrigeration filtration systems,
treatment systems for industrial markets including power generation, oil and gas, chemical, and pulp and paper, gear drives for
irrigation systems and cooling towers and air-cooled heat exchangers.
Retail Solutions provides retail environment design services, marketing programs, in-store digital merchandising, display
fixtures, shopping, material handling, and security carts as well as automation equipment for many industries, and consumer products
sold through retail channels, including work and garden gloves, air compressors and extension cords.
The Engineered Wire & Cable sector supplies electrical and electronic wire and cable for energy related markets and otherindustries.

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Other industrial products
CTB International Corp. (“CTB”), headquartered in Milford, Indiana, is a leading global designer, manufacturer and marketer ofa wide range of agricultural systems and solutions for preserving grain, producing poultry, pigs and eggs, and for processing poultry,
fish, vegetables and other foods. CTB operates from facilities located around the globe and supports customers through a worldwide
network of independent distributors and dealers.
CTB competes with a variety of manufacturers and suppliers, many of which offer only a limited number of the products offeredby CTB and two of which offer products across many of CTB’s product lines. Competition is based on the price, value, reputation,
quality and design of the products offered and the customer service provided by distributors, dealers and manufacturers of the products.
CTB’s leading brand names, distribution network, diversified product line, product support and high-quality products enable it tocompete effectively. CTB manufactures its products primarily from galvanized steel, steel wire, stainless steel and polymer materials
and supplies of these materials have been sufficient in recent years.
In 2014, Berkshire acquired a global supplier of pipeline flow improver products from Phillips 66. The business, headquarteredin Houston, Texas, was named Phillips Specialty Products, Inc. at the time of the acquisition and is currently named LiquidPowerSpecialty Products Inc. (“LSPI”). LSPI specializes in maximizing the flow potential of pipelines, increasing operational flexibility andthroughput capacity. The Scott Fetzer companies are a group of businesses that manufacture, distribute, service and finance a wide
variety of products for residential, industrial and institutional use.
Berkshire’s industrial products manufacturers employ approximately 72,000 persons.
Building Products
Shaw Industries
Shaw Industries Group, Inc. (“Shaw”), headquartered in Dalton, Georgia, is a leading carpet manufacturer based on both revenue
and volume of production. Shaw designs and manufactures over 3,800 styles of tufted carpet, wood and resilient flooring for residential
and commercial use under about 30 brand and trade names and under certain private labels. Shaw also provides project management
and installation services. Shaw’s manufacturing operations are fully integrated from the processing of raw materials used to make fiber
through the finishing of carpet. Shaw also manufactures or distributes a variety of hardwood, vinyl and laminate floor products (“hardsurfaces”). In 2016, Shaw acquired USFloors, Inc., which is a leading innovator and marketer of wood-plastic composite luxury vinyl
tile flooring, as well as cork, bamboo and hardwood products. Shaw’s carpet and hard surface products are sold in a broad range ofpatterns, colors and textures. Shaw operates Shaw Sports Turf and Southwest Greens International, LLC, which provide synthetic
sports turf, golf greens and landscape turf products.
Shaw products are sold wholesale to over 34,000 retailers, distributors and commercial users throughout the United States,
Canada and Mexico and are also exported to various overseas markets. Shaw’s wholesale products are marketed domestically by over
2,700 salaried and commissioned sales personnel directly to retailers and distributors and to large national accounts. Shaw’s sevencarpet, seven hard surface and two sample full-service distribution facilities and 25 redistribution centers, along with centralized
management information systems, enable it to provide prompt and efficient delivery of its products to both its retail customers andwholesale distributors.
Substantially all carpet manufactured by Shaw is tufted carpet made from nylon, polypropylene and polyester. In the tufting
process, yarn is inserted by multiple needles into a synthetic backing, forming loops, which may be cut or left uncut, depending on thedesired texture or construction. During 2017, Shaw processed approximately 99% of its requirements for carpet yarn in its own yarnprocessing facilities. The availability of raw materials continues to be good but costs are impacted by petro-chemical and natural gas
price changes. Raw material cost changes are periodically factored into selling prices to customers.
The floor covering industry is highly competitive with more than 100 companies engaged in the manufacture and sale of carpet
in the United States and numerous manufacturers engaged in hard surface floor covering production and sales. According to industry
estimates, carpet accounts for approximately 50% of the total United States consumption of all flooring types. The principal
competitive measures within the floor covering industry are quality, style, price and service.

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Johns ManvilleJohns Manville (“JM”) is a leading manufacturer and marketer of premium-quality products for building, mechanical andindustrial insulation, commercial roofing and roof insulation, as well as engineered fibers and nonwovens for commercial, industrial
and residential applications. JM serves markets that include building, flooring, interiors, aerospace, automotive and transportation, airhandling, appliance, HVAC, pipe insulation, filtration, waterproofing and wind energy. Fiberglass is the basic material in a majority of
JM’s products, although JM also manufactures a significant portion of its products with other materials to satisfy the broader needs of
its customers. Raw materials are readily available in sufficient quantities from various sources for JM to maintain and expand its
current production levels. JM regards its patents and licenses as valuable, however it does not consider any of its businesses to bematerially dependent on any single patent or license. JM is headquartered in Denver, Colorado, and operates 43 manufacturing
facilities in North America, Europe and China and conducts research and development at its technical center in Littleton, Colorado andat other facilities in the U.S. and Europe.
Fiberglass is made from earthen raw materials and recycled glass, together with proprietary organic and acrylic-basedformaldehyde-free agents to bind many of its glass fibers. JM’s products also contain materials other than fiberglass, including various
chemical and petro-chemical-based materials used in roofing and other specialized products. JM uses recycled material when available
and suitable to satisfy the broader needs of its customers. The raw materials used in these various products are readily available insufficient quantities from various sources to maintain and expand its current production levels.
JM’s operations are subject to a variety of federal, state and local environmental laws and regulations. These laws andregulations regulate the discharge of materials into the air, land and water and govern the use and disposal of hazardous substances.
The most relevant of the federal laws are the Federal Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, theResource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
which are administered by the EPA. In 2015, the EPA revised the hazardous air pollutant rules for the wool fiberglass and mineralwool manufacturing industries. While the new rules implement new emission standards, they are not expected to require material
expenditures to meet the compliance dates in 2018.
JM sells its products through a wide variety of channels including contractors, distributors, retailers, manufacturers andfabricators. JM operates in a highly competitive market, with competitors comprised primarily of several large global and national
manufacturers and smaller regional manufacturers. JM holds leadership positions in the key markets that it serves. JM’s products
compete primarily on the basis of value, product differentiation and customization and breadth of product line. Sales of JM’s products
are moderately seasonal due to increases in construction activity that typically occur in the second and third quarters of the calendar
year. JM is seeing a trend in customer purchasing decisions being influenced by the sustainable and energy efficient attributes of its
products, services and operations.
MiTek Industries, Inc.
MiTek Industries, Inc. (“MiTek”), based in Chesterfield, Missouri, operates in three separate markets: residential, commercial
and industrial. MiTek operates worldwide with sales in over 100 countries and with manufacturing facilities and/or sales/engineering
offices located in 21 countries. MiTek has completed a number of bolt-on acquisitions in the past five years, intended to diversify
product offerings and reduce the impact of the cyclical global housing markets.
In the residential market, MiTek is a leading supplier of engineered connector products, construction hardware, engineering
software and services and computer-driven manufacturing machinery to the truss component market of the building components
industry. MiTek’s primary customers are component manufacturers who manufacture prefabricated roof and floor trusses and wall
panels for the residential building market. MiTek also sells construction hardware to commercial distributors and do-it-yourself retailstores under the MiTek Builders Products name.
MiTek’s commercial market business includes products and services sold to the commercial construction industry. Productofferings include curtain wall systems (Benson Industries, Inc.), anchoring systems for masonry and stone (Hohmann & Barnard, Inc.),
light gauge steel framing products (Aegis Metal Framing Division of MiTek USA, Inc.), engineering services for a proprietary highperformance steel frame connection (SidePlate Systems, Inc.) and a comprehensive range of round, rectangular, oval and spiralductwork for the ventilation market (M&M Manufacturing, Inc. and Snappy ADP, Inc.).
MiTek’s industrial market business includes: automated machinery for the battery manufacturing industry (TBS Engineering,Ltd.), highly customized air handling systems sold to commercial, institutional and industrial markets (TMI Climate Solutions, Inc.),
design and supply of Nuclear Safety Related HVAC systems and components (Ellis & Watts Global Industries, Inc.), energy recovery
and dehumidification systems for commercial applications (Heat-Pipe Technology, Inc.) and pre-engineered and pre-fabricated custom
structural mezzanines and platforms for distribution and manufacturing facilities (Cubic Designs, Inc. and Mezzanine International,Ltd.).

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A significant raw material used by MiTek is hot dipped galvanized sheet steel. While supplies are presently adequate, variations
in supply have historically occurred, producing significant variations in cost and availability.
Benjamin Moore
Benjamin Moore & Co. (“Benjamin Moore”), headquartered in Montvale, New Jersey, is a leading formulator, manufacturer andretailer of a broad range of architectural coatings, available principally in the United States and Canada. Products include water-based
and solvent-based general-purpose coatings (paints, stains and clear finishes) for use by the consumers, contractors and industrial andcommercial users. Products are marketed under various registered brand names, including, but not limited to: Aura®, Natura®, Regal
Select®, Ultra Spec®, ben®, Eco Spec®, Coronado®, Corotech®, Insl-x®, Lenmar®, Super Kote®, Arborcoat®, Super Hide®, Century®,
Ultra Spec®, SCUFF-X® and Notable™.
Benjamin Moore relies primarily on an independent dealer network for distribution of its products. Benjamin Moore’s
distribution network includes over 3,300 independent retailers currently representing over 5,000 storefronts in the United States andCanada. The independent dealer channel offers a broad array of products including Benjamin Moore®, Coronado® and Insl-x® brands
and other competitor coatings, wall coverings, window treatments and sundries. In addition, Benjamin Moore operates an on-line “pickup in store” program, which allows consumers to place orders via an e-commerce site or for national accounts and government
agencies via its customer information center. These orders may be picked up at the customer’s nearest dealer.
Benjamin Moore competes with numerous manufacturers, distributors and paint, coatings and related products retailers. Productquality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage.
Competitors include other paint and decorating stores, mass merchandisers, home centers, independent hardware stores, hardware
chains and manufacturer-operated direct outlets, such as Sherwin-Williams Company, PPG Industries, Inc., The Valspar Corporation,
The Home Depot, Inc. and Lowe’s Companies.
The most significant raw materials in Benjamin Moore products are titanium dioxide, solvents, and epoxy and other resins.
Historically, these materials have been generally available, with pricing and availability subject to fluctuation.
Acme Brick
Acme Brick Company (“Acme”) headquartered in Fort Worth, Texas, manufactures and distributes clay bricks (Acme Brick®),
concrete block (Featherlite) and cut limestone (Texas Quarries). In addition, Acme and its subsidiaries distribute a number of otherbuilding products of other manufacturers, including floor and wall tile, wood flooring and other masonry products. Products are soldprimarily in the South Central and South Eastern United States through company-operated sales offices. Acme distributes products
primarily to homebuilders and masonry and general contractors.
Acme and its affiliates operate 25 clay brick manufacturing facilities at 21 sites located in eight states, six concrete block
facilities in Texas and two stone fabrication facilities located in Texas and Alabama. In addition, Acme and its subsidiaries operate aglass block fabrication facility, a concrete bagging facility and a stone burnishing facility, all located in Texas. The demand for Acme’s
products is seasonal, with higher sales in the warmer weather months, and is subject to the level of construction activity, which is
cyclical. Acme also owns and leases properties and mineral rights that supply raw materials used in many of its manufactured products.
Acme’s raw materials supply is believed to be adequate.
The brick industry is subject to the EPA’s Maximum Achievable Control Technology Rule (MACT Rule) finalized in October of2015 with a deadline for compliance of December 31, 2018. Key elements of the MACT Rule include emission limits established forcertain hazardous air pollutants and acidic gases. The MACT Rule also establishes work practices for “periodic” kilns, including using
a designed firing time and temperature for each product, labeling maximum loads, keeping a log of each load, and developing andimplementing inspection and maintenance procedures. While many of Acme’s facilities are in compliance, additional capital
expenditures may be required to bring other facilities into compliance by the deadline.
Berkshire’s building products manufacturers employ approximately 39,000 people.

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Consumer Products
ApparelFruit of the Loom (“FOL”) is headquartered in Bowling Green, Kentucky. FOL is primarily a manufacturer and distributor ofbasic apparel, underwear, casualwear, athletic apparel and hardgoods. Products, under the Fruit of the Loom® and JERZEES® labels areprimarily sold in the mass merchandise, mid-tier chains and wholesale markets. In the Vanity Fair Brands product line, Vassarette®
and Curvation® are sold in the mass merchandise market, while Vanity Fair® and Lily of France® products are sold to mid-tier chainsand department stores. FOL also markets and sells athletic uniforms, apparel, sports equipment and balls to team dealers; collegiate
licensed tee shirts and fleecewear to college bookstores; and athletic apparel, sports equipment and balls to sporting goods retailers
under the Russell Athletic® and Spalding® brands. Additionally, Spalding® markets and sells balls in the mass merchandise market anddollar store channels. In 2015, FOL exited an unprofitable intimate apparel business in Europe. In 2017, a significant portion of FOL’s
sales were to Walmart.
FOL generally performs its own knitting, cloth finishing, cutting, sewing and packaging for apparel. For the North American
market, which comprised about 84% of FOL’s net sales in 2017, the majority of its cloth manufacturing was performed in Honduras.
Labor-intensive cutting, sewing and packaging operations are located in Central America and the Caribbean. For the European market,
products are either sourced from third-party contractors in Europe or Asia or sewn in Morocco from textiles internally produced in
Morocco. FOL’s bras, athletic equipment, sporting goods and other athletic apparel lines are generally sourced from third-party
contractors located primarily in Asia.
U.S. grown cotton and polyester fibers are the main raw materials used in the manufacturing of FOL’s apparel products and arepurchased from a limited number of third-party suppliers. Additionally in 2015, FOL entered into an eight year agreement with one key
supplier to provide the majority of FOL’s yarn. Management currently believes there are readily available alternative sources of raw
materials and yarn. However, if relationships with suppliers cannot be maintained or delays occur in obtaining alternative sources ofsupply, production could be adversely affected, which could have a corresponding adverse effect on results of operations. Additionally,
raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic climate and otherunpredictable factors. FOL has secured contracts to purchase cotton, either directly or through the yarn suppliers, to meet the majorityof its production plans for 2018. FOL’s markets are highly competitive, consisting of many domestic and foreign manufacturers anddistributors. Competition is generally based upon product features, quality, customer service and price.
Garan designs, manufactures, imports and sells apparel primarily for children, including boys, girls, toddlers and infants.
Products are sold under its own trademark Garanimals® and customer private label brands. Garan also licenses its registered trademark
Garanimals® to third parties for apparel and non-apparel products. Garan conducts its business through operating subsidiaries locatedin the United States, Central America and Asia. Substantially all of Garan’s products are sold through its distribution centers in the
United States with sales to Walmart representing over 90% of its sales. Fechheimer Brothers manufactures, distributes and sells
uniforms, principally for the public service and safety markets, including police, fire, postal and military markets. Fechheimer Brothers
is based in Cincinnati, Ohio.
The H.H. Brown Shoe Group manufactures and distributes work, rugged outdoor and casual shoes and western-style footwear
under a number of brand names, including Justin, Tony Lama®, Nocona®, Chippewa®, BØRN® , B•Ø•C®, Carolina®, Söfft, Double-H
Boots®, Nursemates® and Comfortiva®. Brooks Sports markets and sells performance running footwear and apparel to specialty andnational retailers and directly to consumers under the Brooks® brand. A significant volume of the shoes sold by Berkshire’s shoebusinesses are manufactured or purchased from sources outside the United States. Products are sold worldwide through a variety ofchannels including department stores, footwear chains, specialty stores, catalogs and the Internet, as well as through company-owned
retail stores.
Other consumer products
Forest River, Inc. (“Forest River”) is a manufacturer of recreational vehicles (“RV”), utility cargo trailers, buses and pontoon
boats, headquartered in Elkhart, Indiana with products sold in the United States and Canada through an independent dealer network.
Forest River has numerous manufacturing facilities located in six states. Forest River is a leading manufacturer of RVs with brandnames such as Berkshire, Cardinal, Cedar Creek, Cherokee, Coachman, Dynamax, Flagstaff, Forester, Georgetown, Palomino, Prime
Time Manufacturing, Puma, Rockwood, Salem, Sandpiper, Sierra, Sunseeker, Surveyor, Viking RV and Wildwood. Utility cargo
trailers are sold under Cargo Mate, Continental, Rance and US Cargo brand names among others. Buses are sold under the Battisti,
Berkshire Coach, Elkhart Coach, Glaval Bus, Starcraft Bus, and Startrans Bus brand names. Pontoon boats are sold under theBerkshire, South Bay and Trifecta brand names. The RV industry is very competitive. Competition is based primarily on price, design,quality and service. The industry has consolidated over the past several years with Forest River and its largest competitor possessing
about 83% aggregate market share, with Forest River holding a 35% market share.

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Berkshire acquired the Duracell Company (“Duracell’), on February 29, 2016 from The Procter & Gamble Company. Duracell,
headquartered in Chicago, Illinois, is a leading manufacturer of high performance alkaline batteries. Duracell manufactures batteries in
the U.S., Europe and China and provides a network of worldwide sales and distribution centers. Costco and Walmart are significant
customers, representing approximately 25% of Duracell’s annual revenue. There are several competitors in the battery manufacturingmarket with Duracell holding an approximately 36% market share of the global alkaline battery market. Management believes there aresufficient sources of raw materials, which primarily include steel, zinc and manganese.
Albecca Inc. (“Albecca”), headquartered in Norcross, Georgia, has operations in the U.S., Canada and 13 countries outside ofNorth America and operates primarily under the Larson-Juhl® name. Albecca designs, manufactures and distributes a complete line ofhigh quality, branded custom framing products, including wood and metal moulding, matboard, foamboard, glass and framing supplies.
Complementary to its framing products, Albecca offers art printing and fulfillment services.
Richline Group, Inc. operates four strategic business units: Richline Jewelry, LeachGarner, Rio Grande and Inverness. Eachbusiness unit is a manufacturer and distributor of jewelry with precious metal and non-precious metal products to specific target
markets including large jewelry chains, department stores, shopping networks, mass merchandisers, e-commerce retailers and artisansplus worldwide manufacturers and wholesalers and the medical, electronic and aerospace industries.
Berkshire’s consumer products manufacturers employ approximately 54,000 persons.
Service and Retailing Businesses
Service Businesses
Berkshire’s service businesses provide grocery and foodservice distribution, professional aviation training programs, fractional
aircraft ownership programs and distribution of electronic components. Other service businesses include franchising and servicing ofquick service restaurants, media businesses (newspaper, television and information distribution), as well as logistics businesses.
Berkshire’s service businesses employ approximately 46,000 people. Information concerning these activities follows.
McLane Company
McLane Company, Inc. (“McLane”) provides wholesale distribution services in all 50 states to customers that include
convenience stores, discount retailers, wholesale clubs, drug stores, military bases, quick service restaurants and casual dining
restaurants. McLane provides wholesale distribution services to Walmart, which accounts for approximately 25% of McLane’s
revenues. McLane’s other significant customers include 7-Eleven and Yum! Brands, each of which accounted for approximately 11%of McLane’s revenues in 2017. A curtailment of purchasing by Walmart or its other significant customers could have a material
adverse impact on McLane’s periodic revenues and earnings. McLane’s business model is based on a high volume of sales, rapid
inventory turnover and stringent expense controls. Operations are currently divided into three business units: grocery distribution,
foodservice distribution and beverage distribution.
McLane’s grocery distribution unit, based in Temple, Texas, maintains a dominant market share within the convenience store
industry and serves most of the national convenience store chains and major oil company retail outlets. Grocery operations provide
products to approximately 49,000 retail locations nationwide, including Walmart. McLane’s grocery distribution unit operates 23
distribution facilities in 20 states.
McLane’s foodservice distribution unit, based in Carrollton, Texas, focuses on serving the quick service and casual dining
restaurant industry with high quality, timely-delivered products. Operations are conducted through 50 facilities in 22 states. The
foodservice distribution unit services approximately 36,500 chain restaurants nationwide.
Through its subsidiaries, McLane also operates several wholesale distributors of distilled spirits, wine and beer. Operations are
conducted through 14 distribution centers in Georgia, North Carolina, Tennessee and Colorado. These beverage units operating as
Empire Distributors, Empire Distributors of North Carolina, Empire Distributors of Tennessee and Baroness Small Estates, service
approximately 24,900 retail locations in the Southeastern United States and Colorado.

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FlightSafety International
FlightSafety International Inc. (“FlightSafety”), headquartered at New York’s LaGuardia Airport, is an industry leader in
professional aviation training services to individuals, businesses (including certain commercial aviation companies) and the U.S.
government and certain foreign governments. FlightSafety provides high technology training to pilots, aircraft maintenancetechnicians, flight attendants and dispatchers who operate and support a wide variety of business, commercial and military aircraft.
FlightSafety operates a large fleet of advanced full flight simulators at its learning centers and training locations in the United States,
Canada, China, France, Japan, Norway, Singapore, South Africa, the Netherlands, and the United Kingdom. The vast majority of
FlightSafety’s instructors, training programs and flight simulators are qualified by the United States Federal Aviation Administrationand other aviation regulatory agencies around the world.
FlightSafety is also a leader in the design and manufacture of full flight simulators, visual systems, displays and other advanced
technology training devices. This equipment is used to support FlightSafety training programs and is offered for sale to airlines andgovernment and military organizations around the world. Manufacturing facilities are located in Oklahoma, Missouri and Texas.
FlightSafety strives to maintain and manufacture simulators and develop courseware using state-of-the-art technology and invests inresearch and development as it builds new equipment and training programs.
NetJets
NetJets Inc. (“NetJets”) is the world’s leading provider of shared ownership programs for general aviation aircraft. NetJets’
global headquarters is located in Columbus, Ohio, with most of its logistical and flight operations based at Port Columbus International
Airport. NetJets’ European operations are based in Lisbon, Portugal. The shared ownership concept is designed to meet the travelneeds of customers who require the scale, flexibility and access of a large fleet that whole aircraft ownership cannot deliver. In
addition, shared ownership programs are available for corporate flight departments seeking to outsource their general aviation needs or
add capacity for peak periods and for others that previously chartered aircraft.
With a focus on safety and service, NetJets’ programs are designed to offer customers guaranteed availability of aircraft,
predictable operating costs and increased liquidity. NetJets’ shared aircraft ownership programs permit customers to acquire a specificpercentage of a certain aircraft type and allows customers to utilize the aircraft for a specified number of flight hours annually. In
addition, NetJets offers prepaid flight cards and other aviation solutions and services for aircraft management, customized aircraft sales
and acquisition, ground support and flight operation services under a number of programs including NetJets Shares™, NetJets
Leases™ and the Marquis Jet Card®.
NetJets is subject to the rules and regulations of the United States Federal Aviation Administration, the National Institute of Civil
Aviation of Portugal and the European Aviation Safety Agency. Regulations address aircraft registration, maintenance requirements,
pilot qualifications and airport operations, including flight planning and scheduling as well as security issues and other matters.
TTI, Inc.
TTI, Inc. (“TTI”), headquartered in Fort Worth, Texas, is a global specialty distributor of passive, interconnect,
electromechanical, discrete and semiconductor components used by customers in the manufacturing and assembling of electronic
products. TTI’s customer base includes original equipment manufacturers, electronic manufacturing services, original design
manufacturers, military and commercial customers, as well as design and system engineers. TTI’s distribution agreements with theindustry’s leading suppliers allow it to uniquely leverage its product cost and to expand its business by providing new lines andproducts to its customers. TTI operates sales offices and distribution centers from more than 100 locations throughout North America,
Europe, Asia and Israel.
TTI services a variety of industries including telecommunications, medical devices, computers and office equipment, military/
aerospace, automotive and consumer electronics. TTI’s core customers include businesses in the design through production stages inthe electronic component supply chain, which supports its high volume business, and its Mouser subsidiary, which supports a broader
base of customers with lower volume purchases through internet based marketing. Sager Electrical Supply Company, Inc. is a
subsidiary of TTI located in Massachusetts whose additional focus is the distribution of power components within the electronics
distribution market.

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Other services
International Dairy Queen develops and services a worldwide system of over 6,800 stores operating primarily under the names
DQ Grill and Chill®, Dairy Queen® and Orange Julius® that offer various dairy desserts, beverages, prepared foods and blended fruit
drinks. Business Wire provides electronic dissemination of full-text news releases to the media, online services and databases and theglobal investment community in 150 countries and in 45 languages. Approximately 97% of Business Wire’s revenues derive from its
core news distribution business. The Buffalo News and BH Media Group, Inc. are publishers of 32 daily and 44 weekly newspapers.
WPLG, Inc. is an ABC affiliate broadcast station in Miami, Florida and Charter Brokerage is a leading non-asset based third party
logistics provider to the petroleum and chemical industries.
Retailing Businesses
Berkshire’s retailing businesses include automotive, home furnishings and several other operations that sell various consumer
products to consumers. Information regarding each of these operations follows. Berkshire’s retailing businesses employ approximately
29,400 people.
Berkshire Hathaway Automotive
In the first quarter of 2015, Berkshire acquired a group of affiliated companies referred to as the Berkshire Hathaway Automotive
Group, Inc. (BHA). BHA is one of the largest automotive retailers in the United States, currently operating 109 new vehicle franchises
through 83 dealerships located primarily in major metropolitan markets in the United States. The dealerships sell new and used
vehicles, vehicle maintenance and repair services, extended service contracts, vehicle protection products and other aftermarket
products. BHA also arranges financing for its customers through third-party lenders. BHA operates 30 collision service centers directly
connected to the dealerships’ operations and owns and operates two auto auctions and a fluid maintenance products distribution
company.
Dealership operations are highly concentrated in the Arizona and Texas markets, with approximately 70% of dealership-related
revenues derived from sales in these markets. BHA currently maintains franchise agreements with 27 different vehicle manufacturers,
although it derives a significant portion of its revenue from the Toyota/Lexus, General Motors, Ford/Lincoln, Nissan/Infiniti and
Honda/Acura brands. Over 85% of BHA’s revenues are from dealerships representing these manufacturers.
The retail automotive industry is highly competitive. BHA faces competition from other large public and private dealershipgroups, as well as individual franchised dealerships and competition via the Internet. Given the pricing transparency available via theInternet, and the fact that franchised dealers acquire vehicles from the manufacturers on the same terms irrespective of volume, thelocation and quality of the dealership facility, customer service and transaction speed are key differentiators in attracting customers.
BHA’s overall relationships with the automobile manufacturers are governed by framework agreements. The frameworkagreements contain provisions relating to the management, operation, acquisition and the ownership structure of BHA’s dealerships.
Failure to meet the terms of these agreements could adversely impact BHA’s ability to acquire additional dealerships representing
those manufacturers. Additionally, these agreements contain limitations on the number of dealerships from a specific manufacturer that
may be owned by BHA.
Individual dealerships operate under franchise agreements with the manufacturer, which grants the dealership entity anon-exclusive right to sell the manufacturer’s brand of vehicles and offer related parts and service within a specified market area, as
well as the right to use the manufacturer’s trademarks. The agreements contain various requirements and restrictions related to the
management and operation of the franchised dealership and provide for termination of the agreement by the manufacturer or
non-renewal for a variety of causes. The states generally have automotive dealership franchise laws that provide substantial protection
to the franchisee, and it is difficult for a manufacturer to terminate or not renew a franchise agreement outside of bankruptcy or with“good cause” under the applicable state franchise law.
BHA owns facilities with approximately 6.0 million square feet of space and approximately 970 acres of land that are utilized in
its operations. BHA also develops, underwrites and administers various vehicle protection plans as well as life and accident and healthinsurance plans sold to consumers through BHA’s dealerships and third party dealerships. BHA also develops proprietary training
programs and materials, and provides ongoing monitoring and training of the dealership’s finance and insurance personnel.

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Home furnishings retailing
The home furnishings businesses consist of Nebraska Furniture Mart (“NFM”), R.C. Willey Home Furnishings (“R.C. Willey”),
Star Furniture Company (“Star”) and Jordan’s Furniture, Inc. (“Jordan’s”). These businesses offer a wide selection of furniture,
bedding and accessories. In addition, NFM and R.C. Willey sell a full line of major household appliances, electronics, computers andother home furnishings and offer customer financing to complement their retail operations. An important feature of each of thesebusinesses is their ability to control costs and to produce high business volume by offering significant value to their customers.
NFM operates its business from three large retail complexes with almost 2.8 million square feet of retail space and sizable
warehouse and administrative facilities in Omaha, Nebraska, Kansas City, Kansas and The Colony, Texas (a suburb of Dallas). NFM is
the largest furniture retailer in each of these markets. The Colony, Texas store opened in 2015 and includes retail space ofapproximately 560,000 square feet. NFM also owns Homemakers Furniture located in Des Moines, Iowa, which has approximately
215,000 square feet of retail space. R.C. Willey, based in Salt Lake City, Utah, is the dominant home furnishings retailer in theIntermountain West region of the United States. R.C. Willey currently operates 11 retail stores and three distribution centers. Thesefacilities include approximately 1.3 million square feet of retail space with six stores located in Utah, one store in Idaho, three stores in
Nevada and one store in California.
Jordan’s operates a retail furniture business from six locations with approximately 770,000 square feet of retail space in stores
located in Massachusetts, New Hampshire, Rhode Island and Connecticut. The retail stores are supported by an 800,000 square footdistribution center in Taunton, Massachusetts. Jordan’s is the largest furniture retailer, as measured by sales, in Massachusetts and New
Hampshire. Jordan’s is well known in its markets for its unique store arrangements and advertising campaigns. Star’s retail facilities
include about 700,000 square feet of retail space in 11 locations in Texas with eight in Houston. Star maintains a dominant position ineach of its markets.
Other retailing
Borsheim Jewelry Company, Inc. (“Borsheims”) operates from a single store in Omaha, Nebraska. Borsheims is a high volumeretailer of fine jewelry, watches, crystal, china, stemware, flatware, gifts and collectibles. Helzberg’s Diamond Shops, Inc.
(“Helzberg”) is based in North Kansas City, Missouri, and operates a chain of 213 retail jewelry stores in 36 states, which includes
approximately 460,000 square feet of retail space. Helzberg’s stores are located in malls, lifestyle centers, power strip centers andoutlet malls, and all stores operate under the name Helzberg Diamonds® or Helzberg Diamonds Outlet®. The Ben Bridge Corporation(“Ben Bridge Jeweler”), based in Seattle, Washington, operates a chain of 93 upscale retail jewelry stores located in 11 states primarily
in the Western United States and in British Columbia, Canada. Forty-four of its retail locations are concept stores that sell only
PANDORA jewelry. Principal products include finished jewelry and timepieces. Ben Bridge Jeweler stores are located primarily inmajor shopping malls.
See’s Candies (“See’s”) produces boxed chocolates and other confectionery products with an emphasis on quality anddistinctiveness in two large kitchens in Los Angeles and San Francisco and one smaller facility in Burlingame, California. See’s
operates approximately 245 retail and quantity discount stores located mainly in California and other Western states. See’s revenues
are highly seasonal with nearly half of its annual revenues earned in the fourth quarter.
The Pampered Chef, Ltd. (“Pampered Chef”) is a premier direct seller of distinctive high quality kitchenware products with
operations in the United States, Canada and Germany. Pampered Chef’s product portfolio consists of approximately 400 Pampered
Chef® branded kitchenware items in categories ranging from stoneware and cutlery to grilling and entertaining. Pampered Chef’s
products are available online as well as through a sales force of independent cooking consultants.
Oriental Trading Company (“OTC”) is a leading multi-channel retailer and online destination for value-priced party supplies, artsand crafts, toys and novelties, school supplies and educational games. OTC, headquartered in Omaha, Nebraska, serves a broad base ofnearly four million customers annually, including consumers, schools, churches, non-profit organizations, medical and dental offices
and other businesses. OTC offers over 50,000 products on its websites, and utilizes sophisticated digital and print marketing efforts.
In April 2015, Berkshire acquired Detlev Louis Motorrad (“Louis”) which is headquartered in Hamburg, Germany. Louis is aleading retailer of motorcycle apparel and equipment in Europe. Louis carries over 32,000 different products from more than 600
manufacturers, primarily covering the clothing, technical equipment and leisure markets. Louis has over 70 stores in Germany andAustria and also sells through catalogs and via the Internet throughout most of Europe.

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Finance and Financial Products
Berkshire’s finance and financial products activities include an integrated manufactured housing and finance business,transportation equipment leasing and furniture leasing. Berkshire’s finance and financial products businesses employ approximately
25,600 people in the aggregate. Information concerning these activities follows.
Clayton Homes
Clayton Homes, Inc. (“Clayton”), headquartered near Knoxville, Tennessee, is a vertically integrated housing company utilizing
manufactured, modular and site built methods. Clayton’s homes are marketed in 48 states through a network of over 2,000 retailers,
including 353 company-owned home centers and 118 subdivisions. Home finance and insurance products are offered through its
subsidiaries primarily to purchasers of manufactured and modular homes.
In 2015, Clayton acquired its first site builder and has since added four additional site builders. Clayton plans to continue to seek
acquisitions that fit its business model. Clayton delivered approximately 49,000 homes in 2017 at various price points. Clayton
competes based on price, service, delivery capabilities and product performance and considers the ability to make financing available
to retail purchasers a factor affecting the market acceptance of its products.
Clayton’s financing programs support company-owned home centers and select independent retailers. Proprietary loan
underwriting guidelines have been developed and include ability to repay calculations, including debt to income limits, considerationof residual income and credit score requirements, which are considered in evaluating loan applicants. Currently, approximately 70% of
the loan originations are home-only loans and the remaining 30% have land as additional collateral. The average down payment isapproximately 15%, which may be from cash, trade or land equity. Certain loan types require an independent third-party valuation;
additionally, if land is involved in the transaction it generally is independently appraised in order to establish the value of the land onlyor the home and the land as a package. Originated loans are at fixed rates and for fixed terms. Loans outstanding include
non-government originations, bulk purchases of contracts and notes from banks and other lenders. Clayton also provides inventoryfinancing to certain independent retailers and community operators and services housing contracts and notes that were not purchased ororiginated. The bulk contract purchases and servicing arrangements may relate to the portfolios of other lenders or finance companies,
governmental agencies, or other entities that purchase and hold housing contracts and notes. Clayton also acts as an agent on physicaldamage insurance policies, homebuyer protection plan policies and other programs.
Transportation Equipment Leasing
UTLX Company (“UTLX”), headquartered in Chicago, Illinois, operates railcar, crane, intermodal tank container, manufacturing
and service businesses under several brand names. Union Tank Car is a leading designer, builder and full-service lessor of tank carsand other specialized railcars. Union Tank Car and its Canadian affiliate Procor own a fleet of over 130,000 railcars which they lease tochemical, petrochemical, energy and agricultural/food customers across North America, supported by railcar repair facilities andmobile units. Union Tank Car also manufactures tank cars in two U.S. plants. Sterling Crane located in Canada and the U.S. and FreoGroup located in Australia are major mobile crane service providers with a total fleet of approximately 1,000 cranes primarily serving
energy, mining and petrochemical markets. EXSIF Worldwide is a leading international lessor of intermodal tank containers with afleet of approximately 50,000 units primarily serving chemical producers and logistics operators.
UTLX has a large number of customers diversified both geographically and across industries. UTLX, while subject to cyclicality
and significant competition in all of its markets, competes by offering a broad range of high quality products and services targeted at its
niche markets from geographically strategic locations. Railcars and intermodal tank containers are usually leased for multiple-year
terms and most of the leases are renewed upon expiration. As a result of selective ongoing capital investment and high maintenancestandards, utilization rates (the number of units on lease to total units available) of UTLX’s railcar, crane and intermodal tank container
equipment are generally relatively high. Following the downturn of oil and gas related markets in recent years, renewal rental rates
have declined in each of these markets and has precipitated a decline in utilization in UTLX’s railcar leasing business, which has ameaningful effect on UTLX. While tank cars operate in a highly regulated environment in North America, regulatory changes are notexpected to materially impact UTLX’s operational capability, competitive position, or financial strength.
XTRA Corporation (“XTRA”), headquartered in St. Louis, Missouri, is a leading transportation equipment lessor operating underthe XTRA Lease® brand name. XTRA manages a diverse fleet of approximately 81,000 units located at 51 facilities throughout theUnited States. The fleet includes over-the-road and storage trailers, chassis, temperature controlled vans and flatbed trailers. XTRA is
one of the largest lessors (in terms of units available) of over-the-road trailers in North America. Transportation equipment customers
lease equipment to cover cyclical, seasonal and geographic needs and as a substitute for purchasing equipment. Therefore, as aprovider of marginal capacity to its customers, XTRA’s utilization rates and operating results tend to be cyclical. In addition,transportation providers often use leasing to maximize their asset utilization and reduce capital expenditures. By maintaining a large
fleet, XTRA is able to provide customers with a broad selection of equipment and quick response times.

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Other financial activities
CORT Business Services Corporation is the leading national provider of rental relocation services including rental furniture,accessories and related services in the “rent-to-rent” market of the furniture rental industry. BH Finance LLC invests in fixed-income
and equity instruments.
Additional information with respect to Berkshire’s businesses
Revenue, earnings before taxes and identifiable assets attributable to Berkshire’s reportable business segments are included in
Note 23 to Berkshire’s Consolidated Financial Statements contained in Item 8, Financial Statements and Supplementary Data.
Additional information regarding Berkshire’s investments in fixed maturity and equity securities is included in Notes 3 and 4,
respectively, to Berkshire’s Consolidated Financial Statements.
Since June 2013, Berkshire has maintained significant investments in H.J. Heinz Holding Corporation (now The Kraft Heinz
Company). Information concerning these investments is included in Note 5 to Berkshire’s Consolidated Financial Statements. Kraft
Heinz is one of the largest food and beverage companies in the world, with sales in approximately 190 countries and territories. Kraft
Heinz manufactures and markets food and beverage products, including condiments and sauces, cheese and dairy meals, meats,
refreshment beverages, coffee and other grocery products, throughout the world, under a host of iconic brands including Heinz, Kraft,
Oscar Mayer, Philadelphia, Velveeta, Lunchables, Planters, Maxwell House, Capri Sun, Ore-Ida, Kool-Aid and Jell-O.
Berkshire maintains a website (http://www.berkshirehathaway.com) where its annual reports, certain corporate governancedocuments, press releases, interim shareholder reports and links to its subsidiaries’ websites can be found. Berkshire’s periodic reports
filed with the SEC, which include Form 10-K, Form 10-Q, Form 8-K and amendments thereto, may be accessed by the public free ofcharge from the SEC and through Berkshire. Electronic copies of these reports can be accessed at the SEC’s website(http://www.sec.gov) and indirectly through Berkshire’s website (http://www.berkshirehathaway.com). Copies of these reports may
also be obtained, free of charge, upon written request to: Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, Attn:
Corporate Secretary. The public may read or obtain copies of these reports from the SEC at the SEC’s Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549 (1-800-SEC-0330).
Item 1A.

Risk Factors

Berkshire and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks anduncertainties in its business operations which are described below. The risks and uncertainties described below are not the only risks
we face. Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair ourbusiness operations.
We are dependent on a few key people for our major investment and capital allocation decisions.
Major investment decisions and all major capital allocation decisions are made by Warren E. Buffett, Chairman of the Board of
Directors and Chief Executive Officer, age 87, in consultation with Charles T. Munger, Vice Chairman of the Board of Directors, age
94. If for any reason the services of our key personnel, particularly Mr. Buffett, were to become unavailable, there could be a material
adverse effect on our operations. However, Berkshire’s Board of Directors has identified certain current Berkshire subsidiary managers
who, in their judgment, are capable of succeeding Mr. Buffett and has agreed on a replacement for Mr. Buffett should a replacement beneeded currently. The Board continually monitors this risk and could alter its current view regarding a replacement for Mr. Buffett in
the future. We believe that the Board’s succession plan, together with the outstanding managers running our numerous and highly
diversified operating units helps to mitigate this risk.
We need qualified personnel to manage and operate our various businesses.
In our decentralized business model, we need qualified and competent management to direct day-to-day business activities of ouroperating subsidiaries and to manage changes in future business operations due to changing business or regulatory environments. Ouroperating subsidiaries also need qualified and competent personnel in executing their business plans and serving their customers,
suppliers and other stakeholders. Our inability to recruit and retain qualified and competent managers and personnel could negatively
affect the operating results, financial condition and liquidity of our subsidiaries and Berkshire as a whole.

K-22

The past growth rate in Berkshire’s book value per share is not an indication of future results.
In the years since present management acquired control of Berkshire, our book value per share has grown at a highly satisfactoryrate. Because of the large size of our capital base (Berkshire shareholders’ equity was approximately $348 billion as of December 31,2017), our book value per share will very likely not increase in the future at a rate close to its past rate.
Investments are unusually concentrated and fair values are subject to loss in value.
We concentrate a high percentage of the investments of our insurance subsidiaries in a relatively small number of equity
securities and diversify our investment portfolios far less than is conventional in the insurance industry. A significant decline in the fairvalues of our larger investments may produce a material decline in our consolidated shareholders’ equity and our consolidated bookvalue per share. Beginning in 2018, all changes in the fair values of equity securities (whether realized or unrealized) will berecognized as gains or losses in our consolidated statement of earnings. Accordingly, significant declines in the fair values of thesesecurities will produce significant declines in our reported earnings.
Since a large percentage of our equity securities are held by our insurance subsidiaries, significant decreases in the fair values ofthese investments will produce significant declines in statutory surplus. Our large statutory surplus is a competitive advantage, and amaterial decline could have a materially adverse effect on our claims-paying ability ratings and our ability to write new insurance
business thus potentially reducing our future underwriting profits.
Competition and technology may erode our business franchises and result in lower earnings.
Each of our operating businesses face intense competitive pressures within markets in which they operate. While we manage ourbusinesses with the objective of achieving long-term sustainable growth by developing and strengthening competitive advantages,
many factors, including market and technology changes, may erode or prevent the strengthening of competitive advantages.
Accordingly, future operating results will depend to some degree on whether our operating units are successful in protecting or
enhancing their competitive advantages. If our operating businesses are unsuccessful in these efforts, our periodic operating results inthe future may decline.
Deterioration of general economic conditions may significantly reduce our operating earnings and impair our ability to access
capital markets at a reasonable cost.
Our operating businesses are subject to normal economic cycles affecting the economy in general or the industries in which they
operate. To the extent that the economy deteriorates for a prolonged period of time, one or more of our significant operations could bematerially harmed. In addition, our utilities and energy businesses and our railroad business regularly utilize debt as a component of
their capital structures. These businesses depend on having access to borrowed funds through the capital markets at reasonable rates.
To the extent that access to the capital markets is restricted or the cost of funding increases, these operations could be adversely
affected.
Terrorist acts could hurt our operating businesses.
A successful (as defined by the aggressor) cyber, biological, nuclear or chemical attack could produce significant losses to ourworldwide operations. Our business operations could be adversely affected directly through the loss of human resources or destructionof production facilities and information systems. This is a risk that we share with all businesses.
Regulatory changes may adversely impact our future operating results.
In recent years, partially in response to financial markets crises, global economic recessions, and social and environmental issues,
regulatory initiatives have accelerated in the United States and abroad. Such initiatives address for example, the regulation of banks
and other major financial institutions, environmental and global-warming matters and health care reform. These initiatives impact not
only our regulated insurance, energy and railroad transportation businesses, but also our manufacturing, services, retailing andfinancing businesses. Increased regulatory compliance costs could have a significant negative impact on our operating businesses, aswell as on the businesses in which we have a significant but not controlling economic interest. We cannot predict whether suchinitiatives will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

K-23

Cyber security risks
We rely on information technology in virtually all aspects of our business. Like those of many large businesses, certain of our
information technology systems have been subject to computer viruses, malicious codes, unauthorized access, phishing efforts,
denial-of-service attacks and other cyber attacks and we expect to be subject to similar attacks in the future as such attacks become
more sophisticated and frequent. A significant disruption or failure of our information technology systems could result in service
interruptions, safety failures, security violations, regulatory compliance failures, an inability to protect information and assets against
intruders, and other operational difficulties. Attacks perpetrated against our information systems could result in loss of assets andcritical information and expose us to remediation costs and reputational damage.
Although we have taken steps intended to mitigate these risks, including business continuity planning, disaster recovery planningand business impact analysis, a significant disruption or cyber intrusion could lead to misappropriation of assets or data corruption andcould adversely affect our results of operations, financial condition and liquidity. Additionally, if we are unable to acquire, implement
or protect rights around new technology, we may suffer a competitive disadvantage, which could also have an adverse effect on our
results of operations, financial condition and liquidity.
Cyber attacks could further adversely affect our ability to operate facilities, information technology and business systems, orcompromise confidential customer and employee information. Political, economic, social or financial market instability or damage toor interference with our operating assets, customers or suppliers may result in business interruptions, lost revenues, higher commodity
prices, disruption in fuel supplies, lower energy consumption, unstable markets, increased security, repair or other costs, may
materially adversely affect us in ways that cannot be predicted at this time. Any of these risks could materially affect our consolidated
financial results. Furthermore, instability in the financial markets resulting from terrorism, sustained or significant cyber attacks, or war
could also have a material adverse effect on our ability to raise capital. These are risks we share with all businesses.
Derivative contracts may require significant cash settlement payments and result in significant losses in the future.
We have assumed the risk of potentially significant losses under equity index put option contracts. Although we received
considerable premiums as compensation for accepting these risks, there is no assurance that the premiums we received will exceed ouraggregate settlement payments. Risks of losses under our equity index put option contracts are based on declines in equity prices ofstocks comprising certain major stock indexes. When these contracts expire beginning in 2018, we could be required to makesignificant payments if equity index prices are significantly below the strike prices specified in the contracts.
Equity index put option contracts are recorded at fair value in our Consolidated Balance Sheet and the periodic changes in fairvalues are reported in earnings. Currently, the valuations of these contracts are primarily dependent on the related index values.
Material decreases in index values may result in material losses in periodic earnings.
Risks unique to our regulated businesses
Our tolerance for risk in our insurance businesses may result in significant underwriting losses.
When properly paid for the risk assumed, we have been and will continue to be willing to assume more risk from a single event
than any other insurer has knowingly assumed. Accordingly, we could incur a significant loss from a single event. We may also write
coverages for losses arising from acts of terrorism. We attempt to take into account all possible correlations and avoid writing groupsof policies from which pre-tax losses might aggregate above $10 billion. Currently, we estimate that our aggregate exposure from asingle event under outstanding policies is significantly below $10 billion. However, despite our efforts, losses may aggregate inunanticipated ways. Our tolerance for significant insurance losses may result in lower reported earnings (or net losses) in a future
period.
The degree of estimation error inherent in the process of estimating property and casualty insurance loss reserves may result insignificant underwriting losses.
The principal cost associated with the property and casualty insurance business is claims. In writing property and casualty
insurance policies, we receive premiums today and promise to pay covered losses in the future. However, it will take decades before all
claims that have occurred as of any given balance sheet date will be reported and settled. Although we believe that liabilities for unpaid
losses are adequate, we will not know whether these liabilities or the premiums charged for the coverages provided were sufficientuntil well after the balance sheet date. Estimating insurance claim costs is inherently imprecise. Our estimated unpaid losses arisingunder contracts covering property and casualty insurance risks are large ($104 billion at December 31, 2017) so even small percentage
increases to the aggregate liability estimate can result in materially lower future periodic reported earnings.

K-24

Changes in regulations and regulatory actions can adversely affect our operating results and our ability to allocate capital.
Our insurance businesses are subject to regulation in the jurisdictions in which we operate. Such regulations may relate to among
other things, the types of business that can be written, the rates that can be charged for coverage, the level of capital that must be
maintained, and restrictions on the types and size of investments that can be made. Regulations may also restrict the timing and amountof dividend payments to Berkshire by these businesses. Accordingly, changes in regulations related to these or other matters or
regulatory actions imposing restrictions on our insurance companies may adversely impact our results of operations and restrict ourability to allocate capital.
Our railroad business conducted through BNSF is also subject to a significant number of governmental laws and regulations withrespect to rates and practices, taxes, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure
to comply with applicable laws and regulations could have a material adverse effect on BNSF’s business. Governments may change
the legislative and/or regulatory framework within which BNSF operates without providing any recourse for any adverse effects thatthe change may have on the business. For example, federal legislation enacted in 2008 and amended in 2015 mandates theimplementation of positive train control technology by December 31, 2018, on certain mainline track where inter-city and commuter
passenger railroads operate and where toxic-by-inhalation (“TIH”) hazardous materials are transported. Complying with legislative andregulatory changes may pose significant operating and implementation risks and require significant capital expenditures.
BNSF derives significant amounts of revenue from the transportation of energy-related commodities, particularly coal. To theextent that changes in government policies limit or restrict the usage of coal as a source of fuel in generating electricity or alternate
fuels, such as natural gas, displace coal on a competitive basis, revenues and earnings could be adversely affected. As a common
carrier, BNSF is also required to transport TIH chemicals and other hazardous materials. An accidental release of hazardous materials
could expose BNSF to significant claims, losses, penalties and environmental remediation obligations. Changes in the regulation of therail industry could negatively impact BNSF’s ability to determine prices for rail services and to make capital improvements to its rail
network, resulting in an adverse effect on our results of operations, financial condition or liquidity.
Our utilities and energy businesses operated under BHE are highly regulated by numerous federal, state, local and foreign
governmental authorities in the jurisdictions in which they operate. These laws and regulations are complex, dynamic and subject to
new interpretations and/or change. Regulations affect almost every aspect of our utilities and energy businesses. Regulations broadly
apply and may limit management’s ability to independently make and implement decisions regarding numerous matters including
acquiring businesses; constructing, acquiring or disposing of operating assets; operating and maintaining generating facilities andtransmission and distribution system assets; complying with pipeline safety and integrity and environmental requirements; setting rates
charged to customers; establishing capital structures and issuing debt or equity securities; transacting between our domestic utilities
and our other subsidiaries and affiliates; and paying dividends or similar distributions. Failure to comply with or reinterpretations ofexisting regulations and new legislation or regulations, such as those relating to air and water quality, renewable portfolio standards,
cyber security, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste
disposal, protected species and other environmental matters, or changes in the nature of the regulatory process may have a significant
adverse impact on our financial results.
Our railroad business requires significant ongoing capital investment to improve and maintain its railroad network so thattransportation services can be safely and reliably provided to customers on a timely basis. Our utilities and energy businesses also
require significant amounts of capital to construct, operate and maintain generation, transmission and distribution systems to meet theircustomers’ needs and reliability criteria. Additionally, system assets may need to be operational for long periods of time in order tojustify the financial investment. The risk of operational or financial failure of capital projects is not necessarily recoverable throughrates that are charged to customers. Further, a significant portion of costs of capital improvements are funded through debt issued by
BNSF and BHE and their subsidiaries. Disruptions in debt capital markets that restrict access to funding when needed could adversely
affect the results of operations, liquidity and capital resources of these businesses.
Item 1B.

Unresolved Staff Comments

None.
Item 2.

Description of Properties

The properties used by Berkshire’s business segments are summarized in this section. Berkshire’s railroad and utilities andenergy businesses, in particular, utilize considerable physical assets in their businesses.
Railroad Business—Burlington Northern Santa Fe
Through BNSF Railway, BNSF operates approximately 32,500 route miles of track (excluding multiple main tracks, yard tracks
and sidings) in 28 states, and also operates in three Canadian provinces. BNSF owns over 23,000 route miles, including easements, andoperates over 9,000 route miles of trackage rights that permit BNSF to operate its trains with its crews over other railroads’ tracks. The
total BNSF system, including single and multiple main tracks, yard tracks and sidings, consists of over 50,000 operated miles of track,
all of which are owned by or held under easement by BNSF except for over 10,000 miles operated under trackage rights.

K-25

BNSF operates various facilities and equipment to support its transportation system, including its infrastructure, locomotives andfreight cars. It also owns or leases other equipment to support rail operations, such as vehicles. Support facilities for rail operations
include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, acentralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas,
regional dispatching centers, computers, telecommunications equipment, signal systems and other support systems. Transfer facilities
are maintained for rail-to-rail as well as intermodal transfer of containers, trailers and other freight traffic and include approximately 25
intermodal hubs located across the system. BNSF owns or holds under non-cancelable leases exceeding one year approximately 8,000
locomotives and 71,000 freight cars, in addition to maintenance of way and other equipment.
In the ordinary course of business, BNSF makes significant capital investments to expand and improve its railroad network.
BNSF incurs significant costs in repairing and maintaining its properties. In 2017, BNSF recorded approximately $2 billion in repairs
and maintenance expense.
Utilities and Energy Businesses—Berkshire Hathaway Energy
BHE’s energy properties consist of the physical assets necessary to support its electricity and natural gas businesses. Properties
of BHE’s electricity businesses include electric generation, transmission and distribution facilities, as well as coal mining assets that
support certain of BHE’s electric generating facilities. Properties of BHE’s natural gas businesses include natural gas distribution
facilities, interstate pipelines, storage facilities, compressor stations and meter stations. The transmission and distribution assets areprimarily within each of BHE’s utility service territories. In addition to these physical assets, BHE has rights-of-way, mineral rights
and water rights that enable BHE to utilize its facilities. Pursuant to separate financing agreements, a majority of these properties arepledged or encumbered to support or otherwise provide the security for the related subsidiary debt. BHE or its affiliates own or haveinterests in the following types of electric generating facilities at December 31, 2017:

Energy Source

EntityLocation by SignificanceNatural gas
Coal

PacifiCorp, MEC, NV Energy and BHE
Renewables
PacifiCorp, MEC and NV Energy

Wind

PacifiCorp, MEC and BHE Renewables

Solar

BHE Renewables and NV Energy

Hydroelectric

PacifiCorp, MEC and BHE Renewables

NuclearGeothermal

MEC
PacifiCorp and BHE Renewables

Nevada, Utah, Iowa, Illinois, Washington,
Oregon, Texas, New York, and Arizona
Wyoming, Iowa, Utah, Arizona, Nevada,Colorado and Montana
Iowa, Wyoming, Nebraska, Washington,
California, Texas, Oregon, Illinois andKansasCalifornia, Texas, Arizona, Minnesota
and Nevada
Washington, Oregon, The Philippines,
Idaho, California, Utah, Hawaii,Montana, Illinois and Wyoming
Illinois
California and Utah
Total

(1)

FacilityNet
Capacity(MW) (1)Net
Owned
Capacity(MW) (1)10,91910,640

16,232

9,158

6,533

6,524

1,675

1,527

1,299
1,820
370

1,277
455
370

38,84829,951

Facility Net Capacity (MW) represents the lesser of nominal ratings or any limitations under applicable interconnection, powerpurchase, or other agreements for intermittent resources and the total net dependable capability available during summer
conditions for all other units. An intermittent resource’s nominal rating is the manufacturer’s contractually specified capability(in MW) under specified conditions. Net Owned Capacity indicates BHE’s ownership of Facility Net Capacity.

As of December 31, 2017, BHE’s subsidiaries also have electric generating facilities that are under construction in Iowa, Illinois
and Minnesota having total Facility Net Capacity and Net Owned Capacity of 1,902 MW.
PacifiCorp, MEC and NV Energy own electric transmission and distribution systems, including approximately 24,800 miles oftransmission lines and approximately 1,690 substations, gas distribution facilities, including approximately 26,800 miles of gas mains
and service lines, and an estimated 39 million tons of recoverable coal reserves in mines owned or leased in Wyoming and Colorado.
The electricity distribution network of Northern Powergrid (Northeast) and Northern Powergrid (Yorkshire) includes
approximately 17,400 miles of overhead lines, approximately 42,000 miles of underground cables and approximately 750 major
substations. AltaLink’s electricity transmission system includes approximately 8,100 miles of transmission lines and approximately
310 substations.

K-26

Northern Natural’s pipeline system consists of approximately 14,700 miles of natural gas pipelines, including approximately
6,300 miles of mainline transmission pipelines and approximately 8,400 miles of branch and lateral pipelines. Northern Natural’send-use and distribution market area includes points in Iowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and Illinois
and its natural gas supply and delivery service area includes points in Kansas, Texas, Oklahoma and New Mexico. Storage services areprovided through the operation of one underground natural gas storage field in Iowa, two underground natural gas storage facilities in
Kansas and two liquefied natural gas storage peaking units, one in Iowa and one in Minnesota.
Kern River’s system consists of approximately 1,700 miles of natural gas pipelines, including approximately 1,400 miles ofmainline section, including 100 miles of lateral pipelines, and approximately 300 miles of common facilities. Kern River owns theentire mainline section, which extends from the system’s point of origination in Wyoming through the Central Rocky Mountains into
California.
Other Segments
The physical properties used by Berkshire’s other significant business segments are summarized below:

Business

Insurance:
GEICO
Berkshire Hathaway
Reinsurance Group

Berkshire Hathaway
Primary Group

Manufacturing

Country

Location

Type of Property/Facility

Numberof
Properties

Owned/
Leased

12
108

Owned
LeasedU.S.

Chevy Chase, MD and 5 other states Offices
Various locations in 38 states
OfficesU.S.

Stamford, CT

Offices1

Owned

Various locations

Offices

31

LeasedNon-U.S.

Cologne, Germany
Various locations in 22 countries

Offices
Offices

1
35

Owned
LeasedU.S.

Omaha, NE, Fort Wayne, IN,
Offices
Princeton, NJ, Wilkes-Barre, PA andOklahoma City, OK
Various locations in 23 states
Offices

7

Owned

74

LeasedNon-U.S

Locations in 7 countries

Offices

10

LeasedU.S.

Various locations

Manufacturing plants
Manufacturing plants
Offices/Warehouses
Offices/Warehouses
Retail/Showroom
Retail/Showroom

481
143
223
403
16
49

Owned
LeasedOwned
LeasedOwned
LeasedNon-U.S.

Various locations in over 60
countries

Manufacturing plants
Manufacturing plants
Offices/Warehouses
Offices/Warehouses
Retail/Showroom

202
132
78
526
5

Owned
LeasedOwned
LeasedLeasedK-27

Business

ServiceCountry

Location

Type of Property/Facility

Numberof
Properties

Owned/
LeasedU.S.

Various locations

Training facilities/Hangars
Training facilities/Hangars
Offices/Distribution
Offices/Distribution
Production facilities
Production facilities

19
130
56
159
26
3

Owned
LeasedOwned
LeasedOwned
LeasedNon-U.S.

Various locations in 33 countries

Offices/Distribution/
Hangars/Training facilities
Offices/Distribution/
Hangars/Training facilities

19

Owned

129

LeasedMcLane Company

U.S.

Various locations

Distribution centers/Offices
Distribution centers/Offices

54
33

Owned
LeasedRetailing

U.S.

Various locations

Offices/Warehouses/Plants
Offices/Warehouses
Retail/Showroom
Retail/Showroom

29
27
143
546

Owned
LeasedOwned
LeasedNon-U.S.

Germany
Locations in 6 countries

Office/Warehouse
Retail/Offices

1
97

Owned
LeasedU.S.

Various locations

Manufacturing plants
Manufacturing plants
Offices/Warehouses
Offices/Warehouses
Leasing/Showroom/Retail
Leasing/Showroom/Retail
Housing communities

67
6
22
73
234
255
118

Owned
LeasedOwned
LeasedOwned
LeasedOwned

Non-U.S.

Various locations in 12 countries

Manufacturing plants
Manufacturing plants
Offices/Warehouses
Offices/Warehouses

22
32
3
25

Owned
LeasedOwned
LeasedFinance & Financial
Products

K-28

Item 3.

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 androutine 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
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 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-K.
Executive Officers of the Registrant
Following is a list of the Registrant’s named executive officers:
Name

Age

Position with Registrant

Since

Warren E. Buffett
Charles T. Munger
Gregory E. Abel
Ajit Jain
Marc D. Hamburg

87
94
55
66
68

Chairman and Chief Executive Officer
Vice Chairman
Vice Chairman – Non-Insurance Operations
Vice Chairman – Insurance Operations
Senior Vice-President – Chief Financial Officer

1970
1978
2018
2018
1992

Each executive officer serves, in accordance with the by-laws of the Registrant, until the first meeting of the Board of Directors
following the next annual meeting of shareholders and until a successor is chosen and qualified or until such executive officer sooner
dies, resigns, is removed or becomes disqualified.

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, 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 andpossible 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 anumber of factors. The principal risk factors that could cause our actual performance and future events and actions to differ materiallyfrom such forward-looking statements include, but are not limited to, changes in market prices of our investments in fixed maturity andequity 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, changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries, changes infederal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries inwhich we do business.

K-29

Part II
Item 5.

Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity
Securities

Market Information
Berkshire’s Class A and Class B common stock are listed for trading on the New York Stock Exchange, trading symbol: BRK.A
and BRK.B. The following table sets forth the high and low sales prices per share, as reported on the New York Stock Exchange
Composite List during the periods indicated:
2017

2016

Class AFirst Quarter . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . .

Class BClass AClass B

High

Low

High

Low

High

Low

High

Low

$266,445
257,944
275,945
301,000$237,983
242,180
252,254
270,250$177.86
171.95184.00200.50$158.61
160.93168.00180.44$215,130
221,985
226,490
250,786$186,900
205,074
211,500
213,030$143.40148.03151.05167.25$123.55
136.65140.95141.92

Shareholders
Berkshire had approximately 2,100 record holders of its Class A common stock and 19,800 record holders of its Class B
common stock at February 12, 2018. Record owners included nominees holding at least 410,000 shares of Class A common stock and1,339,000,000 shares of Class B common stock on behalf of beneficial-but-not-of-record owners.
Dividends
Berkshire has not declared a cash dividend since 1967.
Common Stock Repurchase Program
Berkshire’s Board of Directors has approved a common stock repurchase program permitting Berkshire to repurchase its Class A
and Class B shares at prices no higher than a 20% premium over the book value of the shares. The program allows share repurchases in
the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased.
There were no share repurchases under the program in 2017.
Stock Performance Graph
The following chart compares the subsequent value of $100 invested in Berkshire common stock on December 31, 2012 with asimilar investment in the Standard & Poor’s 500 Stock Index and in the Standard & Poor’s Property – Casualty Insurance Index.**
260

H
E

240

B

220

248

Berkshire Hathaway Inc.
S&P 500 Index*
S&P 500 Property & Casualty Insurance Index*

221

203

DOLLARS

200
182

208

175

180

168
153

160

171

160
138

140

151
147

132
132

120
100

100
80
2012

2013

2014

2015

2016

2017

*

Cumulative return for the Standard & Poor’s indices based on reinvestment of dividends.

**

It would be difficult to develop a peer group of companies similar to Berkshire. The Corporation owns subsidiaries engaged
in a number of diverse business activities of which the most important is the property and casualty insurance business and,accordingly, management has used the Standard & Poor’s Property—Casualty Insurance Index for comparative purposes.

K-30

Item 6.

Selected Financial Data
Selected Financial Data for the Past Five Years(dollars in millions except per-share data)
2017

2016

2015

2014

2013

$ 60,597
125,963
39,943
5,144$ 45,881
119,489
37,542
4,725$ 41,294
107,001
40,004
5,357$ 41,253
97,097
40,6905,052$ 36,684
92,99334,757
5,196

8,362
2,128

7,663
8,304

6,940
10,347

6,526
4,081

6,109
6,673

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 242,137$ 223,604$ 210,943$ 194,699$ 182,412

Earnings:
Net earnings attributable to Berkshire Hathaway (1) . . .

$ 44,940$ 24,074$ 24,083$ 19,872$ 19,476

Net earnings per share attributable to Berkshire
Hathaway shareholders (2) . . . . . . . . . . . . . . . . . . . .

$ 27,326$ 14,645$ 14,656$ 12,092$ 11,850$ 702,095$ 620,854$ 552,257$ 525,867$ 484,624

27,32462,17813,08527,17559,085
15,384

14,59957,73911,951

11,85455,306
12,73012,396
46,39913,122

348,296

282,070

254,619239,239

220,959

1,645

1,644

1,643

1,643

1,644

$ 211,750$ 171,542$ 154,935$ 145,619$ 134,407

Revenues:
Insurance premiums earned . . . . . . . . . . . . . . . . . . . . . .
Sales and service revenues . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy revenues . . . . . . . . . . . . .
Interest, dividend and other investment income . . . . . .
Finance and financial products sales and service
revenues and interest and dividend income . . . . . . .
Investment and derivative gains/losses . . . . . . . . . . . . .

Year-end data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings:
Insurance and other . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . .
Berkshire Hathaway shareholders’ equity (3) . . . . . . . .
Class A equivalent common shares outstanding, inthousands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway shareholders’ equity per
outstanding Class A equivalent commonshare (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)

(2)

(3)

Includes after-tax investment and derivative gains/losses of $1.4 billion in 2017, $6.5 billion in 2016, $6.7 billion in 2015,$3.3 billion in 2014 and $4.3 billion in 2013. Net earnings in 2017 includes a one-time net benefit of $29.1 billion attributable
to the enactment of the Tax Cuts and Jobs Act of 2017.
Represents net earnings per average equivalent Class A share outstanding. Net earnings per average equivalent Class B
common share outstanding is equal to 1/1,500 of such amount.
Beginning in 2017, discounting of certain workers’ compensation claim liabilities for financial reporting purposes was
discontinued. The effect of the change was immaterial to the Consolidated Statements of Earnings from 2013 through 2016,
and such amounts were not restated. The after-tax net discount as of December 31, 2016 of $931 million was charged toretained earnings as of the earliest period presented. Accordingly, shareholders’ equity and shareholders’ equity per Class A
equivalent common share for the years 2013-2016 have been restated from the amounts previously reported.

K-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Net earnings attributable to Berkshire Hathaway shareholders for each of the past three years are disaggregated in the table that
follows. Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests (in millions).
2017

2016

2015

Insurance – underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance – investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilities and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing, service and retailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment and derivative gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Cuts and Jobs Act of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,219)
3,917
3,959
2,083
6,208
1,335
1,377
(826)
29,106$ 1,370
3,636
3,569
2,287
5,631
1,427
6,497
(343)
—

$ 1,162
3,725
4,248
2,132
4,683
1,378
6,725
30
—

Net earnings attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . . . . . . .

$44,940$24,074$24,083

Through our subsidiaries, we engage in a number of diverse business activities. We manage our operating businesses on an
unusually decentralized basis. There are essentially no centralized or integrated business functions and there is minimal involvement by
our corporate headquarters in the day-to-day business activities of the operating businesses. Our senior corporate management teamparticipates 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. It also is responsible for establishing and monitoring Berkshire’s corporate
governance practices. The business segment data (Note 23 to the accompanying Consolidated Financial Statements) should be read in
conjunction with this discussion.
Our net earnings in 2017 included approximately $29.1 billion attributable to a one-time net benefit from the enactment of the
Tax Cuts and Jobs Act (“TCJA”) on December 22, 2017. See Note 16 to the Consolidated Financial Statements. This benefit included
approximately $29.6 billion related to a one-time non-cash reduction of our net deferred income tax liabilities that arose from thereduction in the statutory U.S. corporate income tax rate from 35% to 21%, as well as a net benefit of approximately $900 million
primarily from our earnings from Kraft Heinz, partly offset by a one-time income tax expense of approximately $1.4 billion payable
over eight years on the deemed repatriation of certain accumulated undistributed earnings of foreign subsidiaries. Due to theirsignificance, we presented these one-time effects as a distinct item in the preceding table. Accordingly, the after-tax figures presented
in the discussion of our various operating businesses and other activities in this section exclude the one-time effects of the TCJA.
Our insurance businesses generated after-tax losses from underwriting of $2.2 billion in 2017 compared to after-tax gains of$1.4 billion in 2016 and $1.2 billion in 2015. Underwriting results for 2017 included estimated pre-tax losses of approximately$3.0 billion ($1.95 billion after-tax), primarily attributable to three major hurricanes in the U.S. and Puerto Rico and wildfires in
California. Underwriting results in each year also included after-tax foreign currency exchange rate gains and losses from therevaluation of certain non-U.S. Dollar denominated reinsurance liabilities. In 2017, such after-tax losses were $295 million compared
to after-tax gains of $458 million in 2016 and $164 million in 2015.
After-tax earnings of our railroad business in 2017 were $4.0 billion, an increase of 10.9% compared to 2016, reflecting
increased unit volume. Our railroad business generated lower net earnings in 2016 compared to 2015, primarily due to a 5.0% decline
in unit volume. After-tax earnings of our utility and energy business in 2017 declined $204 million compared to 2016. Earnings in2017 were negatively affected by losses from the prepayment of certain long-term debt. After-tax earnings of our utilities and energy
businesses increased in 2016 compared to 2015, attributable to increased pre-tax earnings and a lower effective income tax rate.
After-tax earnings of our manufacturing, service and retailing businesses in 2017 were $6.2 billion, an increase of 10.2%
compared to 2016. Earnings in 2017 reflected comparatively higher earnings from several of our larger operations and the impact ofbusinesses acquired in 2016 and 2017. After-tax earnings in 2016 of our manufacturing, service and retailing businesses increased
compared to 2015, primarily due to earnings from Precision Castparts, which was acquired on January 29, 2016, partly offset bycomparatively lower overall earnings from the other businesses within this group.

K-32

Management’s Discussion and Analysis (Continued)
Results of Operations (Continued)
After-tax investment and derivative gains were approximately $1.4 billion in 2017, $6.5 billion in 2016 and $6.7 billion in
2015. The gains in 2016 included approximately $2.7 billion from the redemptions of our Wrigley and Kraft Heinz preferred stock
investments, sales of Dow Chemical common stock that we received upon conversion of our Dow Chemical preferred stock investment
and a non-cash gain of approximately $1.9 billion related to the exchange of Procter & Gamble (“P&G”) common stock for 100% of
the common stock of Duracell. Gains in 2015 included non-cash holding gains of approximately $4.4 billion in connection with ourinvestment in Kraft Heinz common stock.
After-tax unrealized gains in 2017 related to our investments in equity securities included in other comprehensive income wereapproximately $19 billion. Beginning in 2018, unrealized gains and losses on equity securities will be included in net earnings due to a
new accounting standard. We believe that investment and derivative gains/losses, whether realized from sales or unrealized fromchanges in market prices, are often meaningless in terms of understanding our reported results or evaluating our periodic economic
performance. Investment and derivative gains and losses have caused and will continue to cause significant volatility in our earnings.
Other earnings in 2017 and 2016 included after-tax foreign currency exchange rate gains and losses related to parent company
Euro-denominated debt. After-tax foreign exchange losses on our Euro-denominated debt were $655 million in 2017 compared toafter-tax gains of $159 million in 2016. In addition, other earnings includes earnings from our investment in Kraft Heinz.
Insurance—Underwriting
We engage in both primary insurance and reinsurance of property/casualty, life and health risks. In primary insurance activities,
we assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance
activities, we assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in
their own insuring activities. Our insurance and reinsurance businesses are GEICO, Berkshire Hathaway Reinsurance Group(“BHRG”) and Berkshire Hathaway Primary Group.
Our management views insurance businesses as possessing two distinct operations – underwriting and investing. Underwriting
decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman andCEO, Warren E. Buffett and Berkshire’s corporate investment managers. Accordingly, we evaluate performance of underwriting
operations without any allocation of investment income or investment gains/losses. We consider investment income as a component of
our aggregate insurance operating results. However, we consider investment gains and losses, whether realized or unrealized as
non-operating, based on our long-held philosophy of acquiring securities and holding those securities for long periods. Accordingly,
we believe that such gains and losses are not predictable or necessarily meaningful in understanding the operating results of our
insurance operations.
The timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly
with respect to our reinsurance businesses. Generally, we consider pre-tax catastrophe losses in excess of $100 million from a current
year event as significant, and we had six such events in 2017. There were no significant events in either 2016 or 2015. Changes in
estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years can alsosignificantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts
as of December 31, 2017 were approximately $104 billion. These estimates will be revised upward or downward in future periods,
which could produce significant decreases or increases to pre-tax earnings. 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 denominatedreinsurance liabilities of our U.S. based insurance subsidiaries due to foreign currency exchange rate fluctuations. Foreign currency
exchange rates can be volatile and the resulting impact on our underwriting earnings can be relatively significant.
Underwriting results of our insurance businesses are summarized below (in millions).
2017

2016

2015

Underwriting gain (loss):
GEICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Reinsurance Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Primary Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (310)(3,648)
719

$ 462
1,012
657

$ 460
553
824

Pre-tax underwriting gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,239)(1,020)

2,131
761

1,837
675

Net underwriting gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,219)$1,370$1,162K-33

Management’s Discussion and Analysis (Continued)
Insurance—Underwriting (Continued)
GEICO
GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District ofColumbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to thecompany via the Internet or over the telephone. A summary of GEICO’s underwriting results follows (dollars in millions).
2017
Amount2016%

Amount2015%%

Premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,547

Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29,441

100.0$ 25,483

100.0$ 22,718

100.0

Losses and loss adjustment expenses . . . . . . . . . . . . . . . . .
Underwriting expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,497
4,254

86.6
14.5

21,044
3,977

82.6
15.6

18,647
3,611

82.1
15.9

Total losses and expenses . . . . . . . . . . . . . . . . . . . . . . . . .

29,751

101.1

25,021

98.2

22,25898.0

Pre-tax underwriting gain (loss) . . . . . . . . . . . . . . . . . . . .

$

(310)

$ 26,309

Amount$462$ 23,378$

460

Premiums written in 2017 were $30.5 billion, an increase of 16.1% compared to 2016. Premiums earned in 2017 were$29.4 billion, exceeding 2016 by approximately $4.0 billion (15.5%). During 2017, our voluntary auto policies-in-force grew
approximately 8.6% and premiums per auto policy increased 6.9%. The increase in average premiums per policy was attributable torate increases, coverage changes and changes in state and risk mix. Voluntary auto new business sales in 2017 increased 10.5%
compared to 2016. Voluntary auto policies-in-force increased approximately 1,276,000 during 2017.
We incurred pre-tax underwriting losses in 2017, which included approximately $450 million from hurricanes Harvey andIrma. Our underwriting results in 2017 were also affected by increased average claims severities. Losses and loss adjustment expenses
in 2017 were $25.5 billion, an increase of approximately $4.5 billion (21.2%) compared to 2016. Our loss ratio (the ratio of losses andloss adjustment expenses to earned premiums) in 2017 increased 4.0 percentage points compared to 2016. Average claims severities
were higher in 2017 for property damage and collision coverages (four to six percent range) and bodily injury coverage (five to sevenpercent range). Claims frequencies in 2017 were relatively unchanged compared to 2016 for bodily injury coverage, decreased about
one percent for property damage and collision coverages and decreased about two to three percent for personal injury protection
coverage. Losses and loss adjustment expenses in 2017 also included pre-tax losses of $517 million from the re-estimation of liabilities
for prior years’ claims compared to pre-tax gains of $61 million in 2016 and $150 million in 2015.
Underwriting expenses increased $277 million (7.0%) compared to 2016. Our expense ratios (underwriting expenses topremiums earned) in 2017 declined 1.1 percentage points compared to 2016. The largest components of underwriting expenses are
employee-related (salaries and benefits) and advertising, which increased at lower rates than premiums earned.
Premiums written in 2016 increased 12.5% to $26.3 billion and premiums earned increased approximately $2.8 billion (12.2%)
to $25.5 billion, compared to 2015. These increases reflected voluntary auto policies-in-force growth of 7% and increased averagepremiums per auto policy. Voluntary auto new business sales in 2016 increased 10.9% compared to the prior year. Voluntary auto new
business growth accelerated over the last half of 2016 and, for the year, voluntary auto policies-in-force increased 974,000.
Losses and loss adjustment expenses incurred in 2016 increased $2.4 billion (12.9%) to $21.0 billion and our loss ratio in 2016
increased 0.5 percentage points compared to 2015. In 2016, we experienced increases in storm losses (primarily from hail andflooding) and claims severity, partly offset by the effects of premium rate increases. Claims frequencies in 2016 were relatively
unchanged from 2015 for property damage, collision, bodily injury and personal injury protection coverages. Average claims severities
were higher in 2016 for bodily injury, physical damage and collision coverages (four to six percent range). Underwriting expenses in2016 were $4.0 billion, an increase of $366 million (10.1%) over 2015. The increase in underwriting expenses in 2016 reflected theincrease in policies-in-force.

K-34

Management’s Discussion and Analysis (Continued)
Insurance—Underwriting (Continued)
Berkshire Hathaway Reinsurance GroupWe offer excess-of-loss and quota-share reinsurance coverages on property and casualty risks and life and health reinsurance toinsurers and reinsurers worldwide through several legal entities, led by National Indemnity Company (“NICO Group”), Berkshire
Hathaway Life Insurance Company of Nebraska (“BHLN Group”), and General Reinsurance Corporation, General Reinsurance AG
and General Re Life Corporation (collectively, “General Re Group”). We also periodically assume property and casualty risks underretroactive reinsurance contracts written through NICO. In addition, the BHLN Group writes periodic payment annuity contracts.
With the exception of our retroactive reinsurance and periodic payment annuity businesses, we strive to generate pre-tax
underwriting profits in all product lines. Time-value-of-money concepts are important elements in establishing prices for our
retroactive reinsurance and periodic payment annuity businesses due to the expected long durations of the liabilities. We expect toincur pre-tax underwriting losses from such businesses, primarily through deferred charge amortization and discount accretion charges.
Premiums received at inception under these contracts are often large, which are then available for investment. A summary of thepremiums and pre-tax underwriting results of our reinsurers follows (in millions).
Premiums written

Property/casualty . . . . . . . . . . . . .
Retroactive reinsurance . . . . . . . .
Life/health . . . . . . . . . . . . . . . . . .
Periodic payment annuity . . . . . .

Premiums earned

Pre-tax underwriting gain (loss)

2017

2016

2015

2017

2016

2015

2017

2016

2015

$ 7,713
10,755$ 6,993
1,254$ 7,4275$ 7,552
10,755$ 7,218
1,254$ 7,2215$(1,595)(1,330)

$ 895
(60)

$1,095(470)

18,468

8,247

7,432

18,307

8,472

7,226

(2,925)

835

625

4,846
898

4,588
1,082

4,665
1,286

4,808
898

4,587
1,082

4,670
1,286

(52)
(671)

305
(128)

130
(202)

5,744

5,670

5,951

5,706

5,669

5,956

(723)

177

(72)

$24,212$13,917$13,383$24,013$14,141$ 13,182$(3,648)$1,012$ 553

Property/casualty
A summary of premiums and underwriting results of our property/casualty reinsurance businesses follows (in millions).
Premiums written

NICO Group . . . . . . . . . . . . . . . .
General Re Group . . . . . . . . . . .

Premiums earned

Pre-tax underwriting gain (loss)

2017

2016

2015

2017

2016

2015

2017

2016

2015

$

4,371
3,342

$ 4,433
2,560$4,702
2,725$ 4,451
3,101$ 4,649
2,569$4,4162,805$(1,044)
(551)

$ 767
128

$ 944
151

$

7,713

$ 6,993$7,427$ 7,552$ 7,218$7,221$(1,595)

895

1,095

NICO Group’s premiums earned were $4.4 billion, a decrease of $198 million (4%) in 2017 compared to 2016, while
premiums written declined slightly. Roughly 40% of NICO Group’s premiums written and earned in 2017 and 2016 derived from a
10-year, 20% quota-share contract with Insurance Australia Group Ltd. (“IAG”) that incepted in July 2015. General Re Group’s
premiums earned were $3.1 billion in 2017, an increase of $532 million (21%) compared to 2016. The increase reflected higher written
premiums in both direct and broker markets, derived primarily from new business and increased participations for renewal business.
Industry capacity dedicated to property and casualty markets remains high and price competition in most reinsurance markets persists.
We continue to decline business when we believe prices are inadequate.
On a combined basis, our property/casualty reinsurance business sustained pre-tax underwriting losses of $1.6 billion in 2017.
We incurred estimated losses of approximately $2.4 billion in 2017 from several significant catastrophe loss events occurring during
the year including hurricanes Harvey, Irma and Maria, an earthquake in Mexico, a cyclone in Australia and wildfires in California.
There were no significant catastrophe loss events in 2016 or 2015.

K-35

Management’s Discussion and Analysis (Continued)
Insurance—Underwriting (Continued)
Property/casualty (Continued)
On a combined basis, we also decreased estimated ultimate claims liabilities for prior years’ loss events by $295 million in2017 compared to $955 million in 2016. The comparative decline reflected higher than expected reported property claims and theeffects of increases in certain United Kingdom (“U.K.”) claim liabilities attributable to the U.K. Ministry of Justice’s decision in thefirst quarter of 2017 to reduce the fixed discount rate required in lump sum settlement calculations of U.K. personal injury claims,
known as the Ogden rate, from 2.5% to negative 0.75%. The Ogden rate is subject to adjustment in the future at the discretion of the
U.K. Government and significant changes in that rate may have a significant effect on our claim liability estimates.
NICO Group’s premiums earned in 2016 increased $233 million (5%) compared to 2015 reflecting the impact of the IAG
quota-share contract, partly offset by declines from other business, while General Re Group’s premiums earned declined $236 million(8%) versus 2015. The decline in General Re Group’s premiums earned was primarily due to lower volume in direct and broker market
business.
Our property/casualty reinsurers produced pre-tax underwriting gains of $895 million in 2016 and $1,095 million in 2015. On a
combined basis, we decreased estimated ultimate claims liabilities for prior years’ loss events by $955 million in 2016 and $1.2 billion
in 2015. These decreases were primarily attributable to lower than expected reported losses from ceding companies with respect toproperty coverages. Pre-tax underwriting results in 2016 and 2015 included discount accretion related to certain workers’
compensation claim liabilities of $80 million in 2016 and $82 million in 2015. There was no effect from discounting on 2017 results,
as the practice of discounting these related liabilities was discontinued in 2017.
Retroactive reinsurance
Premiums earned in 2017 included $10.2 billion from an aggregate excess-of-loss retroactive reinsurance agreement withvarious subsidiaries of American International Group, Inc. (the “AIG Agreement”). At the inception of the AIG Agreement, we also
recorded losses and loss adjustment expenses incurred of $10.2 billion, representing our initial estimate of the unpaid losses and loss
adjustment expenses assumed of $16.4 billion, partly offset by an initial deferred charge asset of $6.2 billion. Thus, on the effective
date, the AIG Agreement had no effect on our pre-tax underwriting results. In the fourth quarter of 2017, we increased our ultimate
claim liability estimates related to the AIG Agreement by approximately $1.8 billion based on higher than expected loss payments
being reported under the contractual retention, which affected our estimate of our liability. We also increased the related deferredcharge asset by $1.7 billion based on our re-estimation of the amount and timing of our recorded liabilities.
Certain liabilities related to retroactive reinsurance contracts written by our U.S. subsidiaries are denominated in foreign
currencies. Underwriting results included pre-tax losses of $264 million in 2017 and pre-tax gains of $392 million in 2016 and$150 million in 2015 associated with the re-measurement of such liabilities due to changes in foreign currency exchange rates,
primarily related to the Great Britain Pound Sterling (“GBP”).
Pre-tax underwriting losses before foreign currency gains/losses were $1,066 million in 2017, $452 million in 2016 and$620 million in 2015 derived from deferred charge amortization and changes in the timing and amount of ultimate losses. Pre-tax
losses in 2017 increased compared to 2016, due to amortization charges related to new contracts, including the AIG Agreement, partly
offset by lower amortization on prior years’ contracts. Changes in estimated ultimate liabilities for prior years’ contracts wererelatively insignificant in 2017 and 2016. During 2015, we increased estimated ultimate liabilities approximately $550 million for prioryears’ contracts. The increase in estimated ultimate liabilities, net of related deferred charge adjustments, produced incremental pre-tax
underwriting losses of approximately $90 million in 2015.
Gross unpaid losses assumed under retroactive reinsurance contracts were approximately $42.9 billion at December 31, 2017and $25.0 billion at December 31, 2016. Unamortized deferred charge assets related to such reinsurance contracts were approximately$15.3 billion at December 31, 2017 and $8.0 billion at December 31, 2016. The increases in unpaid losses and deferred charges werepredominantly attributable to the AIG Agreement. Our deferred charge asset balances will be amortized as charges to pre-tax earnings
over the expected remaining claims settlement period.

K-36

Management’s Discussion and Analysis (Continued)
Insurance—Underwriting (Continued)
Life/healthPremiums earned and pre-tax underwriting results of our life/health reinsurance businesses are further summarized as follows(in millions).
Premiums earned2017

Pre-tax underwriting gain (loss)

2016

2015

2017

2016

2015

General Re Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,306
BHLN Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,502$ 3,068
1,519$ 3,1701,500$(369)
317

$ 73
232

$ (18)
148$ 4,808$ 4,587$ 4,670$ (52)

$ 305

$ 130

General Re Group’s premiums earned increased $238 million (8%) in 2017 compared to 2016, which reflected growth in the
U.S., Asia, Europe and Australia markets. Premiums earned declined $102 million (3%) in 2016 compared to 2015, primarily
attributable to foreign currency translation effects and lower volume in Canada, partly offset by increased volume in the United
Kingdom and Asia markets. Approximately 65% of BHLN Group’s premiums earned in each of the past three years was derived
primarily from a single yearly renewable term life agreement in the U.S. with a major reinsurer.
The General Re Group produced pre-tax underwriting losses of $369 million in 2017, gains of $73 million in 2016 and losses
of $18 million in 2015. Pre-tax underwriting losses in 2017 included losses of approximately $450 million from the run-off of our U.S.
long-term care business driven by discount rate reductions and changes in other actuarial assumptions in the fourth quarter, which
increased our estimated benefit liabilities. In 2016, underwriting results reflected increased underwriting gains from our international
life business, lower claim severity in North America, and lower losses from changes in actuarial assumptions related to the long-termcare business as compared to 2015.
BHLN Group’s pre-tax underwriting results included pre-tax gains of $256 million in 2017, $231 million in 2016 and$193 million in 2015 from the run-off of variable annuity business (reinsurance contracts that provide guarantees on closed blocks ofvariable annuity business). Periodic underwriting results from this business reflect changes in remaining liabilities for guaranteed
benefits, resulting from changes in securities markets and interest rates and from the periodic amortization of expected profit margins.
Periodic underwriting results from these variable annuity contracts can be volatile, reflecting the volatility of securities markets,
interest rates and foreign currency exchange rates. Estimated liabilities for variable annuity guarantees were approximately $1.8 billion
at December 31, 2017 and $2.1 billion at December 31, 2016. BHLN Group’s life reinsurance business produced pre-tax gains of$61 million in 2017 and $1 million in 2016 and losses of $45 million in 2015.
Periodic payment annuity
Periodic payment annuity premiums earned declined $184 million (17%) in 2017 compared to 2016, due to lower volumes.
Premiums earned decreased $204 million (16%) in 2016 compared to 2015. Premiums earned in 2015 included $425 million from asingle reinsurance contract.
Certain periodic payment annuity liabilities are denominated in foreign currencies, primarily the GBP. Underwriting results
included pre-tax losses of $190 million in 2017 and pre-tax gains of $313 million in 2016 and $103 million in 2015 associated with there-measurement of such liabilities due to changes in exchange rates.
Before foreign currency gains and losses, pre-tax underwriting losses from periodic payment annuity contracts were$481 million in 2017, $441 million in 2016 and $305 million in 2015. These losses were primarily attributable to the recurring discountaccretion on new business and existing liabilities and the impact of lower interest rates in 2017 and 2016, which increased expected
future loss payments under certain reinsurance contracts in those years. Discounted annuity liabilities were approximately $11.2 billion
at December 31, 2017 and $9.8 billion at December 31, 2016. The weighted average annual discount rate for these liabilities wasapproximately 4.1% as of December 31, 2017.

K-37

Management’s Discussion and Analysis (Continued)
Insurance—Underwriting (Continued)
Berkshire Hathaway Primary Group
The Berkshire Hathaway Primary Group (“BH Primary”) consists of a wide variety of independently managed insurance
underwriting businesses that primarily provide a variety of commercial insurance solutions, including healthcare malpractice, workers’
compensation, automobile, general liability, property and various specialty coverages for small, medium and large clients. The largestof these insurers include Berkshire Hathaway Specialty Insurance (“BH Specialty”), Berkshire Hathaway Homestate Companies(“BHHC”), MedPro Group, Berkshire Hathaway GUARD Insurance Companies (“GUARD”), and National Indemnity Company(“NICO Primary”). Other BH Primary insurers include U.S. Liability Insurance Company, Applied Underwriters and Central States
Indemnity Company. A summary of BH Primary underwriting results follows (dollars in millions).
2017
Amount2016%

Amount2015%%

Premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,483

Premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,143

100.0$ 6,257

100.0$5,394100.0

Losses and loss adjustment expenses . . . . . . . . . . . . . .
Underwriting expenses . . . . . . . . . . . . . . . . . . . . . . . . .

4,511
1,913

63.1
26.8

3,864
1,736

61.8
27.7

3,070
1,500

56.9
27.8

Total losses and expenses . . . . . . . . . . . . . . . . . . . . . . .

6,424

89.9

5,600

89.5

4,570

84.7

Pre-tax underwriting gain . . . . . . . . . . . . . . . . . . . . . . .

$719$ 6,684

Amount$$5,906657$ 824

Premiums written in 2017 increased 12.0% compared to 2016. All of the significant BH Primary insurers generated increased
premiums written, led by GUARD (26%), BH Specialty (23%) and BHHC (9%). Premiums earned were $7.1 billion in 2017, anincrease of $886 million (14.2%) compared to 2016. BH Primary’s premiums written and earned in 2016 increased 13.2% and 16.0%,
respectively, compared to 2015. The increases were primarily attributable to volume increases from BH Specialty, MedPro Group,
BHHC and GUARD.
BH Primary produced pre-tax underwriting gains of $719 million in 2017, $657 million in 2016 and $824 million in 2015. BH
Primary’s overall loss ratios were 63.1% in 2017, 61.8% in 2016 and 56.9% in 2015. Losses and loss adjustment expenses in 2017
included approximately $225 million (3% of premiums earned) related to the significant catastrophe events, primarily hurricanes
Harvey and Irma. Losses and loss adjustment expenses also included net reductions of estimated ultimate liabilities for prior years’ loss
events of $766 million in 2017, $503 million in 2016 and $643 million in 2015, which produced corresponding increases in pre-tax
underwriting gains. The reductions of prior years’ estimates in each year primarily related to healthcare malpractice and workers’
compensation business. BH Primary writes significant levels of liability and workers’ compensation business and the related claim
costs may be subject to higher severity and longer claims-tails, which could contribute to significant increases in claims liabilities in
the future attributable to higher than expected claim settlements, adverse litigation or judicial rulings and other factors we have notanticipated.
Insurance—Investment Income
A summary of net investment income generated from investments held by our insurance operations follows (in millions).
2017

2016

2015

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,310
3,592

$ 930
3,552

$ 888
3,662

Investment income before taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,902
985

4,482
846

4,550
825

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,917$3,636$3,725

K-38

Management’s Discussion and Analysis (Continued)
Insurance—Investment Income (Continued)
Pre-tax investment income increased $420 million (9%) in 2017 compared to 2016, attributable to an increase in interest
income which reflected higher interest rates on short-term investments and increased other investment income. Pre-tax investment
income in 2016 declined $68 million (1.5%) compared to 2015, reflecting lower dividend income attributable to portfolio changes,
partly offset by an increase in interest income. We continue to hold significant amounts of cash and cash equivalents and U.S. Treasury
Bills earning low yields. We believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect tosuch balances.
Dividend income in 2017 was relatively unchanged compared to 2016 reflecting increased dividend rates and increased overall
investment levels, offset by the impact of the conversion of our $3 billion investment in Dow Chemical Company (“Dow”) 8.5%
preferred stock into Dow common stock at the end of 2016. Prior to its conversion, we received dividends of $255 million per annum.
In December 2017, RBI redeemed our $3 billion investment in 9% RBI Preferred stock investment, which will negatively affectinvestment income in 2018 when compared to 2017.
Invested assets of our insurance businesses derive from shareholder capital, including reinvested earnings, and from net
liabilities under insurance 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 otherliabilities due to policyholders, less premium and reinsurance receivables, deferred charges assumed under retroactive reinsurance
contracts and deferred policy acquisition costs. Float approximated $114 billion at December 31, 2017 and $91 billion at December 31,
2016. The increase in float in 2017 reflected increases in unpaid losses and loss adjustment expenses, including liabilities assumed
under retroactive reinsurance contracts written in 2017 and estimated liabilities related to catastrophe events, and overall growth of our
insurance operations, partly offset by an increase in deferred charges on retroactive reinsurance contracts. Our pre-tax underwriting
losses were approximately $3.2 billion in 2017 and our average cost of float was approximately 3.0%. During the prior fourteen years,
the cost of float was negative as our insurance business generated pre-tax underwriting gains in each year.
A summary of cash and investments held in our insurance businesses as of December 31, 2017 and 2016 follows (in millions).
December 31,

Cash, cash equivalents and U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017

2016

$ 73,285
163,134
21,092$ 48,888
134,144
22,778$257,511$205,810

Unrealized
gains/losses

Carrying
value

Fixed maturity investments as of December 31, 2017 were as follows (in millions).
Amortized
cost

U.S. Treasury, U.S. government corporations and agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
States, municipalities and political subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds, investment grade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds, non-investment grade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,968
840
8,570
5,395
698
714

$

(22)
7
250
392
190
90

$ 3,946
847
8,820
5,787
888
804

$20,185$907$21,092

U.S. government obligations are rated AA+ or Aaa by the major rating agencies. Approximately 88% of all state, municipal
and political subdivisions, foreign government obligations and mortgage-backed securities were rated AA or higher. Non-investment
grade securities represent securities rated below BBB- or Baa3. Foreign government securities include obligations issued or
unconditionally guaranteed by national or provincial government entities.

K-39

Management’s Discussion and Analysis (Continued)
Railroad (“Burlington Northern Santa Fe”)
Burlington Northern Santa Fe, LLC (“BNSF”) operates one of the largest railroad systems in North America. BNSF operates
approximately 32,500 route miles of track in 28 states and also operates in three Canadian provinces. BNSF’s major business groups
are classified by type of product shipped and include consumer products, coal, industrial products and agricultural products. A
summary of BNSF’s earnings follows (in millions).
2017

2016

2015

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,387$ 19,829$ 21,967

Operating expenses:
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment rents, materials and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,969
2,518
2,514
2,352
1,690

4,769
1,934
2,418
2,128
1,895

5,043
2,656
2,546
2,001
2,018

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,043
1,016

13,144992

14,264928

15,05914,13615,192Pre-tax earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,328
2,369

5,693
2,124

6,775
2,527

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,959$ 3,569$ 4,248

Consolidated revenues were $21.4 billion in 2017, representing an increase of $1.6 billion (7.9%) versus 2016. Pre-tax earnings
increased 11.2% in 2017 compared to 2016. During 2017, consolidated revenues reflected a 2.4% comparative increase in averagerevenue per car/unit and a 5.3% increase in volume. Our volume was 10.3 million cars/units in 2017 compared to 9.8 million in 2016.
Our overall volume growth moderated in the second half of the year compared to the growth experienced in the first half of the year.
While we believe the general economy will continue to be strong in 2018, we expect a slower pace of volume growth. The increase inaverage revenue per car/unit was primarily attributable to higher fuel surcharge revenue, increased rates per car/unit and business mix
changes.
Revenues from consumer products were $7.1 billion in 2017, representing an increase of 8.8% compared to 2016, reflecting
volume increases of 6.3% as well as higher average revenue per car/unit. The volume increases were primarily attributable toimproving economic conditions, normalizing of retail inventories, new services and higher market share, which benefited domestic
intermodal, international intermodal and automotive volumes.
Revenues from industrial products were $5.1 billion in 2017, an increase of 7.7% from 2016, attributable to a volume increaseof 5.0% as well as higher average revenue per car/unit. Volumes in 2017 were higher for sand and other commodities that support
drilling. In addition, broad strengthening in the industrial sector drove greater demand for steel and taconite. These volume increases
were partially offset by lower petroleum products volume due to pipeline displacement of U.S. crude rail traffic.
Revenues from agricultural products increased 1.8% to $4.3 billion in 2017 compared to 2016, primarily due to higher averagerevenue per car/unit. Volumes were relatively flat, primarily due to higher shipments of domestic grain, as well as ethanol and othergrain products, offset by lower grain exports.
Revenues from coal increased 13.7% to $3.8 billion in 2017 compared to 2016. This increase reflected higher average revenue
per car/unit as well as 6.3% higher volumes. The volume increases in 2017 were due to continued effects of higher natural gas prices,which led to increased utility coal usage. This was partially offset by the effects of unit retirements at coal generating facilities,
increased renewable generation and coal inventory adjustments at customer facilities.
Operating expenses were $14.0 billion in 2017, an increase of $899 million (6.8%) compared to 2016. Our ratio of operating
expenses to revenues decreased 0.6 percentage points to 65.7% in 2017 versus 2016. Compensation and benefits expenses increased$200 million (4.2%) compared to 2016. The increase was primarily due to higher health and welfare costs and volume-related
increases, partially offset by lower headcount. Fuel expenses increased $584 million (30.2%) compared to 2016 primarily due to higher
average fuel prices and increased volumes.

K-40

Management’s Discussion and Analysis (Continued)
Railroad (“Burlington Northern Santa Fe”) (Continued)
Depreciation and amortization expense increased $224 million (10.5%) compared to 2016 due to a larger base of depreciable
assets in service. Equipment rents, materials and other expense declined $205 million (10.8%) compared to 2016. These declines
resulted from the impact of the enactment of the TCJA on an equity method subsidiary, as well as lower personal injury and casualty
related costs.
Consolidated revenues were approximately $19.8 billion in 2016, a decrease of $2.1 billion (9.7%) compared to 2015. Pre-tax
earnings were $5.7 billion in 2016, a decrease of $1.1 billion (16.0%) compared to 2015. Our total volume was approximately
9.8 million cars/units in 2016 compared to approximately 10.3 million in 2015. In 2016, we experienced declining demand, especiallyin our coal and crude oil categories. Coal had the largest decline, driven by structural changes in that business as well as competition
from low natural gas prices. The decrease in revenue reflected comparative declines in average revenue per car/unit (5.2%) andvolumes (5.0%). The decrease in average revenue per car/unit was primarily attributable to lower fuel surcharge revenue driven bylower fuel prices and business mix changes.
Revenues from consumer products were $6.5 billion in 2016, a decline of 0.9% from 2015, reflecting lower average revenue
per car/unit, partially offset by volume increases of 1%. Consumer products volumes increased primarily due to higher domestic
intermodal volumes and the addition of a new automotive customer, partially offset by lower international intermodal volumes.
Revenues from industrial products were $4.8 billion in 2016, a decline of 14.2% compared with 2015. The decrease wasattributable to lower volumes, primarily for petroleum products, reflecting pipeline displacement of U.S. crude rail traffic and lower
U.S. oil production. In addition, we experienced lower demand for steel and taconite, partially offset by increased plastics products
volume.
Revenues from agricultural products remained relatively unchanged in 2016 at $4.2 billion compared to 2015. Agricultural
product volume increased by 6.3%, primarily due to higher corn, soybean and wheat exports, which offset a decrease in averagerevenue per car/unit.
Revenues from coal decreased 26.9% to $3.4 billion in 2016 compared to 2015, reflecting a 21.1% decline in volumes and alower average rate per car/unit. Demand for coal declined due to reduced energy consumption, coal unit retirements, high coalstockpiles and low natural gas prices.
Operating expenses were $13.1 billion in 2016, a decrease of $1.1 billion (7.9%) compared to 2015, and our ratio of operating
expenses to revenues increased 1.4 percentage points to 66.3%. Compensation and benefits expenses decreased $274 million (5.4%)
compared to 2015. The decline was primarily due to lower employment levels resulting from lower freight volumes and productivity
improvements, partially offset by inflation. Fuel expenses declined $722 million (27.2%) compared to 2015, due to lower average fuelprices and lower volumes. Purchased services declined $128 million (5.0%) due to lower volumes and cost reductions. Depreciation
and amortization expense increased $127 million (6.3%) compared to 2015 due to increased assets in service reflecting our ongoing
capital additions and improvement programs. Equipment rents, materials and other expense declined $123 million (6.1%) compared to2015, primarily due to lower freight volumes and productivity improvements.
Utilities and Energy (“Berkshire Hathaway Energy Company”)
We hold a 90.2% ownership interest in Berkshire Hathaway Energy Company (“BHE”), which operates a global energy
business. BHE’s domestic regulated utility interests are comprised of PacifiCorp, MidAmerican Energy Company (“MEC”) and NV
Energy. In Great Britain, BHE subsidiaries operate two regulated electricity distribution businesses referred to as Northern Powergrid.
BHE also owns two domestic regulated interstate natural gas pipeline companies. Other energy businesses include AltaLink, L.P.
(“AltaLink”), a regulated electricity transmission-only business in Alberta, Canada and a diversified portfolio of independent power
projects. In addition, BHE also operates the second-largest residential real estate brokerage firm and one of the largest residential realestate brokerage franchise networks in the United States.

K-41

Management’s Discussion and Analysis (Continued)
Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued)
The rates our regulated businesses charge customers for energy and services are based, in large part, on the costs of business
operations, including a return on capital, and are subject to regulatory approval. To the extent these operations are not allowed toinclude such costs in the approved rates, operating results will be adversely affected. Revenues and earnings of BHE are summarized
below (in millions).
Revenues

PacifiCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MidAmerican Energy Company . . . . . . . . . . . . . . . . . . . . . . . . . . .
NV Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Northern Powergrid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Natural gas pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other energy businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings

2017

2016

2015

$ 5,276
2,906
3,048
950
1,009
2,294
3,456
—

$ 5,245
2,668
2,925
997
986
2,223
2,815
—

$ 5,279
2,554
3,382
1,141
1,018
2,321
2,536
—

$ 18,939$ 17,859$ 18,231

2017

2016

2015

$ 1,131 $ 1,105 $ 1,026
372
392
292
567
559
586
311
367
460
446
413
401
381
377
394
220
225
191
(844)
(465)
(499)

Pre-tax earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . .

2,584
501

2,973
686

2,851
719

Net earnings attributable to Berkshire Hathaway shareholders . . .

$ 2,083$ 2,287$ 2,132

PacifiCorp
PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming.
Revenues increased 1% in 2017 compared to 2016. Wholesale and other revenues increased, reflecting higher volumes and average
rates, and retail revenues decreased slightly, attributable to lower average rates, partly offset by higher volumes. Pre-tax earnings
increased $26 million (2%) in 2017 as compared to 2016. The increase in earnings reflected higher gross margins (operating revenues
less cost of sales), lower operations and maintenance expenses, and increased depreciation and amortization attributable to additional
plant in-service.
Revenues were $5.25 billion in 2016, a slight decline from 2015, reflecting increased retail revenues and lower wholesale andother operating revenues. The increase in retail revenues was primarily due to higher retail rates as volumes were relatively unchanged.
The declines in wholesale revenues were attributable to lower volumes and average prices. Pre-tax earnings in 2016 increased$79 million (7.7%) from 2015, primarily due to increased gross margins, reflecting lower fuel prices and changes in fuel mix.
MidAmerican Energy Company
MEC operates a regulated electric and natural gas utility primarily in Iowa and Illinois. Revenues increased $238 million (9%)
in 2017 as compared to 2016, primarily attributable to higher electric operating revenues ($123 million) and increased natural gas
operating revenues ($82 million). Our retail electric revenues increased $84 million in 2017 compared to 2016, primarily attributable tohigher recoveries through bill riders (which are substantially offset by increases in costs of sales and other expenses) and fromnon-weather usage and growth and rate factors, partially offset by the unfavorable impact of milder temperatures in 2017. Our
wholesale electric and other revenues increased $39 million in 2017 versus 2016, attributable to comparative increases in volumes,
average rates and transmission fees. The natural gas operating revenues increase was primarily due to higher average per-unit costs ofgas sold, which was offset by an increase in cost of sales. Pre-tax earnings declined $20 million (5%) in 2017 compared to 2016,reflecting increased depreciation, maintenance and other operating expenses and interest expense and debt extinguishment costs,
partially offset by comparative increases in electric gross sales margins of $76 million.
Revenues increased $114 million (4.5%) in 2016 compared to 2015, primarily due to increased electric revenues ($148
million), partially offset by lower natural gas revenues ($24 million). The increase in electric revenues resulted primarily from a 3.8%
increase in customer volumes and higher rates. Wholesale and other revenues increased primarily due to increased average wholesale
prices and higher transmission revenue. The natural gas revenue decline was primarily due to lower average per-unit costs of gas sold($42 million), partly offset by higher wholesale volumes. Pre-tax earnings increased $100 million (34.2%) in 2016 compared to 2015.
The increase in pre-tax earnings was primarily due to increased gross margins from electric revenues and lower operations andmaintenance expenses, partially offset by higher depreciation and amortization from additional assets placed in service, and higher
interest expense.

K-42

Management’s Discussion and Analysis (Continued)
Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued)
NV Energy
NV Energy operates regulated electric and natural gas utilities in Nevada. Revenues increased $123 million (4%) in 2017
compared to 2016. The increase was due primarily to an increase in retail electric operating revenues, which included a combination ofincreased rates from pass-through cost adjustments and higher volumes, partly offset by lower revenues from energy efficiency
programs (offset by lower operating expenses). NV Energy also experienced retail electric revenue declines from the transition ofcertain commercial and industrial customers electing to purchase power from alternative sources and thus becoming distribution
service only customers. Natural gas operating revenue declined $11 million in 2017, primarily due to lower rates, partially offset byhigher customer usage. Pre-tax earnings increased $8 million (1%) in 2017 compared to 2016, primarily due to lower interest expenses.
Revenues were approximately $2.9 billion in 2016, a decrease of $457 million (13.5%) versus 2015. The decline was primarily
attributable to lower electric retail rates resulting from lower energy costs. Electric retail volumes were relatively unchanged. Pre-tax
earnings declined $27 million (4.6%) in 2016 compared to 2015. The decline was primarily due to an increase in operating expenses of$39 million, partly offset by a decrease in interest expense of $17 million. The increase in operating expenses reflected higher
depreciation and amortization and reductions of certain accrued liabilities in 2015.
Northern Powergrid
Revenues declined $47 million (5%) in 2017 compared to 2016. Unfavorable foreign currency translation effects of acomparatively stronger U.S. Dollar in 2017 resulted in a $48 million comparative decline in revenues, substantially all of which
occurred in the first half of the year. Otherwise, we experienced comparative declines in distribution revenues, which were
substantially offset by higher smart metering revenue. Pre-tax earnings declined $56 million (15%) in 2017 compared to the same
period in 2016. The decline was primarily due to foreign currency translation effects, as well as from increased pension expenses andlower distribution revenues, partially offset by lower asset impairment charges and lower distribution costs.
Revenues declined $144 million (12.6%) in 2016 compared to 2015, primarily due to the impact of a stronger U.S. Dollar($127 million) and lower distribution revenues. Pre-tax earnings declined $93 million (20.2%) to $367 million. The decline was due tolower distribution revenues and the stronger U.S. Dollar, as well as increases in depreciation expense from increased assets in service
and higher asset impairment charges.
Natural Gas Pipelines
Revenues increased $23 million (2%) in 2017 compared to 2016. Northern Natural Gas produced higher transportation
revenues and higher gas sales, primarily from system balancing activities (largely offset in cost of sales), which were partly offset bylower transportation revenues at Kern River. Pre-tax earnings increased $33 million (8%) in 2017 compared to 2016. The increase wasprimarily due to the increase in transportation revenues and a reduction in expenses and regulatory liabilities related to the impact of analternative rate structure approved by Kern River’s regulators in the first quarter of 2017, partially offset by higher operating expenses.
Revenues declined $32 million (3.1%) in 2016 as compared to 2015, primarily due to the impact of lower gas sales frombalancing activities and lower transportation revenues from lower volumes and rates, in part due to comparatively milder temperaturesin the first quarter of 2016. Pre-tax earnings increased $12 million (3.0%) versus 2015, reflecting lower interest expense, resulting fromlower average debt balances and lower operating expenses, partly offset by the lower transportation revenues.
Other energy businesses
Revenues increased 3% in 2017 compared to 2016. AltaLink’s operating revenues increased $197 million (39%) in 2017
compared to 2016, primarily due to effects of a decision in 2016 by its regulator, which changed the timing of whenconstruction-in-progress expenditures included in the rate base are billable to customers and earned in revenues. The decision resulted
in a one-time net reduction in revenue in 2016, with offsetting reductions in expenses. In 2017, we also experienced a comparative
revenue increase of 13% from renewable energy and a comparative decline of 12% from the unregulated retail services business. Pretax earnings in 2017 were relatively unchanged from 2016, as increased earnings from renewable energy and AltaLink were offset bylower earnings from the unregulated retail services business and other energy ventures.

K-43

Management’s Discussion and Analysis (Continued)
Utilities and Energy (“Berkshire Hathaway Energy Company”) (Continued)
Other energy businesses (Continued)
Revenues declined $98 million (4.2%) in 2016 compared to 2015. The decline in comparative revenues was principally
attributable to lower revenues from AltaLink and from our unregulated retail services business. AltaLink’s revenue decline reflected
the impact of the aforementioned regulatory decision by AltaLink’s regulator. Pre-tax earnings declined $17 million (4.3%) compared
to 2015, primarily due to lower earnings from our renewable energy businesses, primarily due to higher depreciation expense fromadditional assets placed in service.
Real estate brokerage
Revenues increased 23% in 2017 compared to 2016, primarily due to business acquisitions and an increase in average homesales prices. Pre-tax earnings decreased 2% in 2017 as compared to 2016. Earnings in 2017 included increased earnings from franchisebusinesses, partially offset by lower earnings from brokerage businesses, primarily due to higher operating expenses.
Revenues increased 11.0% to $2.8 billion in 2016 compared to 2015. The increase was primarily attributable to increased
closed brokerage transactions (primarily resulting from business acquisitions) and a 2% increase in average home sales prices, as wellas higher mortgage revenues. Pre-tax earnings increased $34 million (17.8%) in 2016 compared to 2015, primarily due to the increases
in mortgage revenues.
Corporate interest and income taxes
Corporate interest includes interest on unsecured debt issued by BHE and borrowings from Berkshire insurance subsidiaries inconnection with BHE’s acquisitions of NV Energy and AltaLink. Corporate interest in 2017 included pre-tax charges of $410 million
from a tender offer completed in December 2017 to redeem certain long-term debt of BHE. Otherwise, corporate interest declined 7%
in 2017 and 2016 compared to the corresponding prior years, primarily due to lower average borrowings.
BHE’s consolidated effective income tax rates were approximately 7% in 2017, 14% in 2016 and 16% in 2015. BHE’s
effective income tax rates regularly reflect significant production tax credits from wind-powered electricity generation placed inservice. In addition, income tax rates applicable to Northern Powergrid and AltaLink were lower than the U.S. statutory income tax
rate. The effective tax rate in 2017 decreased primarily due to an increase in recognized production tax credits.
Manufacturing, Service and Retailing
A summary of revenues and earnings of our manufacturing, retailing and service businesses follows (in millions).
Revenues

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . .
Service and retailing . . . . . . . . . . . . . . . . . . . . .

Earnings *

2017

2016

2015

2017

2016

2015

$ 50,445
76,088$ 46,506
73,553$ 36,136
71,689$ 6,861
2,382$ 6,2112,251$ 4,893
2,222$126,533$120,059$107,825
9,243
3,035

8,462
2,831

7,115
2,432

$ 6,208$ 5,631$ 4,683

Pre-tax earnings . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . .

* Excludes certain acquisition accounting expenses, which primarily related to the amortization of identified intangible assets
recorded in connection with our business acquisitions. The after-tax acquisition accounting expenses excluded from earnings above
were $896 million in 2017, $771 million in 2016 and $476 million in 2015. These expenses are included in “Other” in the summaryof earnings on page K-32 and in the “Other” earnings section on page K-51.
Manufacturing
Our manufacturing group includes a variety of businesses that produce industrial, building and consumer products. Industrial
products businesses include specialty chemicals (The Lubrizol Corporation (“Lubrizol”)), metal cutting tools/systems (IMC
International Metalworking Companies (“IMC”)), equipment and systems for the livestock and agricultural industries (CTB
International (“CTB”)), and a variety of industrial products for diverse markets (Marmon, Scott Fetzer and LiquidPower Specialty
Products (“LSPI”)). Beginning on January 29, 2016, our industrial products group also includes Precision Castparts Corp. (“PCC”), a
leading manufacturer of complex metal products for aerospace, power and general industrial markets.

K-44

Management’s Discussion and Analysis (Continued)
Manufacturing, Service and Retailing (Continued)
Manufacturing (Continued)
Our building products businesses include 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 constructionand engineering products and systems (MiTek). Our consumer products businesses include leisure vehicles (Forest River), several
apparel and footwear operations (including Fruit of the Loom, Garan, H.H. Brown Shoe Group and Brooks Sports), and beginning
February 29, 2016, the Duracell Company (“Duracell”), a leading manufacturer of high performance alkaline batteries. This group also
includes custom picture framing products (Larson Juhl) and jewelry products (Richline). A summary of revenues and pre-tax earningsof our manufacturing operations follows (in millions).
Revenues

Industrial products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building products . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer products . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-tax earnings

2017

2016

2015

2017

2016

2015

$26,376
11,936
12,133$24,702
10,772
11,032$16,760
10,316
9,060$4,367
1,382
1,112$4,2091,178
824$2,994
1,167
732$50,445$46,506$36,136$6,861$6,211$4,893

Revenues of our manufacturers were approximately $50.4 billion in 2017, an increase of approximately $3.9 billion (8.5%)
over 2016, which increased approximately $10.4 billion (28.7%) over 2015. Pre-tax earnings were approximately $6.9 billion in 2017,an increase of $650 million (10.5%) over 2016 and earnings in 2016 increased $1.3 billion (26.9%) compared to 2015.
Industrial products
Industrial products revenues were approximately $26.4 billion in 2017, an increase of approximately $1.7 billion (6.8%) versus
2016, reflecting increased revenues at several of our businesses. PCC’s revenues increased $754 million (9%) in 2017 compared to theeleven month post-acquisition period in 2016. On a comparable full year-to-date basis, PCC’s revenues increased approximately 2.3%
compared to 2016, reflecting increases in aerospace and oil and gas markets, partially offset by declines in other power markets. In
2017, PCC produced revenue increases from structural castings, airfoils and forged products and from business acquisitions, partly
offset by lower revenues from airframe products and industrial gas turbine products used in power markets. PCC continues to transition
into product lines for new programs within the aerospace markets, which we expect will produce future revenue increases, but may
have negative effects on revenues in the near term as prior programs wind down.
IMC’s revenues increased 13%, primarily due to increased customer demand and unit sales and from business acquisitions. The
global demand for cutting tools was generally higher in 2017. Marmon’s revenues increased $349 million (7%) in 2017 versus 2016,
primarily due to business acquisitions and higher average metal prices, partly offset by lower overall volumes and changes in mix.
Marmon’s highway transportation, retail food and restaurant equipment businesses experienced volume-based revenue growth in 2017,
which was more than offset by declines at the engineered wire/cable and retail store products businesses. Lubrizol’s revenues increased$165 million (3%) compared to 2016, primarily due to higher unit volumes, partly offset by effects of the disposition of anunderperforming business in 2016. CTB’s revenues increased 5% in 2017 compared to 2016. The increase reflected the impact of abolt-on business acquisition, partly offset by weak demand in the U.S. egg and poultry production markets and selling price pressures
for grain storage systems.
Pre-tax earnings of our industrial products businesses in 2017 increased $158 million (3.8%) compared to 2016. Overall,
pre-tax earnings as a percentage of revenues were 16.6% in 2017 and 17.0% in 2016.
PCC’s pre-tax earnings decreased 12.5% in 2017 compared to the post-acquisition period in 2016, primarily due to certain
one-time inventory and impairment charges that were recorded in the fourth quarter of 2017. Pre-tax earnings from IMC and Marmon
increased in 2017 compared to 2016, due to a combination of increased sales, increased manufacturing efficiencies, the effects ofbusiness acquisitions and ongoing expense control efforts. Lubrizol’s pre-tax earnings increased 17% in 2017 compared to 2016 due tocomparatively lower earnings charges related to the disposition in 2016 of an underperforming bolt-on business and ongoing cost
containment efforts, partly offset by lower gross sales margins, which were primarily attributable to higher average raw material prices.
In 2017, average raw material prices at Lubrizol, including base oil feedstock and petrochemicals, increased about 9% versus 2016.

K-45

Management’s Discussion and Analysis (Continued)
Manufacturing, Service and Retailing (Continued)
Industrial products (Continued)
Industrial products revenues increased approximately $7.9 billion (47.4%) in 2016 versus 2015, primarily due to the inclusionof PCC, partially offset by revenue declines of $859 million (5.1%) across our other businesses. Sales volumes of our other businesses
declined compared to 2015, reflecting sluggish demand for many product categories, particularly for products sold to businesses in theoil and gas and heavy equipment industries. In addition, lower average costs of oil-based raw materials and metals and increased
competitive pressures continued to lower average selling prices.
Pre-tax earnings increased $1.2 billion (40.6%) in 2016 compared to 2015, reflecting the inclusion of PCC, partially offset bycomparative earnings declines from our other businesses. Lubrizol’s earnings in 2016 included pre-tax losses of $365 million related tothe aforementioned disposition of an underperforming business. Earnings from several of Marmon’s manufacturing businesses andLubrizol’s continuing operations declined, while earnings from IMC increased slightly. Generally, our earnings in 2016 reflected thenegative effects of a combination of weaker customer demand, sales price and mix changes, and increased restructuring costs, partially
offset by the favorable effects of cost containment initiatives and lower average material prices.
Building products
Building products revenues were approximately $11.9 billion in 2017, an increase of approximately $1.2 billion(10.8%) compared to 2016. Approximately half of the increase was attributable to bolt-on business acquisitions by Shaw and MiTek.
The remainder of the increase reflected sales volume increases at MiTek, Benjamin Moore and Johns Manville, partly offset bychanges in prices and product mix.
Pre-tax earnings were $1.4 billion in 2017, an increase of $204 million (17.3%) compared to 2016. The comparative earnings
increase reflected the fact that approximately $107 million of asset impairment, pension settlement and environmental claim charges
were recorded in 2016 by Shaw and Benjamin Moore. The comparative earnings increase also was a result of bolt-on acquisitions,partly offset by comparative declines in average gross sales margin rates due to higher raw material and other production costs.
Revenues increased $456 million (4.4%) in 2016 compared to 2015, reflecting volume-driven revenue increases by MiTek,
Johns Manville, Acme and Shaw, as well as revenues from bolt-on acquisitions by Shaw and MiTek. The revenue increase reflected
increased unit sales across several product categories, partly offset by lower average sales prices and changes in product mix. Pre-tax
earnings increased $11 million (0.9%) in 2016 compared to 2015. The favorable effects of increased sales volume and lower
manufacturing costs in 2016 attributable to deflation in certain commodity unit costs, were substantially offset by increased charges for
asset impairments, pension settlements and environmental claims.
Consumer products
Consumer products revenues were approximately $12.1 billion in 2017, an increase of $1.1 billion (10%) compared to 2016,
driven by comparative revenue increases from Duracell and Forest River. Duracell’s revenues increased 25.3% in 2017 compared tothe ten-month post-acquisition period in 2016. Forest River’s revenues increased 13.7% in 2017 compared to 2016, reflecting a 13.5%
comparative increase in units sold. Apparel and footwear revenues were approximately $4.2 billion in 2017, an increase of 1.6%
compared to 2016.
Pre-tax earnings increased $288 million (35%) in 2017 compared to 2016. The increase in earnings was primarily due toincreased earnings from Duracell and Forest River. Pre-tax earnings from Duracell were $82 million in 2017, compared to a pre-tax
loss of $89 million in 2016, which included significant transition costs arising from the acquisition. The improvement in operating
results in 2017 reflects an overall reduction in transition costs and the positive effects of ongoing restructuring and businessdevelopment efforts. Forest River’s earnings increased 23% in 2017, primarily attributable to the increase in sales and lower
manufacturing overhead rates. Earnings from apparel and footwear businesses increased 5% in 2017 compared to 2016, primarily due
to increased earnings from the footwear businesses.
Revenues were approximately $11.0 billion in 2016, an increase of approximately $2.0 billion (21.8%) compared to 2015. The
increase reflected the inclusion of Duracell and a 12% increase in Forest River’s revenues, primarily attributable to increased unit
sales. Apparel revenues declined $81 million (1.9%) in 2016 compared to 2015, reflecting lower footwear sales and the impact of adivestiture by Fruit of the Loom.

K-46

Management’s Discussion and Analysis (Continued)
Manufacturing, Service and Retailing (Continued)
Consumer products (Continued)
Pre-tax earnings increased $92 million (12.6%) in 2016 compared to 2015. The earnings increase reflected increased earnings
from Forest River and apparel and footwear businesses, partly offset by pre-tax losses of Duracell. In 2016, Duracell incurred a pre-tax
loss of approximately $89 million primarily due to significant transition, business integration and restructuring costs. Forest Rivergenerated a pre-tax earnings increase of 28%, primarily due to increased sales volumes and higher gross margins. Earnings of ourapparel businesses increased 22% in 2016, primarily attributable to lower restructuring costs and a loss in 2015 from the disposition of
a Fruit of the Loom operation, partly offset by lower earnings from our footwear businesses.
Service and retailing
Our service and retailing businesses are comprised of a large group of independently managed businesses engaged in a varietyof activities. A summary of revenues and pre-tax earnings of these operations follows (in millions).
Revenues

Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McLane Company . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-tax earnings

2017

2016

2015

2017

2016

2015

$ 11,249
15,064
49,775$ 10,386
15,09248,075$ 10,201
13,26548,223$ 1,298
785
299$ 1,161659
431$ 1,156564
502$ 76,088$ 73,553$ 71,689$ 2,382$ 2,251$ 2,222

ServiceOur service businesses offer fractional ownership programs for general aviation aircraft (NetJets) and high technology training
to operators of aircraft (FlightSafety). We also distribute electronic components (TTI) and franchise and service a network of quick
service restaurants (Dairy Queen). Other service businesses include the electronic distribution of corporate news, multimedia andregulatory filings (Business Wire), publication of newspapers (Buffalo News and the BH Media Group) and operation of a television
station in Miami, Florida (WPLG). Also included in this group is a third party logistics business that primarily serves the petroleum
and chemical industries (Charter Brokerage).
Service business revenues were $11.2 billion in 2017, an increase of $863 million (8%) compared to 2016, primarily
attributable to comparative increases at TTI and NetJets. TTI’s sales increased 16% in 2017 compared to 2016, primarily due to higher
customer demand. NetJets’ revenues increased due to an increase in revenue flight hours and increased aircraft management service
revenues.
Pre-tax earnings were $1.3 billion in 2017, an increase of $137 million (12%) compared to 2016. The comparative increase inearnings was primarily attributable to increased earnings of NetJets and TTI, partly offset by lower earnings from FlightSafety, as wellas our media and logistics businesses.
Revenues increased 1.8% to $10.4 billion in 2016, primarily due to revenue increases from TTI and Charter Brokerage, partly
offset by a revenue decrease from NetJets. TTI’s revenues increased 7.2%, primarily due to sales volume increases in Asia, Europe andthrough the Internet, while the increase from Charter Brokerage primarily derived from a commodity trading business launched in2015. NetJets’ revenues decreased 2.0% reflecting lower aircraft sales.
Pre-tax earnings were $1.2 billion in 2016, relatively unchanged versus 2015, reflecting increased earnings from NetJets andlower earnings from our newspaper operations. NetJets’ earnings increased 19%, primarily due to lower subcontracting expense and a
decline in losses from aircraft impairments and dispositions, partly offset by increases in depreciation and restructuring charges andreduced aircraft sales margins. TTI’s earnings were relatively unchanged, as changes in geographic sales mix and price competition
produced lower gross margin rates, substantially offsetting the aforementioned revenue increase.
Retailing
Our retailers include Berkshire Hathaway Automotive (“BHA”), which we acquired in the first quarter of 2015. BHA includes
over 80 auto dealerships that sell new and pre-owned automobiles, and offer repair services and related products. BHA also operates
two insurance businesses, two auto auctions and an automotive fluid maintenance products distributor. Our retailing businesses also
include four home furnishings retailing businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture and Jordan’s), which sellfurniture, appliances, flooring and electronics.

K-47

Management’s Discussion and Analysis (Continued)
Manufacturing, Service and Retailing (Continued)
Retailing (Continued)
Our other retailing businesses include three jewelry retailing businesses (Borsheims, Helzberg and Ben Bridge), See’s Candies(confectionary products), Pampered Chef (high quality kitchen tools), Oriental Trading Company (party supplies, school supplies andtoys and novelties) and Detlev Louis Motorrad (“Louis”), a Germany-based retailer of motorcycle accessories acquired in the second
quarter of 2015.
Retailing revenues were $15.1 billion in 2017, slightly lower than 2016. BHA’s aggregate revenues, which represented 63% of
our total retailing revenues, declined 1.3% in 2017 compared to 2016, due primarily to a 3.7% decline in new and used cars sold, partly
offset by higher service and finance and insurance revenues. Revenues of our other retailers increased 1.7% in 2017 compared to 2016.
Pre-tax earnings increased $126 million (19%) in 2017 as compared to 2016. The increase reflected comparatively higher
earnings from BHA, primarily due to increased earnings from finance and insurance activities and lower selling and administrative
expenses, partly offset by lower auto sales volumes and margins. Pre-tax earnings of our home furnishings retailers increased 6.5% in2017 compared to 2016. Pampered Chef also produced comparatively higher earnings in 2017, primarily attributable to revenue
increases and expense management efforts.
Retailing revenues increased $1.8 billion (13.8%) in 2016 to $15.1 billion as compared to 2015. The acquisitions of BHA andLouis accounted for approximately $1.6 billion of the comparative increase. Home furnishings’ revenues increased $227 million(7.8%), primarily due to new stores opened in 2015 by Nebraska Furniture Mart and Jordan’s, as well as modest organic growth.
Pre-tax earnings increased $95 million (16.8%) in 2016 compared to 2015. The increase reflected the impact of the BHA and Louisacquisitions and increased earnings from most of our other retailers, which benefitted from a combination of revenue increases and costsavings initiatives.
McLane Company
McLane operates a wholesale distribution business that provides grocery and non-food consumer products to retailers andconvenience 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 businesses generate high sales volumes and very low profit
margins and have several significant customers, including Walmart, 7-Eleven and Yum! Brands. A curtailment of purchasing by any of
its significant customers could have an adverse impact on McLane’s periodic revenues and earnings.
McLane’s revenues were approximately $49.8 billion in 2017, an increase of 3.5% compared to 2016. The increase in revenues
was primarily due to a 4.7% increase in grocery business sales. Pre-tax earnings in 2017 were $299 million, a decrease of $132 million(31%) compared to 2016. The earnings decline reflected a 57% decline in earnings from our grocery operations, partly offset by a
$39 million increase in gains from asset sales. Throughout 2017, significant pricing pressures and an increasingly competitive businessenvironment negatively affected our operating results, particularly with respect to the grocery business. These conditions contributed to
declining gross margin rates, which together with increases in fuel, depreciation and certain other operating expenses produced a 29
basis point decline in our consolidated operating margin rate (ratio of pre-tax earnings to revenues) in 2017 compared to 2016. Our
grocery and foodservice businesses will likely continue to be subject to intense competition in 2018.
Revenues were $48.1 billion in 2016, a decline of $148 million (0.3%) compared to 2015. In 2016, we experienced a decline ingrocery revenues, partly offset by an increase in foodservice revenues. Earnings were $431 million in 2016, a decrease of $71 million(14%) compared to 2015. The reduced earnings was primarily due to a reduction in McLane’s operating margin rate. The decline wasprimarily due to increased employee related costs. Additionally, earnings in 2015 included a gain of $19 million from the disposition of
a subsidiary.

K-48

Management’s Discussion and Analysis (Continued)
Finance and Financial Products
Our finance and financial products businesses include manufactured housing and finance (Clayton Homes), transportationequipment manufacturing and leasing businesses (UTLX and XTRA, and together, “transportation equipment leasing”), as well asother leasing and financing activities. A summary of revenues and earnings from our finance and financial products businesses follows(in millions).
Revenues

Manufactured housing and finance . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment leasing . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings

2017

2016

2015

$ 5,0102,609
757$ 4,230
2,650
795$ 3,5762,540
848$ 8,376$ 7,675$ 6,964Pre-tax earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . . . . . . . . . . . . . . .

2017

$

765
869
424

2016

$

744
959
427

2015

$

706
909
471

2,058
723

2,130
703

2,086
708

$ 1,335$ 1,427$ 1,378

Manufactured housing and finance
Clayton Homes’ revenues were $5.0 billion in 2017, an increase of $780 million (18%) compared to 2016. The revenues
increase was primarily due to higher home sales, attributable to an increase in overall unit sales (9%) and higher average prices. The
increase in average prices was primarily due to sales mix changes, which reflected increases in site built home sales, a relatively new
business for Clayton. Site built homes include higher land content and unit prices tend to be higher, although gross sales margin rates
are typically lower than manufactured homes. Interest and financial services revenues increased 2% in 2017 compared to 2016.
Pre-tax earnings increased $21 million (2.8%) in 2017 compared to 2016. Pre-tax earnings in 2017 from manufacturing,retailing and site built activities increased, while earnings from finance activities declined slightly from 2016. Earnings in 2017 also
included a gain from a legal settlement, offset by increased employee healthcare, technology, marketing and other expenses. A
significant portion of Clayton Homes’ earnings are generated from lending activities, which in recent years benefitted from relatively
low delinquency rates and loan losses and from low average interest rates on borrowings. As of December 31, 2017, Clayton Homes’
installment loan portfolio was approximately $13.7 billion.
Revenues increased $654 million (18%) in 2016 compared to 2015, attributable to a 30% increase in revenues from home sales,
primarily due to a 25% increase in units sold and product mix changes. Interest and other financial service income increased 1.8% from2015. Pre-tax earnings increased $38 million (5.4%) compared to 2015. Earnings benefitted from increased home sales and improved
manufacturing and retailing operating margins, partly offset by lower earnings from lending and financial services and increased
insurance losses.
Transportation equipment leasing
Transportation equipment leasing revenues declined $41 million (2%) in 2017 compared to 2016. The revenue decline was due
to lower railcar and trailer units on lease and lower railcar lease rates. We currently believe industry railcar capacity available for lease
exceeds demand, which is contributing to lower lease rates. We also experienced increased other service revenues, primarily
attributable to business acquisitions and favorable foreign currency translation effects.
Pre-tax earnings declined $90 million (9%) in 2017 compared to 2016. Earnings as a percentage of revenues decreased from
36.2% in 2016 to 33.3% in 2017. These decreases reflected the aforementioned lease revenue declines and higher railcar repair, storage
costs and depreciation expense. Significant components of our operating costs, such as depreciation expense, do not vary
proportionately to revenue changes and therefore changes in revenues can produce a disproportionate effect on earnings. In response to
weakened demand in the railcar and oil and gas industries, we undertook overhead cost reduction initiatives.
Transportation equipment leasing revenues increased $110 million (4.3%) in 2016 compared to 2015, primarily from theacquisition of General Electric Company’s tank car fleet and its railcar repair services business in 2015 and increased rates and tank car
additions. These revenue increases were partly offset by lower utilization rates, unfavorable foreign currency translation effects, lower
crane lease demand in North America and reduced volume related to oil and gas markets.

K-49

Management’s Discussion and Analysis (Continued)
Finance and Financial Products (Continued)
Transportation equipment leasing (Continued)
Pre-tax earnings increased $50 million (5.5%) in 2016 compared to 2015. The increase was primarily attributable to revenue
growth and lower depreciation rates on certain tank car assets, partially offset by higher repair costs and interest expense on borrowings
from a Berkshire financing subsidiary.
Other
Other finance activities include CORT furniture leasing, our share of the earnings of a commercial mortgage servicing business(“Berkadia”) in which we own a 50% interest, and interest and dividends from loans and equity security investments. Pre-tax earnings
were $424 million in 2017, relatively unchanged from 2016, and reflected lower earnings from CORT, partly offset by slightly higher
interest and finance income. Other earnings also includes income from interest rate spreads charged on borrowings by a Berkshire
financing subsidiary that are used to finance installment loans made by Clayton Homes and assets held for lease by UTLX. Other
earnings in 2016 were $427 million, a decrease of $44 million compared to 2015. The decline reflected lower earnings from investment
securities, partly offset by increased earnings from CORT and Berkadia.
Investment and Derivative Gains/Losses
A summary of investment and derivative gains and losses and other-than-temporary impairment losses on investments follows(in millions).
2017

Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$Gains/losses before income taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . .
Income taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,410
718

$

2,128
751
$

1,377

$

2016

2015

7,553
751

$ 9,373
974

8,304
1,807

10,347
3,622

6,497

$ 6,725

Investment gains/losses
Investment gains/losses arise primarily from the sale, redemption or exchange of investments. The timing of gains or losses canhave a material effect on periodic earnings. Investment gains and losses included in earnings usually have minimal impact on the
periodic changes in our consolidated shareholders’ equity since most of our investments are recorded at fair value with the unrealized
gains and losses included in shareholders’ equity as a component of accumulated other comprehensive income.
We believe the amount of investment gains/losses included in earnings in any given period typically has little analytical or
predictive value. Our decisions to sell securities are not motivated by the impact that the resulting gains or losses will have on ourreported earnings. Although we do not consider investment gains and losses as necessarily meaningful or useful in evaluating ourperiodic results, we provide information to explain the nature of such gains and losses when reflected in our earnings.
As discussed in Note 1(u) to the Consolidated Financial Statements, we adopted a new accounting standard on January 1, 2018that changes the reporting of unrealized gains and losses on our investments in equity securities. Beginning as of that date, unrealized
gains and losses on investments in equity securities will be included in our Consolidated Statements of Earnings along with realized
gains and losses from dispositions. This new standard does not permit the restatement of prior years’ statements of earnings. Upon
adoption of this accounting standard, we reclassified net after-tax unrealized gains of $61.5 billion related to our investments in equity
securities from accumulated other comprehensive income to retained earnings.
While the adoption of this standard did not affect our consolidated shareholders’ equity, it will almost certainly produce a verysignificant increase in the volatility of our periodic net earnings in the future given the magnitude of our existing equity securities
portfolio and the inherent volatility of equity securities prices. To illustrate the impact of this standard, our other comprehensive
income for the year ending December 31, 2017 included after-tax net unrealized gains from equity securities of approximately$19 billion. Had the new accounting standard been in effect as of the beginning of 2017, this amount would have been included in our
Consolidated Statements of Earnings. However, our consolidated comprehensive income for the period would have been unchanged.

K-50

Management’s Discussion and Analysis (Continued)
Investment and Derivative Gains/Losses (Continued)
Investment gains/losses (Continued)
Pre-tax investment gains were approximately $1.4 billion in 2017, $7.6 billion in 2016 and $9.4 billion in 2015. Investment
gains in 2016 included $4.2 billion from the redemptions of our Wrigley and Kraft Heinz preferred stock investments and from thesales of Dow Chemical common stock that was received upon the conversion of our Dow Chemical preferred stock investment. We
also realized pre-tax gains of $1.1 billion in connection with the tax-free exchange of our shares of P&G common stock for 100% of
the common stock of Duracell. Income tax expense allocated to investment gains in 2016 included a benefit from the reduction ofcertain deferred income tax liabilities in connection with the exchange of P&G common stock for Duracell. Our after-tax gain fromthis transaction was approximately $1.9 billion. Pre-tax investment gains in 2015 included non-cash holding gains related to ourinvestment in Kraft Heinz of $6.8 billion. In connection with its acquisition of Kraft Foods on July 2, 2015, Kraft Heinz issued newshares of its common stock in exchange for the outstanding shares of Kraft Foods common stock, thus reducing Berkshire’s ownershipinterest in Kraft Heinz by approximately 50%. Under the equity method of accounting, such transactions are treated by the investor as
if it sold a portion of its interests.
Derivative gains/losses
Derivative gains/losses primarily represented the changes in fair value of our equity index put option contract liabilities. The
periodic changes in the fair values of these liabilities are recorded in earnings and can be significant, reflecting the volatility ofunderlying equity markets and the changes in the inputs used to measure such liabilities.
Changes in the values of our equity index put option contract liabilities produced pre-tax gains of $718 million in 2017,$662 million in 2016 and $1.0 billion in 2015. The gains in each year reflected the effects of shorter remaining contract durations andoverall higher index values.
As of December 31, 2017, the aggregate intrinsic value of our equity put option contracts was approximately $800 million andour recorded liability was approximately $2.2 billion. Our ultimate payment obligations, if any, under our equity index put option
contracts will be determined as of the contract expiration dates (beginning in June 2018), and will be based on the intrinsic value as
defined under the contracts.
In July 2016, our last credit default contract was terminated by mutual agreement with the counterparty and we paid thecounterparty $195 million. This contract produced pre-tax earnings of $89 million in 2016 and pre-tax losses of $34 million in 2015.
Other
A summary of after-tax other earnings (losses) which include corporate income (including income from our investments in
Kraft Heinz), expenses and income taxes not allocated to operating businesses is summarized below (in millions).
2017

2016

2015

Kraft Heinz earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition accounting expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate interest expense, before foreign currency effects . . . . . . . . . . . . .
Corporate interest expense – Euro note foreign exchange gains (losses) . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

972
(936)
(266)
(655)
59

$ 706
(846)
(256)
159
(106)

$ 841
(515)
(146)
(45)
(105)

Net earnings (losses) attributable to Berkshire Hathaway shareholders . . . . .

$

(826)

$ (343)$30

Our after-tax Kraft Heinz earnings includes Berkshire’s share of Kraft Heinz’s earnings attributable to common shareholders
determined pursuant to the equity method. Our after-tax Kraft Heinz earnings in 2017 excludes approximately $1.1 billion from the net
effects of the TCJA on Kraft Heinz’s net earnings. Kraft Heinz earnings included pre-tax dividend income from our preferred stock
investment of $180 million in 2016 and $852 million in 2015. Kraft Heinz redeemed the preferred stock in June 2016.
After-tax other earnings (losses) also include charges arising from the application of the acquisition method in connection withBerkshire’s past business acquisitions. Such charges were primarily from the amortization of intangible assets recorded in connection
with those business acquisitions.
In each of the last three years, Berkshire issued Euro-denominated debt and at December 31, 2017, the aggregate par amountoutstanding was €6.85 billion. Changes in foreign currency exchange rates can produce sizable non-cash gains and losses from theperiodic revaluation of these liabilities into U.S. Dollars. The increase in interest expense in 2016 over 2015 before those gains andlosses was primarily attributable to increased average outstanding debt.

K-51

Management’s Discussion and Analysis (Continued)
Financial Condition
Our consolidated balance sheet continues to reflect significant liquidity and a strong capital base. Our consolidated
shareholders’ equity at December 31, 2017 was $348.3 billion, an increase of $65.3 billion since December 31, 2016 (based uponshareholders’ equity as originally reported in our 2016 Form 10-K). Net earnings attributable to Berkshire shareholders in 2017 were
$44.9 billion. Net unrealized appreciation of investments and foreign currency translation gains included in other comprehensive
income in 2017 were approximately $18.9 billion and $2.2 billion, respectively.
At December 31, 2017, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of
approximately $104.0 billion and investments (excluding our investment in Kraft Heinz) of $185.4 billion. In 2017, Berkshire issued€1.1 billion of senior notes and repaid $1.1 billion of maturing senior notes. Berkshire’s outstanding debt at December 31, 2017 wasapproximately $18.8 billion, an increase of $1.1 billion from December 31, 2016, of which $990 million was attributable to foreign
currency exchange rate changes applicable to the €6.85 billion par amount of Euro-denominated senior notes. Berkshire term debt of$800 million matured in February 2018 and $750 million will mature in August 2018.
Our railroad, utilities and energy businesses (conducted by 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. During 2017,
BHE’s and BNSF’s capital expenditures were $4.6 billion and $3.3 billion, respectively. We forecast capital expenditures of these two
operations will approximate $9.7 billion in 2018.
BNSF’s outstanding debt approximated $22.5 billion as of December 31, 2017, an increase of $455 million since December 31,
2016. In March 2017, BNSF issued $1.25 billion of senior unsecured debentures with $500 million due in 2027 and $750 million due
in 2047. BNSF debentures of $650 million par amount will mature in March 2018. Outstanding borrowings of BHE and its subsidiaries
were approximately $39.7 billion at December 31, 2017, an increase of $2.6 billion since December 31, 2016. During 2017, BHE andits subsidiaries issued approximately $1.9 billion of debt with maturity dates ranging from 2022 to 2057. In January 2018, BHE issued
senior unsecured debt of $2.2 billion with maturities ranging from 2021 to 2048. The proceeds from these borrowings were used to
repay certain short-term borrowings and for other general corporate purposes. Within the next twelve months, approximately$3.4 billion of BHE and subsidiary term debt will mature. Berkshire does not guarantee the repayment of debt issued by BNSF, BHE
or any of their subsidiaries and is not committed to provide capital to support BNSF, BHE or any of their subsidiaries.
Finance and financial products assets were approximately $41.9 billion as of December 31, 2017, a decrease of $175 million
from December 31, 2016. Finance assets consist primarily of loans and finance receivables, various types of property held for lease,cash, cash equivalents and U.S. Treasury Bills. Finance and financial products liabilities declined $3.0 billion to approximately$16.7 billion as of December 31, 2017. The decrease was primarily due to a reduction in borrowings of approximately $2.3 billion,
reflecting repayments of $3.6 billion, partly offset by $1.3 billion of senior unsecured notes issued in January by a wholly-owned
financing subsidiary, Berkshire Hathaway Finance Corporation (“BHFC”). The new BHFC notes mature in 2019 and 2020. BHFC’s
outstanding borrowings were $12.9 billion at December 31, 2017. In January 2018, $600 million par amount of BHFC senior notes
matured and an additional $4.0 billion will mature over the remainder of 2018. BHFC’s senior note borrowings are used to fund loans
originated and acquired by Clayton Homes and a portion of assets held for lease by our UTLX railcar leasing business. Berkshire
guarantees the full and timely payment of principal and interest with respect to BHFC’s senior notes.
Berkshire’s Board of Directors has authorized Berkshire management to repurchase, at its discretion, Berkshire Class A andClass B common stock at prices no higher than a 20% premium over book value per share. 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 $20 billion. Thereis no obligation to repurchase any stock and the program is expected to continue indefinitely. Financial strength and redundant liquidity
will always be of paramount importance at Berkshire. There were no share repurchases in 2017.
Contractual Obligations
We are party to contracts associated with ongoing business and financing activities, which will result in cash payments tocounterparties in future periods. Certain obligations included in our Consolidated Balance Sheets, such as notes payable, require future
payments on contractually specified dates and in fixed and determinable amounts. Other obligations pertain to the acquisition of goods
or services in the future, such as minimum rentals under operating leases and certain purchase obligations, and are not currently
reflected in our financial statements. These obligations will be recognized in future periods as the goods are delivered or services areprovided.

K-52

Management’s Discussion and Analysis (Continued)
Contractual Obligations (Continued)
The timing and/or amount of the payments under certain contracts are contingent upon the outcome of future events. Most
significantly, the timing and amount of future payments of unpaid losses and loss adjustment expenses arising under property andcasualty insurance and reinsurance contracts, including retroactive reinsurance contracts, are contingent upon the outcome of claim
settlement activities or events. Obligations arising under life, annuity and health insurance benefits are also contingent on futurepremiums, allowances, mortality, morbidity, expenses and policy lapse rates. The amounts included in the following table are based on
the liability estimates reflected in our Consolidated Balance Sheet as of December 31, 2017. Although certain insurance losses and loss
adjustment expenses and life, annuity and health benefits are recoverable under reinsurance contracts, those receivables are notreflected in the table.
A summary of our contractual obligations as of December 31, 2017 follows (in millions). Actual payments will likely vary,perhaps significantly, from estimates reflected in the table.
Estimated payments due by period
Total

2018

2019-20202021-2022

After 2022

Notes payable and other borrowings, including interest . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpaid losses and loss adjustment expenses (2) . . . . . . . . . . .
Life, annuity and health insurance benefits (3) . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 151,777
8,486
39,957104,059
33,095
16,899$21,736
1,330
12,95920,614
1,196
3,328$19,099
2,259
6,940
21,377(29)813$ 15,707
1,581
5,018
14,740293
2,344$ 95,235
3,316
15,04047,32831,635
10,414

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 354,273$61,163$ 50,459$ 39,683$ 202,968

(1)

(2)
(3)

Primarily related to fuel, capacity, transmission and maintenance contracts and capital expenditure commitments of BHE andBNSF and aircraft purchase commitments of NetJets.
Includes unpaid losses and loss adjustment expenses under retroactive reinsurance contracts.
Amounts represent estimated undiscounted benefits, net of estimated future premiums, as applicable.

Critical Accounting Policies
Certain accounting policies require us to make estimates and judgments in determining the amounts reflected in theConsolidated Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of
uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on
new available information and changes in other facts and circumstances.
Property and casualty losses
We record liabilities for unpaid losses and loss adjustment expenses (also referred to as “gross unpaid losses” or “claim
liabilities”) based upon estimates of the ultimate amounts payable for losses occurring on or before the balance sheet date. The timing
and amount of ultimate loss payments are contingent upon, among other things, the timing of claim reporting from insureds and cedingcompanies and the final determination of the loss amount through the loss adjustment process. We use a variety of techniques inestablishing claim liabilities and all techniques require significant judgments and assumptions.
As of the balance sheet date, recorded claim liabilities include provisions for reported claims, as well as claims not yet reported
and the development of reported claims. The period between the loss occurrence date and loss settlement date is the “claim-tail.”
Property claims usually have relatively short claim-tails, absent litigation. Casualty claims usually have longer claim-tails, occasionallyextending for decades. Casualty claims may be more susceptible to litigation and the impact of changing contract interpretations. The
legal environment and judicial process further contribute to extending claim-tails.
Our consolidated claim liabilities as of December 31, 2017 were $104 billion, of which 87% related to GEICO and theBerkshire Hathaway Reinsurance Group (General Re Group and NICO Group). Additional information regarding significant
uncertainties inherent in the processes and techniques of these businesses follows.

K-53

Management’s Discussion and Analysis (Continued)
Property and casualty losses (Continued)
GEICO
GEICO predominantly writes private passenger auto insurance. As of December 31, 2017, GEICO’s gross unpaid losses were$18.1 billion. Claim liabilities, net of reinsurance recoverable were $17.2 billion.
GEICO’s claim reserving methodologies produce liability estimates based upon the individual claims. The key assumptions
affecting our liability estimates include projections of ultimate claim counts (“frequency”) and average loss per claim (“severity”). We
utilize a combination of several actuarial estimation methods, including Bornhuetter-Ferguson and chain-ladder methodologies.
Claim liability estimates for automobile liability coverages (such as bodily injury (“BI”), uninsured motorists, and personal
injury protection) are more uncertain due to the longer claim-tails, so we establish additional case development estimates. As of
December 31, 2017, case development liabilities averaged approximately 30% of the case reserves. We select case development factors
through analysis of the overall adequacy of historical case liabilities.
For incurred-but-not-reported (“IBNR”) claims, liabilities are based on projections of the ultimate number of claims expected(reported and unreported) for each significant coverage. We use historical claim count data to develop age-to-age projections of theultimate counts by quarterly accident period, from which we deduct reported claims to produce the number of unreported claims. We
estimate the average costs per unreported claim and apply such estimates to the unreported claim counts, producing an IBNR liability
estimate. We may record additional IBNR estimates when actuarial techniques are difficult to apply.
We test the adequacy of the aggregate claim liabilities using one or more actuarial projections based on claim closure models,and paid and incurred loss triangles. Each type of projection analyzes loss occurrence data for claims occurring in a given period andprojects the ultimate cost.
Our claim liability estimates recorded at the end of 2016 increased $517 million during 2017, which produced a corresponding
decrease to pre-tax earnings. We modified the assumptions used to estimate liabilities at December 31, 2017 to reflect the most recent
frequency and severity results. Future development of recorded liabilities will depend on whether actual frequency and severity are
more or less than anticipated.
With respect to liabilities for BI claims, our most significant claim category, we believe it is reasonably possible that average
severities will change by at least one percentage point from the severities used in establishing the recorded liabilities at December 31,
2017. We estimate that a one percentage point increase or decrease in BI severities would produce a $275 million increase or decrease
in recorded liabilities, with a corresponding decrease or increase in pre-tax earnings. Many of the economic forces that would likely
cause BI severity to differ from expectations would likely also cause severities for other injury coverages to differ in the same
direction.
Berkshire Hathaway Reinsurance Group (“BHRG”)
BHRG’s liabilities for unpaid losses and loss adjustment expenses derive primarily from reinsurance contracts issued throughthe NICO Group and the General Re Group. In connection with reinsurance contracts, the nature, extent, timing and perceived
reliability of premium and loss information received from ceding companies varies widely depending on the type of coverage and thecontractual reporting terms. Contract terms, conditions and coverages also tend to lack standardization and may evolve more rapidly
than primary insurance policies.
The nature and extent of loss information provided under many facultative (individual risk), per occurrence excess or
retroactive reinsurance contracts may not differ significantly from the information received under a primary insurance contract if
reinsurer personnel either work closely with the ceding company in settling individual claims or manage the claims themselves.
However, loss information is often less detailed with respect to aggregate excess-of-loss and quota-share contracts. Additionally, loss
information we receive through periodic reports is often in a summary format rather than on an individual claim basis. Loss data
includes recoverable paid losses, as well as case loss estimates. Ceding companies infrequently provide IBNR estimates to reinsurers.
Loss reporting to reinsurers is typically slower in comparison to primary insurers. Periodic premium and claims reports are
required from ceding companies. In the U.S., such reports are generally required at quarterly intervals ranging from 30 to 90 days after
the end of the quarterly period. Outside of the U.S., reinsurance reporting practices may vary further. In certain countries, clients reportannually, often 90 to 180 days after the end of the annual period. In some instances, reinsurers assume and cede underlying risks
thereby creating multiple contractual parties between us and the primary insured, potentially compounding the claim reporting delays.
The relative impact of reporting delays on the reinsurer may vary depending on the type of coverage, contractual reporting terms, themagnitude of the claim relative to the attachment point of the reinsurance coverage, and for other reasons.

K-54

Management’s Discussion and Analysis (Continued)
Property and casualty losses (Continued)
Berkshire Hathaway Reinsurance Group (“BHRG”) (Continued)
As reinsurers, the premium and loss data we receive is at least one level removed from the underlying claimant, so there is arisk that the loss data reported is incomplete, inaccurate or the claim is outside the coverage terms. When received, we review the
information for completeness and compliance with the contract terms. Generally, our reinsurance contracts permit us to access theceding company’s books and records with respect to the subject business, thus providing the ability to audit the reported information.
In the normal course of business, disputes occasionally arise concerning whether claims are covered by our reinsurance policies. We
resolve most coverage disputes through negotiation with the client. If disputes cannot be resolved, our contracts generally provide
arbitration or alternative dispute resolution processes. There are no coverage disputes at this time for which an adverse resolution
would likely have a material impact on our consolidated results of operations or financial condition.
A summary of BHRG’s property and casualty unpaid losses and loss adjustment expenses, other than retroactive reinsurance
losses and loss adjustment expenses, as of December 31, 2017 follows (in millions).
General Re Group

NICO Group

Total

Property

Casualty

Total

Property

Casualty

Total

Property

Casualty

Total

Reported case liabilities . . . . . . . . . . .
IBNR liabilities . . . . . . . . . . . . . . . . .

$ 1,488
1,622$ 6,608
6,630$ 8,096
8,252$ 3,477
2,574$ 2,833
4,487$ 6,310
7,061$ 4,965
4,196$ 9,441
11,117$14,406
15,313Gross unpaid losses and loss
adjustment expenses . . . . . . . . . . .
Reinsurance recoverable . . . . . . . . . .

3,110
256

13,238610

16,348
866

6,051
33

7,320
418

13,371
451

9,161
289

20,558
1,028

29,7191,317

Net unpaid losses and loss adjustment
expenses . . . . . . . . . . . . . . . . . . . .

$ 2,854$12,628$15,482$ 6,018$ 6,902$12,920$ 8,872$19,530$28,402

Gross unpaid losses and loss adjustment expenses in the table above consist primarily of traditional property and casualty
coverages written primarily under excess-of-loss and quota-share treaties. Under certain contracts, coverage can apply to multiple linesof business written and the ceding company may not report loss data by such lines consistently, if at all. In those instances, we
allocated losses to property and casualty coverages based on internal estimates.
With respect to the General Re Group, we use a variety of actuarial methodologies to establish unpaid losses and loss
adjustment expenses. Certain methodologies, such as paid and incurred loss development techniques, incurred and paid loss
Bornhuetter-Ferguson techniques and frequency and severity techniques, are utilized, as well as ground-up techniques whenappropriate. The critical processes involved in estimating unpaid losses and loss adjustment expenses include the establishment of caseliability estimates, the determination of expected loss ratios and loss reporting patterns, which drive IBNR liability estimates, and thecomparison of reported activity to the expected loss reporting patterns.
General Re Group’s process for estimating unpaid losses and loss adjustment expenses starts with case loss estimates reported
by ceding companies. We independently evaluate certain reported case losses and if appropriate, we use our own case liability
estimate. As of December 31, 2017, our case loss estimates exceeded ceding company estimates by approximately $2.2 billion, whichwere concentrated in legacy workers’ compensation claims occurring over 10 years ago. We also periodically conduct detailed reviewsof individual client claims, which may cause us to adjust our case estimates.
In estimating General Re Group’s IBNR liabilities, we consider expected case loss emergence and development patterns,
together with expected loss ratios by year. In this process, we classify all loss and premium data into groups or portfolios of policies
based primarily on product type (e.g., treaty, facultative and program), line of business (e.g., auto liability, property and workers’
compensation) and/or geographic jurisdiction, and in some cases contractual features or market segment. For each portfolio, weaggregate premiums and losses by accident year or coverage period and analyze the paid and incurred loss data over time. We estimate
the expected development of reported claims, which, together with the expected loss ratios, are used to calculate IBNR liability
estimates. Factors affecting our loss development analysis include, but are not limited to, changes in the following: client claims
reporting and settlement practices; the frequency of client company claim reviews; policy terms and coverage (such as loss retention
levels and occurrence and aggregate policy limits); loss trends; and legal trends that result in unanticipated losses. Collectively, thesefactors influence our selections of expected case loss emergence patterns.
For the NICO Group, we generally also establish reinsurance claim liabilities on a contract-by-contract basis determined from
reported case loss estimates reported by ceding companies and IBNR liabilities that are primarily a function of an anticipated loss ratio
for the contract and the reported case loss estimates. Liabilities are subsequently adjusted over time to reflect case losses reported
versus expected case losses, which are used to form judgments on the adequacy of the expected loss ratio and the level of IBNR
liabilities required for unreported claims. Anticipated loss ratios are also revised to include estimates of the impact of major
catastrophe events as they become known.
K-55

Management’s Discussion and Analysis (Continued)
Property and casualty losses (Continued)
Berkshire Hathaway Reinsurance Group (“BHRG”) (Continued)
Certain catastrophe, individual risk and aviation excess-of-loss contracts tend to generate low frequency/high severity losses.
Our processes and techniques for estimating liabilities under such contracts generally rely more on a per-policy assessment of theultimate cost associated with the individual loss event rather than with an analysis of the historical development patterns of past losses.
In the aggregate, we reduced net losses for prior years’ occurrences by $295 million in 2017, which produced a corresponding
increase in pre-tax earnings. Reported claims for prior years’ property loss events were less than anticipated and we reduced ourestimated ultimate liabilities by $152 million. However, property losses incurred during any given period may be more volatile becauseof the effect of catastrophe and large individual property loss events.
In 2017, reported nominal losses for prior years’ workers’ compensation claims of the General Re Group were less than
expected. After reevaluating expected remaining IBNR estimates, we reduced our liabilities by $160 million. An increase of ten
percent in the tail of the expected loss emergence pattern and an increase of ten percent in the expected loss ratios would produce a netincrease in workers’ compensation IBNR liabilities of approximately $1 billion, producing a corresponding decrease in pre-tax
earnings. We believe it is reasonably possible for these assumptions to increase at these rates.
We reduced General Re Group’s other casualty, excluding asbestos and environmental, estimated ultimate losses for prioryears’ events by $114 million in 2017 reflecting lower than expected reported losses, resulting in a $114 million increase in pre-tax
earnings. For our significant casualty and general liability portfolios, we estimate that an increase of five percent in the claim-tails of
the expected loss emergence patterns and a five percent increase in expected loss ratios would produce a net increase in our nominal
IBNR liabilities and a corresponding reduction in pre-tax earnings of approximately $900 million. While we believe it is reasonably
possible for these assumptions to increase at these rates, more likely outcomes are less than $900 million given the diversification inworldwide business.
Overall industry-wide loss experience data and informed judgment are used when internal loss data is of limited reliability,
such as for asbestos, environmental and latent injury liability estimates. Our combined net liabilities for such losses at December 31,
2017, were approximately $1.6 billion, which included an increase in estimated ultimate losses of approximately $145 million during
2017, which produced a corresponding reduction in pre-tax earnings. Loss estimations for these exposures are difficult to determine
due to the changing legal environment, and increases may be required in the future if new exposures or claimants are identified, newclaims are reported or new theories of liability emerge. In addition to the previously described methodologies, we consider “survival
ratios”, which is the average net claim payments in recent years in relation to net unpaid losses, as a rough guide to reserve adequacy.
Our survival ratio was approximately 15 years as of December 31, 2017.
Retroactive reinsurance
Our retroactive reinsurance contracts cover loss events occurring before the contract inception dates. Claim liabilities relating
to our retroactive reinsurance contracts are predominately related to casualty or liability exposures. We expect the claim-tails to be very
long. Our gross unpaid losses, deferred charge assets, and net liabilities at December 31, 2017 were as follows (in millions).

December 31, 2017 . . . . . . . .

Gross unpaid losses$42,937

Deferred charges$15,278

Liabilities, net ofdeferred charges$27,659

Our contracts are generally subject to maximum limits of indemnifications. We currently expect that maximum remaining
gross losses payable under our retroactive policies will not exceed $57 billion due to the applicable aggregate contract limits. Absent
significant judicial or legislative changes affecting asbestos, environmental or latent injury exposures, we also currently believe it
unlikely that losses will develop upward to the maximum losses payable or downward by more than 15% of our $42.9 billion estimatedliability at December 31, 2017.
We establish liability estimates by individual contract, considering exposure and development trends. In establishing ourliability estimates, we often analyze historical aggregate loss payment patterns and project expected ultimate losses under various
scenarios. We assign judgmental probability factors to these scenarios and an expected outcome is determined. We then monitor
subsequent loss payment activity and review ceding company reports and other available information concerning the underlying losses.
We re-estimate the expected ultimate losses when significant events or significant deviations from expected results are revealed.

K-56

Management’s Discussion and Analysis (Continued)
Property and casualty losses (Continued)
Retroactive reinsurance (Continued)
Certain of our retroactive reinsurance contracts include asbestos, environmental and other latent injury claims. Our estimatedliabilities for such claims were approximately $14.0 billion at December 31, 2017. We do not consistently receive reliable detailed data
regarding asbestos, environmental and latent injury claims from all ceding companies, particularly with respect to multi-line oraggregate excess-of-loss policies. When possible, we conduct a detailed analysis of the underlying loss data to make an estimate ofultimate reinsured losses. When detailed loss information is unavailable, we develop estimates by applying recent industry trends andprojections to aggregate client data. Judgments in these areas necessarily consider the stability of the legal and regulatory environment
under which we expect these claims will be adjudicated. Legal reform and legislation could also have a significant impact on ourultimate liabilities.
Changes in ultimate estimated liabilities for prior years’ retroactive reinsurance contracts were relatively insignificant in 2017,as were changes in the estimated timing and amount of remaining unpaid losses. In 2017, we paid losses and loss adjustment expenses
of approximately $1.0 billion with respect to these contracts.
In connection with our retroactive reinsurance contracts, we also record deferred charge assets, which at contract inception
represents the excess, if any, of the estimated ultimate liability for unpaid losses over premiums. We amortize deferred charge assets,
which produces charges to pre-tax earnings in future periods based on the expected timing and amount of loss payments. We also
adjust deferred charge balances due to changes in the expected timing and ultimate amount of claim payments. Significant changes insuch estimates may have a significant effect on unamortized deferred charge balances and the amount of periodic amortization. Basedon the contracts in effect as of December 31, 2017, we currently estimate that amortization expense in 2018 will approximate$1.2 billion.
Derivative contract liabilities
We measure derivative contract liabilities at fair value. Our remaining significant derivative contract exposures relate to equity
index put option contracts written between 2004 and 2008. Our recorded liabilities are based on models as there are essentially noobservable prices for comparable contracts. Actual values in an exchange may differ significantly from the values produced by suchmodels, as transaction values may also reflect the prevailing perceptions of individual buyers and sellers and other changes in market
conditions.
We determine the fair values of equity index put option contracts using a Black-Scholes based option valuation model. Inputs
to the model include the current index value, strike price, interest rate, dividend rate and contract expiration date. The weighted averageinterest and dividend rates used as of December 31, 2017 were 1.1% and 3.2%, respectively. The interest rates were approximately 40
basis points (on a weighted average basis) over benchmark interest rates at the end of 2017 and represented our estimate of ournonperformance risk.
The Black-Scholes based model also incorporates volatility inputs that estimate potential price changes over time. Ourcontracts have an average remaining maturity of about three years. The weighted average volatility used as of December 31, 2017 wasapproximately 17.4%. We determine the weighted average volatilities based on the volatility input for each contract weighted by thecontract’s notional value. The potential impact from changes in our volatility assumptions are as follows. (Dollars in millions).
Fair value at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hypothetical change in volatility$2,172
Hypothetical fair value

Increase 2 percentage points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase 4 percentage points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease 2 percentage points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease 4 percentage points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-57$2,332
2,502
2,022
1,883

Management’s Discussion and Analysis (Continued)
Other Critical Accounting Policies
Our Consolidated Balance Sheet at December 31, 2017 included goodwill of acquired businesses of $81.3 billion. We evaluate
goodwill for impairment at least annually and we conducted our most recent annual review during the fourth quarter of 2017. Ourreview includes determining the estimated fair values of our reporting units. There are several methods of estimating a reporting unit’s
fair value, including market quotations, underlying asset and liability fair value determinations and other valuation techniques, such as
discounted projected future net earnings or net cash flows and multiples of earnings. We primarily use discounted projected future
earnings or cash flow methods. The key assumptions and inputs used in such methods may include forecasting revenues and expenses,
operating cash flows and capital expenditures, as well as an appropriate discount rate and other inputs. A significant amount of
judgment is required in estimating the fair value of a reporting unit and in performing goodwill impairment tests. Due to the inherent
uncertainty in forecasting cash flows and earnings, actual results may vary significantly from the forecasts. If the carrying amount of areporting unit, including goodwill, exceeds the estimated fair value, then, as required by GAAP, we estimate the fair values of theidentifiable assets and liabilities of the reporting unit. The excess of the estimated fair value of the reporting unit over the estimated fairvalue of its net assets establishes the implied value of goodwill. The excess of the recorded amount of goodwill over the implied
goodwill value is charged to earnings as an impairment loss.
Market Risk Disclosures
Our Consolidated Balance Sheets include substantial amounts of assets and liabilities whose fair values are subject to market
risks. Our significant market risks are primarily associated with equity prices, interest rates, foreign currency exchange rates andcommodity prices. The fair values of our investment portfolios and equity index put option contracts remain subject to considerable
volatility. The following sections address the significant market risks associated with our business activities.
Equity Price Risk
Equity securities represent a significant portion of our investment portfolio. Strategically, we strive to invest in businesses thatpossess excellent economics and able and honest management, and we prefer to invest a meaningful amount in each investee.
Consequently, equity investments are concentrated in relatively few issuers. At December 31, 2017, approximately 65% of the total
fair value of equity securities was concentrated in five issuers.
We often hold our equity investments for long periods and short-term price volatility has occurred in the past and will occur inthe future. We strive to maintain significant levels of shareholder capital and ample liquidity to provide a margin of safety against
short-term price volatility.
We are also subject to equity price risk with respect to our equity index put option contracts. While our ultimate liability withrespect to these contracts is determined from the movement of the underlying stock index between the contract inception date andexpiration date, fair values of these contracts are also affected by changes in other factors such as interest rates, expected dividend rates
and the remaining duration of the contracts.
The following table summarizes our equity securities and derivative contract liabilities with significant equity price risk as ofDecember 31, 2017 and 2016 and the estimated effects of a hypothetical 30% increase and a 30% decrease in market prices as of those
dates. The selected 30% hypothetical increase and decrease does not reflect the best or worst case scenario. Indeed, results fromdeclines could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in our equity
investment portfolio. Dollar amounts are in millions.

Fair Value

December 31, 2017
Investments in equity securities . . . . . . . . . . . . . . . . . .

$170,540

Equity index put option contract liabilities . . . . . . . . . .

2,172

December 31, 2016
Investments in equity securities . . . . . . . . . . . . . . . . . .

$131,629

Equity index put option contract liabilities . . . . . . . . . .

2,890

(1)

HypotheticalPrice Change

Estimated
Fair Value after
Hypothetical
Change in Prices

Hypothetical
Percentage
Increase (Decrease) in
Shareholders’ Equity (1)30% increase
30% decrease
30% increase
30% decrease$221,702
119,378
1,036
4,804

11.6%
(11.6)
0.3(0.6)

30% increase
30% decrease
30% increase
30% decrease$172,341
91,099
1,602
5,572

9.4%
(9.4)
0.3
(0.6)

The hypothetical percentage increase (decrease) is after income taxes at the statutory rate in effect as of the balance sheet date.

K-58

Management’s Discussion and Analysis (Continued)
Interest Rate Risk
We may also invest in bonds, loans or other interest rate sensitive instruments. Our strategy is to acquire or originate such
instruments at prices considered appropriate relative to the perceived credit risk. We recognize and accept that credit losses may occur.
We also issue debt in the ordinary course of business to fund business operations, business acquisitions and for other general purposes.
We strive to maintain high credit ratings, in order to minimize the cost of our debt. We rarely utilize derivative products, such as
interest rate swaps, to manage interest rate risks.
The fair values of our fixed maturity investments, loans and finance receivables, and notes payable and other borrowings willfluctuate in response to changes in market interest rates. In addition, changes in interest rate assumptions used in our equity index put
option contract models cause changes in reported liabilities with respect to those contracts. Increases and decreases in interest rates
generally translate into decreases and increases in fair values of these instruments. Additionally, fair values of interest rate sensitive
instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, theliquidity of the instrument and other general market conditions.
The following table summarizes the estimated effects of hypothetical changes in interest rates on our significant assets andliabilities that are subject to significant interest rate risk at December 31, 2017 and 2016. We assumed that the interest rate changes
occur immediately and uniformly to each category of instrument containing interest rate risk, and that there were no significant
changes to other factors used to determine the value of the instrument. The hypothetical changes in interest rates do not reflect the best
or worst case scenarios. Actual results may differ from those reflected in the table. Dollars are in millions.
Estimated Fair Value after
Hypothetical Change in Interest Rates

Fair Value

100 bpdecrease(bp=basis points)
100 bp200 bpincreaseincrease

300 bpincrease

December 31, 2017
Assets:Investments in fixed maturity securities . . . . . . . . . . .
Loans and finance receivables . . . . . . . . . . . . . . . . . . .

$ 21,353
14,136$ 22,053
14,655$ 20,742
13,652$ 20,200
13,199$ 19,717
12,774

Liabilities:
Notes payable and other borrowings:
Insurance and other . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . .
Equity index put option contracts . . . . . . . . . . . . . . . .

28,18070,53813,582
2,172

29,87977,091
14,0582,460

26,67064,582
13,174
1,911

25,31959,73012,821
1,676

24,10555,581
12,514
1,465

December 31, 2016
Assets:Investments in fixed maturity securities . . . . . . . . . . .
Investments in equity securities . . . . . . . . . . . . . . . . .
Loans and finance receivables . . . . . . . . . . . . . . . . . . .

$ 23,432
7,659
13,717$ 24,087
8,095
14,230$ 22,860
7,213
13,237$ 22,395
6,780
12,790$ 21,952
6,367
12,370Liabilities:
Notes payable and other borrowings:
Insurance and other . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . .
Equity index put option contracts . . . . . . . . . . . . . . . .

27,712
65,774
15,8252,890

29,47572,261
16,4083,287

26,15460,302
15,3182,533

24,77055,634
14,872
2,213

23,53351,624
14,476
1,928

K-59

Management’s Discussion and Analysis (Continued)
Foreign Currency Risk
Certain of our subsidiaries operate in foreign jurisdictions and we transact business in foreign currencies. In addition, we holdinvestments in common stocks of major multinational companies, such as The Coca-Cola Company, who have significant foreignbusiness and foreign currency risk of their own. We generally do not attempt to match assets and liabilities by currency and do not use
derivative contracts to hedge or manage foreign currency price changes in any meaningful way.
Our net assets subject to financial statement translation into U.S. Dollars are primarily in our insurance, utilities and energy andcertain manufacturing and services subsidiaries. This translation related impact may be offset by gains or losses included in net
earnings related to net liabilities of Berkshire and certain of its U.S. subsidiaries that are denominated in foreign currencies, due tochanges in exchange rates. A summary of these gains (losses), after-tax, for each of the years ending December 31, 2017 and 2016
follows (in millions).
2017

Euro-denominated debt included in net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net liabilities under certain reinsurance contracts included in net earnings . . . . . . . . . . . . . . . . . . .
Foreign currency translation included in other comprehensive income . . . . . . . . . . . . . . . . . . . . . .

$ (655)
(295)
2,151

2016

$

159
458
(1,412)

Commodity Price Risk
Our subsidiaries use commodities in various ways in manufacturing and providing services. As such, we are subject to pricerisks related to various commodities. In most instances, we attempt to manage these risks through the pricing of our products andservices to customers. To the extent that we are unable to sustain price increases in response to commodity price increases, ouroperating results will likely be adversely affected. We may utilize derivative contracts to manage a portion of commodity price risks at
BHE.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See “Market Risk Disclosures” contained in Item 7 “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.”
Management’s Report on Internal Control Over Financial Reporting
Management of Berkshire Hathaway Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with theparticipation of our management, including our principal executive officer and principal financial officer, we conducted an evaluationof the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 as required by the Securities
Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on ourevaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal
control over financial reporting was effective as of December 31, 2017.
The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Deloitte &Touche LLP, an independent registered public accounting firm, as stated in their report which appears on page K-61.
Berkshire Hathaway Inc.
February 23, 2018

K-60

Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders ofBerkshire Hathaway Inc.
Omaha, Nebraska
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as ofDecember 31, 2017 and 2016, the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity,and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the“financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, basedon criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial
statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud,
and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of thefinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control overfinancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectivenessof internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary inthe circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effecton the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
February 23, 2018
We have served as the Company’s auditor since 1985.

K-61

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS(dollars in millions)
December 31,

ASSETS
Insurance and Other:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments in U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in fixed maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in The Kraft Heinz Company (Fair Value: 2017 – $25,306; 2016 – $28,418) . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred charges under retroactive reinsurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, Utilities and Energy:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and Financial Products:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments in U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment and assets held for lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See accompanying Notes to Consolidated Financial Statements
K-62

2017

2016

$ 25,460
78,51521,353164,026
17,63528,57816,187
20,10454,98532,51815,278
11,158$ 23,581
47,33823,432
134,835
15,34527,097
15,727
19,32553,99433,481
8,047
7,126

485,797409,328

2,910
128,184
24,7802,950
15,5893,939
123,759
24,111
4,457
13,550174,413

169,816

3,213
5,856
13,748
9,931
1,493
7,644

528
10,984
13,300
9,689
1,381
5,828

41,88541,710$ 702,095$ 620,854

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS(dollars in millions)
December 31,
2017

2016

$ 61,122
42,937
16,04017,608
7,654
23,09927,324$ 53,379
24,972
14,245
15,977
6,714
22,164
27,175

195,784

164,626

11,334
7,511
62,178

11,434
3,121
59,08581,02373,6401,470
2,172
13,0851,444
2,890
15,384

16,727

19,718

Income taxes, principally deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56,60777,442

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

350,141

335,426

Shareholders’ equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

835,69458,571
255,786(1,763)

8
35,68137,298210,846(1,763)

Berkshire Hathaway shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

348,296
3,658

282,070
3,358

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life, annuity and health insurance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other policyholder liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and Financial Products:
Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See accompanying Notes to Consolidated Financial Statements
K-63

351,954285,428$702,095$620,854

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS(dollars in millions except per-share amounts)
2017

Revenues:
Insurance and Other:
Insurance premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $Sales and service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest, dividend and other investment income . . . . . . . . . . . . . . . . . . . . . . . .
Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2016
2015

60,597 $125,963
5,144
1,202

45,881 $
119,489
4,725
5,128

41,294
107,001
5,357
9,363

192,906

175,223

163,015

Railroad, Utilities and Energy operating and other revenues . . . . . . . . . . . . . . . . . .

39,94337,54240,004

Finance and Financial Products:
Sales and service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest, dividend and other investment income . . . . . . . . . . . . . . . . . . . . . . . .
Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contract gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,924
1,438
208
718

6,208
1,455
2,425
751

5,430
1,510
10
974

9,288

10,839

7,924

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242,137

223,604

210,943

Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Life, annuity and health insurance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance underwriting expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,891
5,618
9,321
101,748
16,241
1,740

30,906
5,131
7,713
95,754
16,478445

26,5275,413
7,517
87,02913,723
460

183,559

156,427

140,669

28,034
3,254

26,194
2,642

27,6502,653

31,28828,83630,303

4,050
1,940
400

3,448
1,739
410

2,915
1,586
402

6,390

5,597

4,903

Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221,237

190,860

175,875

Earnings before income taxes and equity in earnings of The Kraft Heinz
Company
Equity in earnings (loss) of The Kraft Heinz Company . . . . . . . . . . . . . . . . . .

20,9002,938

32,744923

35,068(122)

Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,838(21,515)

33,6679,240

34,946
10,532Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .

45,353413

24,427353

24,414331

Net earnings attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . $44,940 $24,074 $24,083

Railroad, Utilities and Energy:
Cost of sales and operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and Financial Products:
Cost of sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net earnings per average equivalent Class A share . . . . . . . . . . . . . . . . . . . . . . . . $27,326 $14,645 $14,656Net earnings per average equivalent Class B share* . . . . . . . . . . . . . . . . . . . . . . . . $18.22 $
9.76 $
9.77
Average equivalent Class A shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,644,615
1,643,826
1,643,183
Average equivalent Class B shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,466,923,163 2,465,739,654 2,464,773,947* Net earnings per average equivalent Class B share outstanding are one-fifteen-hundredth of the equivalent Class A amount.
See accompanying Notes to Consolidated Financial Statements
K-64

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(dollars in millions)Year Ended December 31,
2017

2016

2015

Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$45,353$24,427$24,414

Other comprehensive income:Net change in unrealized appreciation of investments . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of investment appreciation in net earnings . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost and actuarial gains/losses of defined benefit pension plans . . . . .
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,450(10,566)(1,399)
490
2,364
(95)
225
(45)
(9)

13,858(4,846)(6,820)2,387(1,541)
66
354
(187)
(17)

(8,520)3,014(2,332)816(1,931)
(43)
424
(140)
(94)

Other comprehensive income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,4153,254(8,806)Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . .

66,768555

27,681291

15,608275

Comprehensive income attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . .

$66,213$27,390$15,333

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(dollars in millions)
Berkshire Hathaway shareholders’ equity
Common stock Accumulated
and capital inotherexcess of par comprehensive
value
incomeRetainedearnings

Treasurystock

Noncontrollinginterests

Total

Balance December 31, 2014 . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . .
Transactions with noncontrolling interests . . . . .

$ 35,581
—
—
53
(6)

$42,732—(8,750)——$ 162,689
24,083———$ (1,763)————$ 2,857
331
(56)
—
(55)

$ 242,096
24,414(8,806)53(61)

Balance December 31, 2015 . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . .
Transactions with noncontrolling interests . . . . .

35,628
—
—
119
(58)

33,982—
3,316——

186,772
24,074———(1,763)
—
—
—
—

3,077
353
(62)
—
(10)

257,696
24,427
3,254
119
(68)

Balance December 31, 2016 . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net . . . . . . . . . . . .
Issuance of common stock . . . . . . . . . . . . . . . . .
Transactions with noncontrolling interests . . . . .

35,689——76(63)

37,298—21,273——

210,846
44,940———(1,763)
—
—
—
—

3,358
413
142
—
(255)

285,428
45,353
21,41576(318)

Balance December 31, 2017 . . . . . . . . . . . . . . . . . .

$ 35,702$58,571$ 255,786$ (1,763)$ 3,658$ 351,954

See accompanying Notes to Consolidated Financial Statements
K-65

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in millions)Year Ended December 31,
2017

2016

2015

$ 45,353$ 24,427$ 24,414(1,410)9,188
458(7,553)
8,901
(161)

(9,373)
7,779
751

25,027(7,231)
1,761(1,990)(775)(24,957)
352

4,372
(360)
968
(3,302)
(946)
4,044
2,145

2,262
84
1,392
(1,650)
(974)
5,718
1,088

Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,77632,53531,491

Cash flows from investing activities:
Purchases of U.S. Treasury Bills and fixed maturity securities . . . . . . . . . . . . . . . . . .
Purchases of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of Kraft Heinz common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of U.S. Treasury Bills and fixed maturity securities . . . . . . . . . . . . . . . . . . . . .
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities . . .
Sales and redemptions of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of loans and finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections of loans and finance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(158,492)(20,326)—
49,32786,727
19,512(1,435)
1,702(2,708)(11,708)(3,690)(96,568)(16,508)—
18,757
26,17728,464(307)
490(31,399)(12,954)(419)(17,891)(10,220)(5,258)2,471
14,656
8,747
(179)
492
(4,902)(16,082)
165

Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(41,091)(84,267)(28,001)

Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses . . . . . . . . . . . . . . . . . . .
Proceeds from borrowings of railroad, utilities and energy businesses . . . . . . . . . . . .
Proceeds from borrowings of finance businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings of insurance and other businesses . . . . . . . . . . . . . . . . . .
Repayments of borrowings of railroad, utilities and energy businesses . . . . . . . . . . .
Repayments of borrowings of finance businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in short term borrowings, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,342
3,013
1,303
(1,856)(3,549)(3,609)
2,079
(121)

9,431
3,077
4,741
(1,264)(2,123)(1,313)
130
112

3,358
5,479
1,045
(1,916)(1,725)(1,827)
(378)
(233)

Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,398)

12,791

3,803

Effects of foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

248

(172)

(165)

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,535
28,048(39,113)
67,161

7,128
60,033

Cash and cash equivalents at end of year * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31,583$ 28,048$ 67,161* Cash and cash equivalents at end of year are comprised of the following:
Insurance and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, Utilities and Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and Financial Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 25,460
2,910
3,213

$ 23,581
3,939
528$ 56,612
3,437
7,112

$ 31,583$ 28,048$ 67,161

Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net earnings to operating cash flows:
Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred charges reinsurance assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and originated loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contract assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See accompanying Notes to Consolidated Financial Statements
K-66

BERKSHIRE HATHAWAY INC.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
(1)

Significant accounting policies and practices(a) Nature of operations and basis of consolidation
Berkshire Hathaway Inc. (“Berkshire”) is a holding company owning subsidiaries engaged in a number of diverse businessactivities, including insurance and reinsurance, freight rail transportation, utilities and energy, manufacturing, service,retailing and finance. In these notes the terms “us,” “we,” or “our” refer to Berkshire and its consolidated subsidiaries.
Further information regarding our reportable business segments is contained in Note 23. Significant business acquisitions
completed over the past three years are discussed in Note 2.
The accompanying Consolidated Financial Statements include the accounts of Berkshire consolidated with the accounts ofall subsidiaries and affiliates in which we hold a controlling financial interest as of the financial statement date. Normally acontrolling financial interest reflects ownership of a majority of the voting interests. We consolidate a variable interest
entity (“VIE”) when we possess both the power to direct the activities of the VIE that most significantly impact its
economic performance and we are either obligated to absorb the losses that could potentially be significant to the VIE or
we hold the right to receive benefits from the VIE that could potentially be significant to the VIE. Intercompany accounts
and transactions have been eliminated.
Prior to 2017, the liability for unpaid losses and loss adjustment expenses related to workers’ compensation claims
assumed under certain workers’ compensation reinsurance contracts were discounted for the time-value-of-money
consistent with insurance statutory accounting principles. Estimated claim liabilities assumed under all other insurance andreinsurance contracts, including other workers’ compensation contracts are not discounted. In the fourth quarter of 2017,
we discontinued the practice of discounting workers’ compensation claims liabilities assumed under all reinsurance
contracts to achieve full consistency. In connection with this change, we increased our unpaid losses and loss adjustment
expenses by $1.43 billion and reduced our income tax liabilities by $502 million and our shareholders’ equity by$931 million. The effect of this change on net earnings in 2015 and 2016 was immaterial and the aforementioned
adjustment to retained earnings was recorded as of December 31, 2014 in the accompanying Consolidated Financial
Statements. As a result, retained earnings and shareholder’s equity for the years 2014-2016 have been restated from theamounts previously reported.
(b) Use of estimates in preparation of financial statements
The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted in
the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. In
particular, estimates of unpaid losses and loss adjustment expenses and related reinsurance recoverable on unpaid losses
are subject to considerable estimation error due to the inherent uncertainty in projecting ultimate claim costs. In addition,
estimates and assumptions associated with the amortization of deferred charges on retroactive reinsurance contracts,
determinations of fair values of certain financial instruments and evaluations of goodwill and identifiable intangible assets
for impairment require considerable judgment. Actual results may differ from the estimates used in preparing our
Consolidated Financial Statements.
(c) Cash and cash equivalents and Short-term investments in U.S. Treasury Bills
Cash equivalents consist of demand deposit and money market accounts and investments with maturities of three months
or less when purchased. Short-term investments in U.S. Treasury Bills have remaining maturities exceeding three months
at the time of purchase and are stated at amortized cost. Our aggregate investments in U.S. Treasury Bills at December 31,
2017 were $90.1 billion, which consisted of $5.7 billion included in cash and cash equivalents and $84.4 billion included
in short-term investments in U.S. Treasury Bills in our Consolidated Balance Sheet.
(d) Investments in fixed maturity and equity securities
We classify investments in fixed maturity and equity securities at the acquisition date and re-evaluate the classification ateach balance sheet date. Investments classified as held-to-maturity are carried at amortized cost, reflecting the ability andintent to hold the securities to maturity. Trading investments are securities acquired with the intent to sell in the near term
and are carried at fair value with changes in fair value reported in earnings. All other securities are classified asavailable-for-sale and are carried at fair value with net unrealized gains or losses reported as a component of accumulated
other comprehensive income. As of December 31, 2017, substantially all of our investments in equity and fixed maturity
securities were classified as available-for-sale.

K-67

Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(d) Investments in fixed maturity and equity securities (Continued)
Investment gains and losses arise when investments are sold (as determined on a specific identification basis) or are otherthan-temporarily impaired. If a decline in the value of an investment below cost is deemed other than temporary, the costof the investment is written down to fair value, with a corresponding charge to earnings. Factors considered in determining
whether an impairment is other than temporary include: the financial condition, business prospects and creditworthiness of
the issuer, the relative amount of the decline, our ability and intent to hold the investment until the fair value recovers andthe length of time that fair value has been less than cost. With respect to an investment in a fixed maturity security, we
recognize an other-than-temporary impairment if we (a) intend to sell or expect to be required to sell the security before its
amortized cost is recovered or (b) do not expect to ultimately recover the amortized cost basis even if we do not intend tosell the security. Under scenario (a), we recognize the loss in earnings and under scenario (b), we recognize the credit loss
component in earnings and the difference between fair value and the amortized cost basis net of the credit loss in othercomprehensive income.
(e) Investments under the equity method
We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but
not control, over the operating and financial policies of the investee. The ability to exercise significant influence ispresumed when an investor possesses more than 20% of the voting interests of the investee. This presumption may beovercome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence isrestricted. We apply the equity method to investments in common stock and to other investments when such otherinvestments possess substantially identical subordinated interests to common stock.
In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amountof the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee.
We record dividends or other equity distributions as reductions in the carrying value of the investment. In the event that net
losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if other investments in theinvestee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity
method losses, if any, are based upon the change in our claim on the investee’s book value.
(f) Receivables, loans and finance receivables
Receivables of the insurance and other businesses are stated net of estimated allowances for uncollectible balances.
Allowances for uncollectible balances are provided when it is probable counterparties or customers will be unable to pay
all amounts due based on the contractual terms. Receivables are generally written off against allowances after all
reasonable collection efforts are exhausted.
Loans and finance receivables of the finance and financial products businesses are predominantly manufactured housing
installment loans. These loans are stated at amortized cost based on our ability and intent to hold such loans to maturity
and are stated net of allowances for uncollectible accounts. The carrying value of acquired loans represents acquisition
costs, plus or minus origination and commitment costs paid or fees received, which together with acquisition premiums or
discounts, are deferred and amortized as yield adjustments over the life of the loans. Substantially all of these loans are
secured by real or personal property or other assets of the borrower.
Allowances for credit losses on loans include estimates of losses on loans currently in foreclosure and losses on loans not
currently in foreclosure. Estimates of losses on loans in foreclosure are based on historical experience and collateral
recovery rates. Estimates of losses on loans not currently in foreclosure consider historical default rates, collateral recovery
rates and prevailing economic conditions. Allowances for credit losses also incorporate the historical average time elapsed
from the last payment until foreclosure.
Loans are considered delinquent when payments are more than 30 days past due. Loans over 90 days past due are placedon nonaccrual status and accrued but uncollected interest is reversed. Subsequent collections on the loans are first applied
to the principal and interest owed for the most delinquent amount. Interest income accruals resume once a loan is less than
90 days delinquent.
Loans in the foreclosure process are considered non-performing. Once a loan is in foreclosure, interest income is notrecognized unless the foreclosure is cured or the loan is modified. Once a modification is complete, interest income isrecognized based on the terms of the new loan. Foreclosed loans are charged off when the collateral is sold. Loans not in
foreclosure are evaluated for charge off based on individual circumstances concerning the future collectability of the loan
and the condition of the collateral securing the loan.

K-68Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(g) Derivatives
We carry derivative contracts in our Consolidated Balance Sheets at fair value, net of reductions permitted under masternetting agreements with counterparties. The changes in fair value of derivative contracts that do not qualify as hedging
instruments for financial reporting purposes are recorded in earnings or by our regulated utilities businesses as regulatory
assets or liabilities, as applicable, when inclusion in regulated rates is probable.
(h) Fair value measurements
As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between
market participants in the principal market or in the most advantageous market when no principal market exists.
Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order toestimate fair value. Alternative valuation techniques may be appropriate under the circumstances to determine the valuethat would be received to sell an asset or paid to transfer a liability in an orderly transaction. Market participants are
assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Our
nonperformance or credit risk is considered in determining the fair value of liabilities. Considerable judgment may berequired in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value
presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.
(i) Inventories
Inventories consist of manufactured goods and goods acquired for resale. Manufactured inventory costs include raw
materials, direct and indirect labor and factory overhead. As of December 31, 2017, approximately 41% of ourconsolidated inventory cost was determined using the last-in-first-out (“LIFO”) method, with the remainder determined
under first-in-first-out and average cost methods. Non-LIFO inventories are stated at the lower of cost or net realizablevalue. The difference between costs determined under LIFO and current costs was not material as of December 31, 2017.
(j) Property, plant and equipment and leased assets
Additions to property, plant and equipment used in operations and leased assets are recorded at cost and consist ofadditions, improvements and betterments. With respect to constructed assets, all construction related material, direct laborand contract services as well as certain indirect costs are capitalized. Indirect costs include interest over the construction
period. With respect to constructed assets of our regulated utility and energy subsidiaries that are subject to authoritative
guidance for regulated operations, capitalized costs also include an equity allowance for funds used during construction,
which represents the cost of equity funds used to finance the construction of the regulated facilities. Also see Note 1(r).
Normal repairs and maintenance and other costs that do not improve the property, extend the useful life or otherwise do notmeet capitalization criteria are charged to expense as incurred. Rail grinding costs related to our railroad properties are
expensed as incurred.
Depreciation of assets of our regulated utilities and railroad is generally determined using group depreciation methods
where rates are based on periodic depreciation studies approved by the applicable regulator. Under group depreciation, asingle depreciation rate is applied to the gross investment in a particular class of property, despite differences in the service
life or salvage value of individual property units within the same class. When our regulated utilities or railroad retires orsells a component of the assets accounted for using group depreciation methods, no gain or loss is recognized. Gains orlosses on disposals of all other assets are recorded through earnings. Ranges of estimated useful lives of depreciable assets
unique to our railroad business are as follows: track structure and other roadway – 9 to 100 years, locomotives, freight carsand other equipment – 6 to 41 years. Ranges of estimated useful lives of assets unique to our regulated utilities and energy
businesses are as follows: utility generation, transmission and distribution systems – 5 to 80 years, interstate natural gas
pipeline assets – 3 to 80 years and independent power plants and other assets – 3 to 30 years.
Property, plant and equipment and leased assets in use by our other businesses are depreciated to estimated salvage value
primarily using the straight-line method over estimated useful lives. Ranges of estimated useful lives of depreciable assets
used in our other businesses are as follows: buildings and improvements – 5 to 50 years, machinery and equipment – 3 to
25 years, furniture, fixtures and other – 3 to 15 years and assets held for lease – 6 to 35 years.
We evaluate property, plant and equipment for impairment when events or changes in circumstances indicate that thecarrying value of such assets may not be recoverable or when the assets are held for sale. Upon the occurrence of a
triggering event, we assess whether the estimated undiscounted cash flows expected from the use of the asset and theresidual value from the ultimate disposal of the asset exceeds the carrying value. If the carrying value exceeds theestimated recoverable amounts, we reduce the carrying value to fair value and record an impairment loss in earnings,
except with respect to impairment of assets of our regulated utility and energy subsidiaries when the impacts of regulation
are considered in evaluating the carrying value of regulated assets.

K-69

Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(k) Goodwill and other intangible assets
Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of thatbusiness. We evaluate goodwill for impairment at least annually. When evaluating goodwill for impairment, we estimate
the fair value of the reporting unit. There are several methods that may be used to estimate a reporting unit’s fair value,
including market quotations, asset and liability fair values and other valuation techniques, including, but not limited to,
discounted projected future net earnings or net cash flows and multiples of earnings. If the carrying amount of a reporting
unit, including goodwill, exceeds the estimated fair value, then the identifiable assets and liabilities of the reporting unit
are estimated at fair value as of the current testing date. The excess of the estimated fair value of the reporting unit over thecurrent estimated fair value of net assets establishes the implied value of goodwill. The excess of the recorded goodwill
over the implied goodwill value is charged to earnings as an impairment loss. Significant judgment is required inestimating the fair value of the reporting unit and performing goodwill impairment tests.
Intangible assets with finite lives are amortized based on the estimated pattern in which the economic benefits are expected
to be consumed or on a straight-line basis over their estimated economic lives. Intangible assets with finite lives arereviewed for impairment when events or changes in circumstances indicate that the carrying amount may not berecoverable. Intangible assets with indefinite lives are tested for impairment at least annually and when events or changes
in circumstances indicate that it is more likely than not that the asset is impaired.
(l) Revenue recognition
Insurance premiums for prospective property/casualty insurance and reinsurance are earned over the loss exposure or
coverage period in proportion to the level of protection provided. In most cases, such premiums are recognized as revenues
ratably over the term of the contract with unearned premiums computed on a monthly or daily pro-rata basis. Premiums for
retroactive property/casualty reinsurance contracts are earned at the inception of the contracts, as all of the underlying loss
events covered by these policies occurred prior to inception. Premiums for life reinsurance and annuity contracts areearned when due. Premiums earned are stated net of amounts ceded to reinsurers. Premiums earned on contracts containing
experience rating provisions reflect estimated loss experience under contracts.
Sales revenues derive from the sales of manufactured products and goods acquired for resale. Revenues from sales arerecognized upon passage of title to the customer, which generally coincides with customer pickup, product delivery or
acceptance, depending on terms of the sales arrangement.
Service revenues are recognized as the services are performed. Services provided pursuant to a contract are either
recognized over the contract period or upon completion of the elements specified in the contract depending on the terms ofthe contract. Revenues related to the sales of fractional ownership interests in aircraft are recognized ratably over the termof the related management services agreement, as the transfer of ownership interest in the aircraft is inseparable from the
management services agreement.
Leasing revenue is generally recognized ratably over the term of the lease. A substantial portion of our leases are classified
as operating leases.
Operating revenues from the distribution and sale of electricity and natural gas to customers are recognized when theservices are rendered or the energy is delivered. Revenues include unbilled as well as billed amounts. Rates charged are
generally subject to federal and state regulation or established under contractual arrangements. When preliminary rates are
permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund
and a liability for estimated refunds is recorded.
Railroad transportation revenues are recognized based upon the proportion of service provided as of the balance sheet date.
Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specificlocations, are recorded as pro-rata reductions to revenue based on actual or projected future customer shipments. Whenusing projected shipments, we rely on historic trends as well as economic and other indicators to estimate the recorded
liability for customer incentives.
(m) Losses and loss adjustment expenses
We record liabilities for unpaid losses and loss adjustment expenses assumed under short duration property/casualty
insurance and reinsurance contracts for loss events that have occurred on or before the balance sheet date. Such liabilities
represent the estimated ultimate payment amounts without discounting for time value.

K-70

Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(m) Losses and loss adjustment expenses (Continued)
Liability estimates are based upon (1) reports of losses from policyholders, (2) individual case estimates and (3) estimatesof incurred but not reported losses. Paid claims, claim settlement costs and changes in estimated claim liabilities areincluded in losses and loss adjustment expenses in the Consolidated Statements of Earnings. Provisions for losses and loss
adjustment expenses are charged to earnings after deducting amounts recovered and estimates of recoverable amounts
under ceded reinsurance contracts. Reinsurance contracts do not relieve the ceding company of its obligations to indemnify
policyholders with respect to the underlying insurance and reinsurance contracts.
(n) Retroactive reinsurance contracts
We record liabilities for unpaid losses and loss adjustment expenses assumed under retroactive reinsurance of shortduration contracts consistent with other short duration property/casualty insurance and reinsurance contracts discussed in
Note 1(m). With respect to retroactive reinsurance contracts, we also record deferred charge assets at the inception of thecontracts, representing the excess, if any, of the estimated ultimate claim liabilities over the premiums earned. We
subsequently amortize the deferred charge assets using the interest method over the expected claim settlement periods.
Changes to the estimated timing or amount of future loss payments also produce changes in deferred charge balances.
Changes in such estimates are applied retrospectively and the resulting changes in deferred charge balances, together withperiodic amortization, are included in insurance losses and loss adjustment expenses in the Consolidated Statements ofEarnings.
(p) Insurance policy acquisition costs
Incremental costs that are directly related to the successful sale of insurance contracts are capitalized, subject to ultimate
recoverability, and are subsequently amortized to underwriting expenses as the related premiums are earned. Direct
incremental acquisition costs include commissions, premium taxes and certain other costs associated with successful
efforts. All other underwriting costs are expensed as incurred. The recoverability of capitalized insurance policy
acquisition costs generally reflects anticipation of investment income. The unamortized balances are included in otherassets and were $2,529 million and $1,991 million at December 31, 2017 and 2016, respectively.
(q) Life and annuity insurance benefits
Liabilities for insurance benefits under life contracts are computed based upon estimated future investment yields,
expected mortality, morbidity, and lapse or withdrawal rates and reflect estimates for future premiums and expenses under
the contracts. These assumptions, as applicable, also include a margin for adverse deviation and may vary with thecharacteristics of the contract’s date of issuance, policy duration and country of risk. The interest rate assumptions used
may vary by contract or jurisdiction. Periodic payment annuity liabilities are discounted based on the implicit rate as of the
inception of the contracts such that the present value of the liabilities equals the premiums. Discount rates range from lessthan 1% to 7%.
(r) Regulated utilities and energy businesses
Certain energy subsidiaries prepare their financial statements in accordance with authoritative guidance for regulated
operations, reflecting the economic effects of regulation from the ability to recover certain costs from customers and therequirement to return revenues to customers in the future through the regulated rate-setting process. Accordingly, certain
costs are deferred as regulatory assets and certain income is accrued as regulatory liabilities. Regulatory assets andliabilities will be amortized into operating expenses and revenues over various future periods.
Regulatory assets and liabilities are continually assessed for probable future inclusion in regulatory rates by consideringfactors such as applicable regulatory or legislative changes and recent rate orders received by other regulated entities. If
future inclusion in regulatory rates ceases to be probable, the amount no longer probable of inclusion in regulatory rates ischarged or credited to earnings (or other comprehensive income, if applicable) or returned to customers.
(s) Foreign currency
The accounts of our non-U.S. based subsidiaries are measured, in most instances, using functional currencies other than the
U.S. Dollar. Revenues and expenses of these subsidiaries are translated into U.S. Dollars at the average exchange rate forthe period and assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses
from translating the financial statements of these subsidiaries are included in shareholders’ equity as a component ofaccumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than
the functional currency of the reporting entity, including gains and losses from the remeasurement of assets and liabilities
due to changes in exchange rates, are included in earnings.

K-71

Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(t) Income taxes
Berkshire files a consolidated federal income tax return in the United States, which includes eligible subsidiaries. In
addition, we file income tax returns in state, local and foreign jurisdictions as applicable. Provisions for current income tax
liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns forthe current year. Income taxes reported in earnings also include deferred income tax provisions.
Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax basesof assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities associated withcomponents of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise,changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect ondeferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax
expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is
not likely.
Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax
returns when such positions, in our judgment, do not meet a “more-likely-than-not” threshold based on the technical meritsof the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of income
tax expense.
(u) New accounting pronouncements to be adopted subsequent to December 31, 2017
The Financial Accounting Standards Board (“FASB”) issued ASU 2016-01 “Financial Instruments—Recognition andMeasurement of Financial Assets and Financial Liabilities” in 2016, which requires that investments in equity securities(excluding equity method investments) be measured at fair value with changes in fair value recognized in net earnings.
Under existing GAAP, changes in fair value of available-for-sale equity securities are recorded in other comprehensive
income. Given the magnitude of our investments in equity securities and the inherent volatility of prices for equity
securities, the adoption of ASU 2016-01 will have a significant impact on our future reported net earnings, although it will
not affect our comprehensive income or total shareholders’ equity. We adopted ASU 2016-01 as of January 1, 2018. As ofthat date, we reclassified the accumulated net unrealized appreciation relating to our investments in equity securities at
December 31, 2017 (approximately $61.5 billion) from accumulated other comprehensive income to retained earnings.
The FASB issued ASU 2014-09 “Revenue from Contracts with Customers” in 2014. ASU 2014-09 applies to contracts
with customers, excluding, most notably, insurance, reinsurance and leasing contracts. Subsequently the FASB issued
additional guidance that modified or clarified ASU 2014-09. All guidance is collectively referred to as AccountingStandard Codification (“ASC”) 606. The framework prescribed by ASC 606 includes a five-step process for recognizing
revenue. A core principle is that revenues are recognized as the control of distinct goods or services are transferred tocustomers in amounts that reflect the consideration the seller expects to be entitled. Under ASC 606, revenues and related
costs with respect to certain of our contracts with customers will be recognized over time rather than when the products orservices are delivered. In addition, certain of our contracts will be treated as leases for accounting purposes, rather thancontracts with customers subject to ASC 606. We adopted ASC 606 as of January 1, 2018, under the modified
retrospective method. The principal impact of the initial adoption of ASC 606 resulted in an increase to both assets(primarily property, plant and equipment) and liabilities of approximately $3.5 billion.
In 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 requires a lessee to recognize in the statement offinancial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying
asset for the lease term and also requires additional qualitative and quantitative disclosures. ASU 2016-02 is effective forreporting periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effectthis standard will have on our Consolidated Financial Statements.
In 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses,” which provides for the recognition andmeasurement at the reporting date of all expected credit losses for financial assets held at amortized cost andavailable-for-sale debt securities. Currently, credit losses are recognized and measured when such losses become probablebased on the prevailing facts and circumstances. ASU 2016-13 is effective for reporting periods beginning after
December 15, 2019. We are currently evaluating the effect this standard will have on our Consolidated Financial
Statements.

K-72

Notes to Consolidated Financial Statements (Continued)(1)

Significant accounting policies and practices (Continued)(u) New accounting pronouncements to be adopted subsequent to December 31, 2017 (Continued)
In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment.” ASU 2017-04
eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption,
the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over fair value,
limited to the carrying value of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning
after December 15, 2019, with early adoption permitted.

(2)

Significant business acquisitions

Our long-held acquisition strategy is to acquire businesses that have consistent earning power, good returns on equity and able
and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements
beginning on their respective acquisition dates.
On January 29, 2016, Berkshire acquired all outstanding common stock of Precision Castparts Corp. (“PCC”) for $235 pershare in cash pursuant to a definitive merger agreement dated August 8, 2015. The aggregate consideration paid was approximately$32.7 billion, which included the value of PCC shares we already owned. We funded the acquisition with a combination of existing
cash balances and proceeds from a temporary credit facility. PCC is a worldwide, diversified manufacturer of complex metalcomponents and products, serving the aerospace, power and general industrial markets. PCC manufactures complex structuralinvestment castings and forged components for aerospace markets, machined airframe components and highly engineered criticalfasteners for aerospace applications, and in manufacturing airfoil castings for the aerospace and industrial gas turbine markets. PCC
also produces titanium and nickel superalloy melted and mill products for the aerospace, chemical processing, oil and gas and pollution
control industries, and manufactures extruded seamless pipe, fittings and forgings for power generation and oil and gas applications.
On February 29, 2016, we acquired a recapitalized Duracell Company (“Duracell”) from The Procter & Gamble Company(“P&G”) in exchange for shares of P&G common stock held by Berkshire subsidiaries, which had a fair value of approximately$4.2 billion. Duracell manufactures high-performance alkaline batteries and wireless charging technologies. Goodwill from theseacquisitions is not amortizable for income tax purposes. The fair values of identified assets acquired and liabilities assumed andresidual goodwill at their respective acquisition dates are summarized as follows (in millions).
PCC

Duracell

250
3,430
2,765
16,011
23,527
1,916$ 1,807
319
359
866
1,550
242

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$Assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 47,899$

5,143

Accounts payable, accruals and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, principally deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

2,442
5,251
7,548

$

410
—
494

Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,241$904

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 32,658$

4,239

In the first quarter of 2015, we acquired the Van Tuyl Group (now named Berkshire Hathaway Automotive), which included
over 80 automotive dealerships and two related insurance businesses, two auto auctions and a distributor of automotive fluid
maintenance products. In addition to selling new and pre-owned automobiles, the Berkshire Hathaway Automotive group offers repair
and other services and products, including extended warranty services and other automotive protection plans. Consideration paid forthe acquisition was $4.1 billion. The goodwill related to Berkshire Hathaway Automotive is amortizable for income tax purposes.
Over the three years ending December 31, 2017, we completed several smaller-sized business acquisitions, most of which we
consider as “bolt-on” acquisitions to several of our existing business operations. Aggregate consideration paid in 2017, 2016 and 2015
for bolt-on acquisitions was approximately $2.7 billion, $1.4 billion and $1.1 billion, respectively. We do not believe that theseacquisitions are material, individually or in the aggregate to our Consolidated Financial Statements.

K-73

Notes to Consolidated Financial Statements (Continued)(3)

Investments in fixed maturity securities
Investments in fixed maturity securities as of December 31, 2017 and 2016 are summarized by type below (in millions).
Amortized
Cost

December 31, 2017
U.S. Treasury, U.S. government corporations and agencies . . . . . . . . . . . . . .
States, municipalities and political subdivisions . . . . . . . . . . . . . . . . . . . . . . .
Foreign governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2016
U.S. Treasury, U.S. government corporations and agencies . . . . . . . . . . . . . .
States, municipalities and political subdivisions . . . . . . . . . . . . . . . . . . . . . . .
Foreign governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrealized
Gains

Unrealized
LossesFair
Value$ 3,975
847
8,572
6,279
772

$

4
19
274
588
92

$ (26)
(12)
(24)
(5)
(2)

$ 3,953
854
8,822
6,862
862

$20,445$ 977$ (69)$21,353$ 4,519
1,159
8,860
6,899
967

$

$

(8)
(1)
(66)
(9)
(6)

$ 4,527
1,216
9,001
7,604
1,084

$22,404$1,118$ (90)$23,432

16
58
207
714
123

Investments in foreign government securities were issued by national and provincial government entities as well as instrumentsthat are unconditionally guaranteed by such entities. As of December 31, 2017, approximately 92% of our foreign government holdings
were rated AA or higher by at least one of the major rating agencies. Approximately 81% of foreign government holdings were issued
or guaranteed by the United Kingdom, Germany, Australia or Canada.
The amortized cost and estimated fair value of fixed maturity securities at December 31, 2017 are summarized below bycontractual maturity dates. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by
issuers. Amounts are in millions.

Amortized cost . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years

Mortgage-backed
securities

Total$6,123
6,175$ 11,020
11,183$ 510
557$ 2,020
2,576

$ 772
862

$20,445
21,353

Investments in equity securities

Investments in equity securities as of December 31, 2017 and 2016 are summarized based on the primary industry of theinvestee in the table below (in millions).

December 31, 2017 *Banks, insurance and finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial, industrial and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost Basis

Unrealized
Gains

Unrealized
LossesFair
Value$ 27,318
24,85524,029$ 53,491
26,088
14,969

$

—
(68)
(142)

$ 80,809
50,87538,856$ 76,202$ 94,548$ (210)$ 170,540* Approximately 65% of the aggregate fair value was concentrated in five companies (American Express Company – $15.1 billion;
Apple Inc. – $28.2 billion; Bank of America Corporation – $20.7 billion; The Coca-Cola Company – $18.4 billion and Wells
Fargo & Company – $29.3 billion).

K-74

Notes to Consolidated Financial Statements (Continued)(4)

Investments in equity securities (Continued)

December 31, 2016 *Banks, insurance and finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial, industrial and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost Basis

Unrealized
Gains

Unrealized
Losses$ 19,852
10,65735,8687,720$ 30,572
16,760
9,033
9,536

$

$ 74,097$ 65,901$ (710)

—
(9)
(701)
—

Fair
Value

$

50,42427,40844,20017,256$ 139,288* Approximately 60% of the aggregate fair value was concentrated in five companies (American Express Company – $11.2 billion;
Bank of America Corporation – $14.5 billion; The Coca-Cola Company – $16.6 billion; International Business Machines
Corporation – $13.5 billion and Wells Fargo & Company – $27.6 billion).
As of December 31, 2016, other investments included preferred stock and common stock warrants of Bank of America
Corporation (“BAC”) and preferred stock of Restaurant Brands International, Inc. (“RBI”). In 2011, we acquired 50,000 shares of 6%
Non-Cumulative Perpetual Preferred Stock of Bank of America Corporation (“BAC”) with a liquidation value of $100,000 per share(“BAC Preferred”) and warrants to purchase up to 700,000,000 shares of common stock of BAC (“BAC Warrants”) at $7.142857 pershare (up to $5 billion in the aggregate). On August 24, 2017, we exercised all of our BAC Warrants and acquired 700,000,000 sharesof BAC common stock. We also surrendered substantially all of our BAC Preferred as payment of the $5 billion cost to exercise the
BAC Warrants and acquire the BAC common stock. Our investment in BAC is included in the banks, insurance and finance category
at December 31, 2017 and in other investments at December 31, 2016.
On December 12, 2014, we acquired Class A 9% Cumulative Compounding Perpetual Preferred Shares of Restaurant Brands
International, Inc. (“RBI”) having a stated value of $3 billion (“RBI Preferred”). RBI is domiciled in Canada. On December 12, 2017,
RBI redeemed of all of our RBI Preferred investment. Prior to its redemption, we were entitled to dividends on the RBI Preferred at 9%
per annum plus an additional amount, if necessary, to produce an after-tax yield as if the dividends were paid by a U.S.-based
company.
As of December 31, 2017 and 2016, unrealized losses on equity securities in a continuous unrealized loss position for morethan twelve consecutive months were $94 million and $551 million, respectively.
Investments in equity securities are reflected in our Consolidated Balance Sheets as follows (in millions).
December 31,

Insurance and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017

2016

$164,026
1,961
4,553

$134,835
1,186
3,267

$170,540$139,288* Included in other assets.
(5)

Investments in The Kraft Heinz Company

In June 2013, Berkshire invested $12.25 billion in a newly-formed company, H.J. Heinz Holding Corporation (“Heinz
Holding”). The investment consisted of 425,000,000 shares of common stock, warrants to acquire approximately 46,000,000 additional
shares of common stock at $0.01 per share and cumulative compounding preferred stock (“Preferred Stock”) with a liquidationpreference of $8 billion. An affiliate of the global investment firm 3G Capital (such affiliate, “3G”) also acquired 425,000,000 sharesof Heinz Holding common stock for $4.25 billion. At that time, Berkshire and 3G each owned a 50% share of Heinz Holding common
stock. Heinz Holding then acquired H.J. Heinz Company.

K-75

Notes to Consolidated Financial Statements (Continued)(5)

Investments in The Kraft Heinz Company (Continued)

In June 2015, Berkshire exercised the aforementioned common stock warrants. On July 1, 2015, Berkshire and 3G acquired
new shares of Heinz Holding common stock for $5.26 billion and $4.74 billion, respectively. After these transactions, Berkshire owned
approximately 52.5% of the outstanding shares of Heinz Holding. On July 2, 2015, Heinz Holding acquired all of the outstanding
common stock of Kraft Foods Group, Inc. (“Kraft”), at which time Heinz Holding was renamed The Kraft Heinz Company (“Kraft
Heinz”). In connection with its acquisition of Kraft, Kraft Heinz issued one new share of Kraft Heinz common stock for each share of
Kraft common stock, which reduced Berkshire’s and 3G’s ownership interests in Kraft Heinz to 26.8% and 24.2%, respectively. We
accounted for our investment in Heinz Holding common stock and continue to account for our investment in Kraft Heinz common
stock on the equity method. In applying the equity method, the investor treats an investee’s issuance of shares as if the investor had
sold a proportionate share of its investment. As a result, we recorded a non-cash pre-tax holding gain of approximately $6.8 billion in2015, representing the excess of the fair value of Kraft Heinz common stock at the date of the merger over the carrying value
associated with the reduction in our ownership.
Berkshire currently owns 26.7% of the outstanding shares of Kraft Heinz common stock. The carrying value of this investment
was approximately $17.6 billion at December 31, 2017 and $15.3 billion at December 31, 2016. Our earnings determined under theequity method during 2017 were $2.9 billion, which includes certain one-time effects of the Tax Cuts and Jobs Act of 2017 on Kraft
Heinz’s net earnings. We received dividends on the common stock of $797 million during 2017 and $952 million in 2016, which werecorded as reductions of our investment. During 2016, we also received dividends of $180 million on our Preferred Stock investment,
which Kraft Heinz redeemed for cash of $8.32 billion on June 7, 2016.
Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments
and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Summarized consolidated
financial information of Kraft Heinz follows (in millions).

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 30,
2017

December 31,
2016$120,232
53,985$120,480
62,906

Year ending
December 30, 2017

Year ending
December 31, 2016

Year ending
January 3, 2016

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 26,232$ 26,487$18,338

Net earnings attributable to Kraft Heinz . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10,999

$

3,632

$634

Net earnings (loss) attributable to common shareholders . . . . . . . . . . . . . . . .

$ 10,999$

3,452$(266)(6)

Investment gains/losses
Investment gains/losses for each of the three years ending December 31, 2017 are summarized below (in millions).
2017

Fixed maturity securities—
Gross gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities—
Gross gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-76

$

103
(22)

2016

$

58
(51)

2015

$

104
(171)

2,237
(919)
11

7,853
(415)
108

9,526
(129)
43

$ 1,410$ 7,553$ 9,373

Notes to Consolidated Financial Statements (Continued)(6)

Investment gains/losses (Continued)

We record investments in equity and fixed maturity securities classified as available-for-sale at fair value and record thedifference between fair value and cost in other comprehensive income. We recognize investment gains and losses when we sell orotherwise dispose of such securities. Gross gains from equity securities of approximately $1.0 billion in 2017 related to the surrenderof substantially all of our BAC Preferred as described in Note 4. Gross gains from equity securities in 2016 included approximately$4.2 billion from the redemptions of our investments in Wm. Wrigley Jr. Company and Kraft Heinz preferred stock and from the saleof Dow Chemical Company common stock received in the conversion of our Dow Chemical preferred stock investment. In 2016, we
also recorded a non-cash holding gain of approximately $1.1 billion from the exchange of P&G common stock in connection with theacquisition of Duracell. See Note 2. Gross gains from equity securities in 2015 included a non-cash holding gain of approximately$6.8 billion in connection with our investment in Kraft Heinz common stock. See Note 5.
(7)

Inventories
Inventories are comprised of the following (in millions).
December 31,

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished manufactured goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goods acquired for resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)

2017

2016

$ 2,997
2,315
4,179
6,696

$ 2,789
2,506
4,033
6,399

$ 16,187$ 15,727

Receivables
Receivables of insurance and other businesses are comprised of the following (in millions).
December 31,

Insurance premiums receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowances for uncollectible accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017

2016

$11,058
3,201
14,681(362)$10,462
3,338
13,630(333)$28,578$27,097

Loans and finance receivables of finance and financial products businesses are summarized as follows (in millions).
December 31,

Loans and finance receivables before allowances and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowances for uncollectible loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized acquisition discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017

2016

$14,126
(180)
(198)

$13,728
(182)
(246)

$13,748$13,300

Loans and finance receivables are predominantly installment loans originated or acquired by our manufactured housingbusiness. Provisions for loan losses for 2017 and 2016 were $160 million and $144 million, respectively. Loan charge-offs, net ofrecoveries, were $162 million in 2017 and $144 million in 2016. At December 31, 2017, approximately 98% of the loan balances were
evaluated collectively for impairment. As part of the evaluation process, credit quality indicators are reviewed and loans are designatedas performing or non-performing. At December 31, 2017, we considered approximately 99% of the loan balances to be performing andapproximately 95% of the loan balances to be current as to payment status. In June 2017, we agreed to provide a Canada-based
financial institution with a C$2 billion (approximately $1.6 billion) one-year secured revolving credit facility. The agreement expires
on June 29, 2018. There was no outstanding loan balance as of December 31, 2017.

K-77

Notes to Consolidated Financial Statements (Continued)(9)

Property, plant and equipment and assets held for lease
A summary of property, plant and equipment of our insurance and other businesses follows (in millions).
December 31,
2017

2016

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,292
8,810
21,935
4,387$ 2,108
8,360
20,463
4,080

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,424(17,320)35,011(15,686)$ 20,104$ 19,325

A summary of property, plant and equipment of our railroad and our 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.
December 31,
2017

Railroad:Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Track structure and other roadway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Locomotives, freight cars and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

2016

6,088
51,32012,543
989

$

6,063
48,277
12,075965

70,940(8,627)

67,380(6,130)62,313

61,250Utilities and energy:
Utility generation, transmission and distribution systems . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interstate natural gas pipeline assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Independent power plants and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74,660
7,176
7,499
2,556

71,536
6,942
6,596
2,098

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91,891(26,020)

87,172(24,663)

65,87162,509$ 128,184$ 123,759

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets held for lease and property, plant and equipment of our finance and financial products businesses are summarized below(in millions). Assets held for lease includes railcars, intermodal tank containers, cranes, over-the-road trailers, storage units andfurniture. As of December 31, 2017, the minimum future lease rentals to be received on assets held for lease (including rail cars leased
from others) were as follows (in millions): 2018 – $1,103; 2019 – $857; 2020 – $641; 2021 – $439; 2022 – $283; and thereafter –$407.
December 31,
2017

2016

Assets held for lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings, machinery and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 12,318
231
1,444$ 11,902
224
1,302

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,993(4,062)

13,428(3,739)$ 9,931

K-78

$

9,689

Notes to Consolidated Financial Statements (Continued)(9)

Property, plant and equipment and assets held for lease (Continued)
Depreciation expense for each of the three years ending December 31, 2017 is summarized below (in millions).

Insurance and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)

2017

2016

2015

$ 2,2174,852
650$ 2,148
4,639
624$ 1,680
4,383
610$ 7,719$ 7,411$ 6,673

Goodwill and other intangible assets
Reconciliations of the changes in the carrying value of goodwill during 2017 and 2016 follows (in millions).
December 31,
2017

2016

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, including foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 79,486
1,545
227$ 62,708
17,650(872)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 81,258$ 79,486

Our other intangible assets and related accumulated amortization are summarized as follows (in millions).
December 31, 2017

Insurance and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Trademarks and trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2016

Gross carrying
amountAccumulated
amortization

Gross carrying
amountAccumulated
amortization$40,225988$7,707324$39,976898$6,495
293$41,213$8,031$40,874$6,788$ 5,381
4,341
28,322
3,169

$ 692
2,493
3,722
1,124

$ 5,175
4,341
28,243
3,115

$ 616
2,328
2,879
965

$41,213$8,031$40,874$6,788Intangible asset amortization expense was $1,469 million in 2017, $1,490 million in 2016 and $1,106 million in 2015.
Estimated amortization expense over the next five years is as follows (in millions): 2018 – $1,400; 2019 – $1,270; 2020 – $1,175;
2021 – $1,086 and 2022 – $1,031. Intangible assets with indefinite lives as of December 31, 2017 and 2016 were $18,930 million and$18,705 million, respectively, and primarily related to certain customer relationships and trademarks and trade names.
(11)

Derivative contracts

We are party to derivative contracts primarily through our finance and financial products and our utilities and energy
businesses. Currently, the derivative contracts of our finance and financial products businesses consist of equity index put option
contracts written between 2004 and 2008. The liabilities and related notional values of such contracts follows (in millions).
December 31, 2017

Equity index put options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)

December 31, 2016

Liabilities

NotionalValue$ 2,172$28,753(1) $ 2,890

Liabilities

Notional
Value$ 26,497(1)Represents the aggregate undiscounted amounts payable assuming that the value of each index is zero at each contract’s
expiration date. Certain of these contracts are denominated in foreign currencies. Notional amounts are based on the foreign
currency exchange rates as of each balance sheet date.

K-79

Notes to Consolidated Financial Statements (Continued)(11)

Derivative contracts (Continued)

We record derivative contract liabilities at fair value and include the changes in the fair values of such contracts in earnings asderivative gains/losses. A summary of the derivative gains/losses included in our Consolidated Statements of Earnings in each of thethree years ending December 31, 2017 follows (in millions).
2017

Equity index put options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2016

2015

$

718
—

$

662
89

$ 1,008
(34)

$

718

$

751

$

974

The equity index put option contracts are European style options written prior to March 2008 on four major equity indexes. The
contracts expire between June 2018 and January 2026. Future payments, if any, under any given contract will be required if theprevailing index value is below the contract strike price at the expiration date. We received aggregate premiums of $4.2 billion onthese contracts at the contract inception dates and we have no counterparty credit risk. The aggregate intrinsic value (the undiscounted
liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date)
was $789 million at December 31, 2017 and $1.0 billion at December 31, 2016. These contracts may not be unilaterally terminated or
fully settled before the expiration dates and the ultimate amount of cash basis gains or losses on these contracts will not be determineduntil the contract expiration dates. The remaining weighted average life of all contracts was approximately 2.9 years at December 31,
2017.
A limited number of our equity index put option contracts contain collateral posting requirements with respect to changes in thefair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of December 31, 2017, we did nothave any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard & Poor’s and Aa2 from Moody’s)
are downgraded below either A- by Standard & Poor’s or A3 by Moody’s, collateral of up to $1.1 billion could be required to beposted.
Our regulated utility subsidiaries are exposed to variations in the prices of fuel required to generate electricity, wholesale
electricity purchased and sold and natural gas supplied for customers. Derivative instruments, including forward purchases and sales,
futures, swaps and options, are used to manage a portion of these price risks. Derivative contract assets are included in other assets andwere $142 million as of December 31, 2017 and 2016. Derivative contract liabilities are included in accounts payable, accruals andother liabilities and were $82 million as of December 31, 2017 and $145 million as of December 31, 2016. Most of the net derivative
contract assets or liabilities of our regulated utilities are probable of recovery through rates and are offset by regulatory liabilities orassets. Unrealized gains or losses on contracts accounted for as cash flow or fair value hedges are recorded in other comprehensive
income or in net earnings, as appropriate.
(12)

Supplemental cash flow information

A summary of supplemental cash flow information for each of the three years ending December 31, 2017 is presented in thefollowing table (in millions).
Cash paid during the period for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest:
Insurance and other businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions . . . . . . . . . . . . . . . . . . . .
Equity securities exchanged in connection with business acquisitions . . . . . . . . . . . . . .
Conversions and other exchanges of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities surrendered in connection with warrant exercise . . . . . . . . . . . . . . . .

K-80

2017

2016

2015

$3,286$ 4,719$4,535

871
2,828
389

555
2,788
389

346
2,717
403

747
—
—
4,965

16,555
4,239
4,154
—

2,812
—
1,597
—

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under short duration
property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim
occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of thechanges in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 14), for each of the three years
ending December 31, 2017 is as follows (in millions).
2017

2016

2015

Balances – beginning of year:
Gross liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53,379(3,338)$50,519(3,307)$48,208(3,116)Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50,041

47,21245,092

Incurred losses and loss adjustment expenses:
Current accident year events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior accident years’ events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,702(544)—

30,636(1,523)80

27,829(2,015)82

Total incurred losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . .

37,15829,19325,896

Paid losses and loss adjustment expenses:
Current accident year events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior accident years’ events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(17,425)(12,507)(14,898)(10,929)(13,070)(10,229)

Total payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(29,932)(25,827)(23,299)

Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

654
—

(537)
—

(545)
68

Balances – end of year:
Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57,921
3,201

50,041
3,338

47,212
3,307

Gross liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$61,122$53,379$50,519

Incurred losses and loss adjustment expenses in the preceding table were recorded in earnings in each period and related toinsured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”).
We incurred current accident year losses of approximately $3 billion in 2017 with respect to hurricanes Harvey, Irma and Maria, anearthquake in Mexico, a cyclone in Australia and wildfires in California.
Incurred losses and loss adjustment expenses also included net reductions of estimated ultimate liabilities for prior accident
years of $544 million, $1.5 billion and $2.0 billion in 2017, 2016 and 2015, respectively. Overall, we decreased estimated ultimate
liabilities with respect to primary insurance by $249 million in 2017, $569 million in 2016 and $793 million in 2015. In each year,
estimated ultimate claim liabilities for prior accident years were generally lower for medical malpractice and workers’ compensation
insurance. For primary private passenger automobile insurance claims, we increased liabilities for prior years’ claims in 2017,
primarily due to increased average claims severities, and decreased liabilities for prior years’ claims in 2016 and 2015. We decreased
estimated ultimate liabilities with respect to property and casualty reinsurance by $295 million in 2017, $955 million in 2016 and$1.2 billion in 2015. The decrease in 2017 included increased losses from a United Kingdom government-mandated change to thecomputation of certain personal injury lump sum settlements and higher than expected property losses.
Estimated claim liabilities for environmental, asbestos and other latent injury exposures, net of reinsurance recoverables, wereapproximately $1.6 billion at December 31, 2017 and 2016. These liabilities are subject to change due to changes in the legal andregulatory environment as described in Note 14. We are unable to reliably estimate additional losses or a range of losses that arereasonably possible for these claims.

K-81

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses (Continued)

A reconciliation of certain net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of
GEICO, Berkshire Hathaway Reinsurance Group (“BHRG”, which includes the NICO Group and General Re Group) and Berkshire
Hathaway Primary Group (“BH Primary”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2017,
along with a discussion regarding each group’s liability estimation processes, follows (in millions).
GEICO

BHRG
Property

BHRG
Casualty

BH Primary

Total

Unpaid losses and ALAE, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,655$ 8,838$ 19,219$ 11,867
Reinsurance recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
859
289
1,028
1,025
Unpaid unallocated loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 55,579
3,201
2,342

Unpaid losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 61,122GEICO
GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims.
For GEICO, we establish and evaluate unpaid claim liabilities using standard actuarial loss development methods and techniques. The
actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns. Claimliabilities include average, case, case development and IBNR estimates.
We establish average liabilities based on expected severities for newly reported physical damage and liability claims prior toestablishing an individual case reserve when we have insufficient time and information to make specific claim estimates and for a large
number of minor physical damage claims that are paid shortly after being reported. We establish liability case loss estimates, which
includes loss adjustment expenses, once the facts and merits of the claim are evaluated.
Estimates for liability coverages are more uncertain primarily due to the longer claim-tails, the greater chance of protracted
litigation and the incompleteness of facts at the time the case estimate is first established. The “claim-tail” is the time period between
the claim occurrence date and settlement date. As a result, we establish additional case development liabilities, which are usuallypercentages of the case liabilities. For unreported claims, IBNR liabilities are estimated by projecting the ultimate number of claims
expected (reported and unreported) for each significant coverage and deducting reported claims to produce estimated unreported
claims. The product of the average cost per unreported claim and the number of unreported claims produces the IBNR liability
estimate. We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply.

K-82

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses (Continued)

GEICO’s aggregate incurred and paid loss and ALAE data by accident year for these claims, net of reinsurance, follows. IBNR
and case development liabilities are as of December 31, 2017. Claim counts are established when accidents that may result in a liability
are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in
multiple counts. The “Cumulative Number of Reported Claims” includes the combined number of reported claims for all policy
coverages and excludes projected IBNR claims. Dollars are in millions.
Incurred Losses and ALAE through December 31,
Accident
Year
2013
2014
2015
2016
2017

2013*

2014*

2015*

$ 13,085$ 12,900
14,680$ 12,943
14,572
16,887

2016*

2017

12,92014,55916,875
19,106$ 12,961
14,58916,993
19,39022,675

Incurred losses and ALAE

$ 86,608$

IBNR and Case
Development
Liabilities
$

105
236
682
1,806
4,343

Cumulative
Number ofReported Claims(in thousands)
7,105
7,972
8,915
9,601
10,513Cumulative Paid Losses and ALAE through December 31,
Accident
Year
2013
2014
2015
2016
2017

$

2013*

2014*

2015*

8,006

$ 10,573
9,199$ 11,650
12,036
10,606

$

2016*

2017

12,25613,14013,85812,020$ 12,618
13,85015,285
15,862
13,878Paid losses and ALAE

71,493Net unpaid losses and ALAE for 2013 – 2017 accident years
Net unpaid losses and ALAE for accident years before 201315,115540

Net unpaid losses and ALAE

$ 15,655* Unaudited supplemental information
BHRG
We use a variety of actuarial methodologies to establish BHRG’s property and casualty claims liabilities. We use certain
methodologies, such as paid and incurred loss development techniques, incurred and paid loss Bornhuetter-Ferguson techniques andfrequency and severity techniques, as well as ground-up techniques when appropriate.
Our claims liabilities are principally a function of reported losses from ceding companies, case development and IBNR liability
estimates. Case loss estimates are reported under our contracts either individually or in bulk as provided under the terms of thecontracts. We may independently evaluate case losses reported by the ceding company, and if deemed appropriate, we may establish
case liabilities based on our estimates. Estimated IBNR liabilities are driven by expected case loss emergence patterns and expected
loss ratios, which may be evaluated as groups or portfolios of contracts with similar exposures, or on an individual contract-by-contract
basis. Case and IBNR liability estimates for major catastrophe events may be based on a per-contract assessment of the ultimate costassociated with the individual loss event. Claim count data is not provided, as such information is not provided consistently by cedingcompanies under our contracts or is otherwise considered unreliable.

K-83

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses (Continued)

We disaggregated net losses and ALAE for BHRG based on losses that are expected to have shorter claim-tails (property) andthose expected to have longer claim-tails (casualty). Under certain contracts, the coverage can apply to multiple lines of businesswritten by the ceding company, whether property, casualty or combined, and the ceding company may not report loss data by suchlines consistently, if at all. In those instances, we allocated losses to property and casualty coverages based on internal estimates. In thefollowing tables, BHRG’s incurred and paid loss and ALAE data is separately presented for property and casualty coverage by accident
year, net of reinsurance. IBNR and case development liabilities are as of December 31, 2017. Dollars are in millions.
BHRG Property
Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Incurred Losses and ALAE through December 31,
2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017

$3,030$2,7202,385$2,773
2,057
2,545$2,483
2,250
2,538
4,192

$2,392
2,171
2,424
4,127
3,153

$2,432
2,075
2,289
3,850
2,851
3,230

$2,386
2,048
2,200
3,764
2,645
3,074
2,646

$2,353
2,006
2,164
3,761
2,404
2,727
2,458
3,268

$2,344
2,001
2,146
3,729
2,351
2,636
2,344
3,115
3,294

$2,336
2,000
2,126
3,706
2,347
2,614
2,199
2,557
3,938
5,276

Incurred losses and ALAE

$29,099

Cumulative Paid Losses and ALAE through December 31,
2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017

$ 481

$1,449405$1,825
1,122339$2,055
1,627
1,081
661

$2,159
1,792
1,520
2,308
265

$2,205
1,861
1,789
2,963
1,232
522

$2,240
1,931
1,950
3,233
1,813
1,447
467

$2,296
1,965
2,007
3,344
1,952
1,892
1,259
571

$2,307
1,975
2,054
3,433
2,041
2,090
1,591
1,604
706

$ 2,308
1,977
2,079
3,475
2,116
2,211
1,731
1,959
1,807
1,028

Paid losses and ALAE

20,691

Net unpaid losses and ALAE for 2008 – 2017 accident years
Net unpaid losses and ALAE for accident years before 2008

8,408
430

Net unpaid losses and ALAE

$ 8,838* Unaudited supplemental information

K-84

IBNR and Case
Development
Liabilities
$

6
8
32
84
95
172
223
232
1,072
1,993

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses (Continued)

BHRG Casualty

2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017

IBNR and Case
Development
Liabilities$2,448$2,602
2,393$2,2792,711
2,320$2,358
2,571
2,413
2,628

$2,309
2,500
2,345
2,720
2,811

$2,161
2,437
2,282
2,589
2,995
2,152

$2,101
2,362
2,162
2,529
2,829
2,290
1,891

$2,042
2,315
2,111
2,440
2,892
2,320
2,090
1,895

$2,009
2,252
2,066
2,348
2,819
2,162
2,059
2,102
1,923

$ 2,010
2,213
1,903
2,340
2,705
2,107
2,021
2,130
2,132
2,209

$ 226
225
166
419
663
644
736
803
1,012
1,428

Incurred losses and ALAE

$21,770

Incurred Losses and ALAE through December 31,
Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Cumulative Paid Losses and ALAE through December 31,
2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017

$ 253

$664
249

$959
858
120

$ 1,067
947
553
293

$ 1,168
1,219
846
822
311

$ 1,250
1,439
1,035
1,167
754
293

$ 1,325
1,596
1,288
1,409
1,147
527
152

$ 1,367
1,632
1,384
1,498
1,378
814
485
198

$ 1,405
1,669
1,448
1,591
1,535
943
651
497
254

$ 1,442
1,695
1,493
1,670
1,660
1,048
761
722
561
232

Paid losses and ALAE

11,284

Net unpaid losses and ALAE for 2008 – 2017 accident years
Net unpaid losses and ALAE for accident years before 2008

10,486
8,733

Net unpaid losses and ALAE

$19,219* Unaudited supplemental information
BH Primary
BH Primary’s liabilities for unpaid losses and ALAE primarily derive from workers’ compensation, medical professional andother liability insurance. Other liability insurance includes commercial auto and general liability policies. We periodically evaluate
ultimate unpaid loss and ALAE estimates for the workers’ compensation and general liability lines using a combination of commonly
accepted actuarial methodologies, such as the Bornhuetter–Ferguson and chain-ladder approaches using paid and incurred loss data.
Paid and incurred loss data is segregated into groups such as coverages, territories or other characteristics. We establish case liabilities
for reported claims based upon the facts and circumstances of the claim. The excess of the ultimate projected losses, including the
expected development of case estimates, and the case-basis liabilities is included in IBNR liabilities. For medical professional
liabilities, we use a combination of the aforementioned methods, as well as other loss severity based methods. From these estimates,
we determine our best estimate. Periodically, we study developments in older accident years and adjust initial loss estimates to reflect
recent development based upon claim age, coverage and litigation experience. The cumulative number of reported claims reflects thenumber of individual claimants, and includes claims that ultimately result in no liability or payment.

K-85

Notes to Consolidated Financial Statements (Continued)(13)

Unpaid losses and loss adjustment expenses (Continued)

BH Primary’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables.
IBNR and case development liabilities are as of December 31, 2017. Dollars are in millions.
Cumulative
IBNR andNumber of
Case
Reported
Development
ClaimsLiabilities(in thousands)

Incurred Losses and ALAE through December 31,
Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

2016*

2017

$1,573 $1,503 $1,448 $1,369 $1,250 $1,182 $1,135 $1,103 $1,073 $ 1,063
1,528 1,435 1,392 1,322 1,229 1,164 1,109 1,073
1,047
1,516 1,437 1,378 1,321 1,234 1,163 1,119
1,068
1,563 1,461 1,446 1,359 1,290 1,249
1,189
1,710 1,675 1,631 1,559 1,518
1,423
2,199 2,127 2,052 1,977
1,900
2,906 2,737 2,687
2,580
3,519 3,406
3,266
4,149
4,024
5,024

$

69
75
107
168
250
424
736
1,095
1,917
3,161

71
60
61
67
79
100
138
163
171
166

Incurred losses and ALAE $22,584
Cumulative Paid Losses and ALAE through December 31,
Accident
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2008*

2009*

2010*

2011*

2012*

2013*

2014*

2015*

$181

$369
136

$535
335
153

$676
507
366
167

$771
643
522
331
165

$852
752
661
533
444
279

$903
838
768
682
642
621
387

$932 $ 950 $ 968
891
921
933
846
889
916
824
903
946
820
956
1,049
903 1,118
1,272
833 1,192
1,504
499 1,060
1,498
634
1,302
761

2016*

2017

Paid losses and ALAE

11,149Net unpaid losses and ALAE for 2008 – 2017 accident years
Net unpaid losses and ALAE for accident years before 2008

11,435432

Net unpaid losses and ALAE $11,867* Unaudited supplemental information
Supplemental unaudited average historical claims duration information based on the net losses and ALAE incurred and paid
accident year data in the preceding tables follows. The percentages show the average portions of net losses and ALAE paid by eachsucceeding year, with year 1 representing the current accident year.
In Years
GEICO . . . . . . . . . . . . . . . . . . . . . . . .
BHRG Property . . . . . . . . . . . . . . . . .
BHRG Casualty . . . . . . . . . . . . . . . . .
BH Primary . . . . . . . . . . . . . . . . . . . . .

Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
1
2
3
4
5
6
7
8
9
10
61.9%
18.7%
10.7%
14.6%

19.6%
37.5%
18.4%
17.7%

8.1%
18.8%
12.0%
15.0%

K-86

4.9%
8.3%
8.3%
12.5%

2.8%
4.5%
7.1%
9.8%

2.7%
5.0%
7.3%

1.6%
3.0%
4.4%

1.4%
2.0%
2.7%

0.3%
1.5%
1.4%

0.0%
1.8%
1.7%

Notes to Consolidated Financial Statements (Continued)(14)

Retroactive reinsurance contracts

Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance
contracts with respect to underlying loss events that occurred prior to the contract inception date. Claims payments may commence
immediately after the contract date or, if applicable, once a contractual retention amount has been reached. Reconciliations of thechanges in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related
deferred charge reinsurance assumed assets for each of the three years ended December 31, 2017 follows (in millions).
2017
Unpaid losses
Deferredand losschargesadjustment
reinsurance
expensesassumed2016
Unpaid losses
Deferredand losschargesadjustment
reinsurance
expensesassumed2015
Unpaid losses
Deferredand losschargesadjustment
reinsurance
expensesassumedBalances – beginning of year . . . . . . . . . . . . . . . . . .

$24,972$ (8,047)$ 24,058$(7,687)$24,702$(7,772)

Incurred losses and loss adjustment expenses
Current year contracts . . . . . . . . . . . . . . . . . . . .
Prior years’ contracts . . . . . . . . . . . . . . . . . . . .

19,005(41)(7,730)
499

2,136
(63)

(874)
514

—
546

—
85

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,964(7,231)

2,073

(360)

546

85

Paid losses and loss adjustment expenses . . . . . . . . .

(999)

—

(1,159)—(1,190)—

Balances – end of year . . . . . . . . . . . . . . . . . . . . . . .

$42,937$(15,278)$ 24,972$(8,047)$24,058$(7,687)

Incurred losses and loss adjustment expenses, net ofdeferred charges . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,733$ 1,713$631

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of thecontracts. We do not believe that analysis of losses incurred and paid by accident year of the underlying event is relevant or meaningful
given that our exposure to losses incepts when the contract incepts. Further, we believe the classifications of reported claims and casedevelopment liabilities has little or no practical analytical value.
In 2017, we entered into an agreement through a Berkshire subsidiary, National Indemnity Company (“NICO”), with various
subsidiaries of American International Group, Inc. (collectively, “AIG”), which became effective on February 2, 2017. Under thisagreement, NICO agreed to indemnify AIG for 80% of up to $25 billion of losses and allocated loss adjustment expenses in excess of$25 billion retained by AIG, with respect to certain commercial insurance loss events occurring prior to 2016. As of the effective date,
we recorded premiums earned of $10.2 billion, and we also recorded a liability for unpaid losses and loss adjustment expenses of$16.4 billion and a deferred charge reinsurance assumed asset of $6.2 billion. Berkshire agreed to guarantee the timely payment of allamounts due to AIG under the agreement.
In the fourth quarter of 2017, we increased our estimated ultimate claim liabilities under the aforementioned AIG contract byapproximately $1.8 billion based on higher than expected loss payments reported by AIG under the contractual retention. We also
increased the related deferred charge asset by $1.7 billion based on our re-estimation of the amounts and timing of future claim
payments. As of yearend 2017, our net liability from this contract was approximately $10.7 billion, representing the excess of theestimated ultimate claim liabilities of approximately $18.2 billion over the remaining deferred charge asset balance of approximately$7.5 billion.
Incurred losses and loss adjustment expenses related to contracts written in prior years were $458 million in 2017, $451 million
in 2016 and $631 million in 2015, which included recurring amortization of deferred charges and the effect of changes in the timing
and amount of expected future loss payments.
In establishing retroactive reinsurance claim liabilities, we analyze historical aggregate loss payment patterns and project losses
into the future under various probability-weighted scenarios. We expect the claim-tail to be very long for many contracts, with somelasting several decades. We monitor claim payment activity and review ceding company reports and other information concerning theunderlying losses. We reassess and revise the expected timing and amounts of ultimate losses periodically or when significant events
are revealed through our monitoring and review processes.

K-87

Notes to Consolidated Financial Statements (Continued)(14)

Retroactive reinsurance contracts (Continued)

Our retroactive reinsurance claim liabilities include estimated liabilities for environmental, asbestos and other latent injury
exposures of approximately $14.0 billion at December 31, 2017 and $13.7 billion at December 31, 2016. Retroactive reinsurance
contracts are generally subject to aggregate policy limits and thus, our exposure to such claims under these contracts is likewise
limited. We monitor evolving case law and its effect on environmental and other latent injury claims. Changing government
regulations, newly identified toxins, newly reported claims, new theories of liability, new contract interpretations and other factors
could result in increases in these liabilities, which could be material to our results of operations. We are unable to reliably estimate theamount of additional net loss or the range of net loss that is reasonably possible.
(15)

Notes payable and other borrowings

Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity date
ranges shown in the following tables are based on borrowings as of December 31, 2017.

Insurance and other:Issued by Berkshire:
U.S. Dollar denominated borrowings due 2018-2047 . . . . . . . . . . . . . . . . . . .
Euro denominated borrowings due 2020-2035 . . . . . . . . . . . . . . . . . . . . . . . .
Short-term subsidiary borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other subsidiary borrowings due 2018-2045 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Interest Rate

2017

2016

2.8%
1.1%
3.4%
3.6%

$10,603
8,164
1,832
6,725

$11,709
5,994
2,094
7,378

$27,324$27,175

December 31,

In January 2017, Berkshire issued €1.1 billion in senior unsecured notes. The notes consisted of €550 million of 0.25% notes
due in 2021 and €550 million of 0.625% notes due in 2023. In January 2017, senior notes of $1.1 billion matured. In 2017, the carrying
value of Berkshire’s Euro denominated senior notes increased $990 million due to changes in the Euro/U.S. Dollar exchange rates.
This increase produced a corresponding charge to pre-tax earnings of $990 million which was recorded as additional non-cash interest
expense.

Railroad, utilities and energy:
Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:
BHE senior unsecured debt due 2018-2045 . . . . . . . . . . . . . . . . . . . . . . .
Subsidiary and other debt due 2018-2064 . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued by BNSF due 2018-2097 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Interest Rate

2017

2016

5.1%
4.8%
2.0%
4.8%

$ 6,452
28,7394,488
22,499$ 7,818
27,354
1,869
22,044$62,178$59,085

December 31,

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets ofcertain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements
generally contain various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt service coverage
ratios, among other covenants. During 2017, BHE and its subsidiaries issued approximately $1.9 billion of term debt with maturity
dates ranging from 2022 to 2057 with a weighted average interest rate of 3.2%.
BHE’s short-term debt outstanding increased, in part to fund the prepayment of approximately $1.0 billion of BHE seniorunsecured debt in connection with a tender offer in December 2017. BHE recognized a pre-tax loss of $410 million, which was
included in interest expense in the Consolidated Statement of Earnings. In January 2018, BHE issued $2.2 billion of senior notes withmaturity dates ranging from 2021 to 2048 with a weighted average interest rate of 3.2%. Proceeds from this debt issuance were used to
repay short-term debt and for general corporate purposes.
BNSF’s borrowings are primarily senior unsecured debentures. In March 2017, BNSF issued $1.25 billion of senior unsecured
debentures consisting of $500 million of 3.25% debentures due in 2027 and $750 million of 4.125% debentures due in 2047. As of
December 31, 2017, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does notguarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

K-88

Notes to Consolidated Financial Statements (Continued)(15)

Notes payable and other borrowings (Continued)
Weighted
Average
Interest Rate

2017

2016

2.8%
4.5%

$12,926
159$14,423961$13,085$15,384

Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2018-2043 . . . .
Issued by other subsidiaries due 2018-2036 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

In January 2017, BHFC issued $1.3 billion of senior notes consisting of $950 million of floating rate notes due in 2019 and$350 million of floating rate notes due in 2020. During 2017, senior notes of $2.8 billion matured. The borrowings of BHFC, a wholly
owned finance subsidiary of Berkshire, are fully and unconditionally guaranteed by Berkshire.
As of December 31, 2017, our subsidiaries had unused lines of credit and commercial paper capacity aggregating
approximately $7.7 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit
included about $4.0 billion related to BHE and its subsidiaries. In addition to BHFC’s borrowings, at December 31, 2017, Berkshire
guaranteed approximately $1.9 billion of other subsidiary borrowings. Generally, Berkshire’s guarantee of a subsidiary’s debt
obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all payment
obligations.
Principal repayments expected during each of the next five years are as follows (in millions).
2018

Insurance and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(16)

2019

2020

2021

2022

$ 4,741
8,659
4,661

$

844
2,939
4,016

$ 1,800
2,245
931$ 2,527
1,804
750

$

850
3,395
775

$ 18,061$ 7,799$ 4,976$ 5,081$ 5,020

Income taxes
The liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions).
December 31,
2017

Currently payable (receivable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2016$ (129)56,182554$

500
76,457
485$56,607$ 77,442

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (“TCJA”). Among its provisions,
the TCJA reduces the statutory U.S. Corporate income tax rate from 35% to 21% effective January 1, 2018. The TCJA also provides
for a one-time tax on certain accumulated undistributed post-1986 earnings of foreign subsidiaries. Further, the TCJA includes
provisions that, in certain instances, impose U.S. income tax liabilities on future earnings of foreign subsidiaries and limit the
deductibility of future interest expenses. The TCJA also provides for accelerated deductions of certain capital expenditures made after
September 27, 2017 through bonus depreciation. The application of the TCJA may change due to regulations subsequently issued by
the U.S. Treasury Department.
Upon the enactment of the TCJA, we recorded a reduction in our deferred income tax liabilities of approximately $35.6 billion
for the effect of the aforementioned change in the U.S. statutory income tax rate. As a result, we recorded an income tax benefit ofapproximately $29.6 billion and we increased regulatory liabilities of our regulated utility subsidiaries by approximately $6.0 billion
for the portion of the deferred income tax liability reduction that we will be required to, effectively, refund to customers in the ratesetting process. We also recognized an income tax charge of approximately $1.4 billion with respect to the deemed repatriation of theaccumulated undistributed post-1986 earnings of our foreign subsidiaries. Thus, upon the enactment of the TCJA, we included a net
income tax benefit in our 2017 earnings of approximately $28.2 billion.

K-89

Notes to Consolidated Financial Statements (Continued)(16)

Income taxes (Continued)

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”) to provide
clarification in implementing the TCJA when registrants do not have the necessary information available to complete the accounting
for an element of the TCJA in the period of its enactment. SAB 118 provides for tax amounts to be classified as provisional and subject
to remeasurement for up to one year from the enactment date for such elements when the accounting effect is not complete, but can bereasonably estimated.
We consider our estimate of the tax on accumulated undistributed earnings of foreign subsidiaries to be provisional and subject
to remeasurement when we obtain the necessary additional information to complete the accounting. While we believe our estimate to
be reasonable, it will take additional time to validate the inputs to the foreign earnings and profits calculations, the basis on which therepatriation tax is determined, and how the applicable states will address the U.S. repatriation tax. We currently expect that our
accounting for the repatriation tax under the TCJA will be completed by the end of 2018.
We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries, which are
expected to be reinvested indefinitely. Repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to theextent that such earnings represent capital to support normal business operations. Although no U.S. federal taxes will be imposed on
future distributions of foreign earnings, in certain jurisdictions the distributions could be subject to withholding and other local taxes.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities
are shown below (in millions).
December 31,
2017

Deferred tax liabilities:
Investments – unrealized appreciation and cost basis differences . . . . . . .
Deferred charges reinsurance assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets:
Unpaid losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,251
3,226
26,671
7,204
3,216

2016

$

27,6692,876
39,345
11,3445,550

64,56886,784(1,231)(345)(2,501)(4,309)(1,363)(1,021)(3,821)(4,122)(8,386)(10,327)$56,182$ 76,457

Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2017is as follows (in millions).
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-90

2017

2016

2015

$(23,427)
894
1,018

$ 7,796556
888$ 9,253578
701$(21,515)$ 9,240$10,532$ 3,299(24,814)$ 6,565
2,675$ 5,426
5,106$(21,515)$ 9,240$10,532

Notes to Consolidated Financial Statements (Continued)(16)

Income taxes (Continued)

Income tax expense is reconciled to hypothetical amounts computed at the U.S. federal statutory rate for each of the three years
ending December 31, 2017 in the table below (in millions).
2017

2016

2015

Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,838$33,667$34,946

Hypothetical income tax expense computed at the U.S. federal statutory rate . . . . . . . . . . . . . . . . $ 8,343
Dividends received deduction and tax exempt interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(905)
State income taxes, less U.S. federal income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
465
Foreign tax rate differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(339)
U.S. income tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(636)
Non-taxable exchange of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—Net benefit from the enactment of the TCJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(28,200)
Other differences, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(243)$11,783
(789)
361
(421)
(518)
(1,143)—(33)$12,231(1,146)
374
(459)
(461)
—
—
(7)

$ (21,515)$ 9,240$10,532

We file income tax returns in the United States and in state, local and foreign jurisdictions. We are under examination by thetaxing authorities in many of these jurisdictions. We have settled income tax liabilities with U.S. federal taxing authorities (the “IRS”)
for years before 2010. The IRS continues to audit Berkshire’s consolidated U.S. federal income tax returns for the 2010 through 2013
tax years and we currently believe it is reasonably possible that these examinations will be settled during 2018. We are also under audit
or subject to audit with respect to income taxes in many state and foreign jurisdictions. It is reasonably possible that certain of theseincome tax examinations will be settled within the next twelve months. We currently do not believe that the outcome of unresolved
issues or claims will be material to our Consolidated Financial Statements.
At December 31, 2017 and 2016, net unrecognized tax benefits were $554 million and $485 million, respectively. Included in
the balance at December 31, 2017, were $445 million of tax positions that, if recognized, would impact the effective tax rate. The
remaining balance in net unrecognized tax benefits principally relates to tax positions where the ultimate recognition is highly certain
but there is uncertainty about the timing of such recognition. Because of the impact of deferred income tax accounting, the differencesin recognition periods would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority toan earlier period. As of December 31, 2017, we do not expect any material changes to the estimated amount of unrecognized tax
benefits in the next twelve months.
(17)

Dividend restrictions – Insurance subsidiaries

Payments of dividends by our insurance subsidiaries are restricted by insurance statutes and regulations. Without priorregulatory approval, our principal insurance subsidiaries may declare up to approximately $16 billion as ordinary dividends during
2018.
Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus
as Regards Policyholders) was approximately $170 billion at December 31, 2017 and $136 billion at December 31, 2016. Statutory
surplus differs from the corresponding amount based on GAAP due to differences in accounting for certain assets and liabilities. For
instance, deferred charges reinsurance assumed, deferred policy acquisition costs, unrealized gains on certain investments and related
deferred income taxes are recognized for GAAP but not for statutory reporting purposes. In addition, the carrying values of certain
assets, such as goodwill and the carrying values of non-insurance entities owned by our insurance subsidiaries, are not fully recognized
for statutory reporting purposes.

K-91

Notes to Consolidated Financial Statements (Continued)(18)

Fair value measurements

Our financial assets and liabilities are summarized below as of December 31, 2017 and December 31, 2016 with fair values
shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills,
receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values.

December 31, 2017
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations
and agencies . . . . . . . . . . . . . . . . . . . . . . .
States, municipalities and politicalsubdivisions . . . . . . . . . . . . . . . . . . . . . . .
Foreign governments . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . .
Investments in equity securities . . . . . . . . . . . . . . . .
Investment in Kraft Heinz common stock . . . . . . . . .
Loans and finance receivables . . . . . . . . . . . . . . . . . .
Derivative contract assets (1) . . . . . . . . . . . . . . . . . . .
Derivative contract liabilities:
Railroad, utilities and energy (1) . . . . . . . . . . .
Equity index put options . . . . . . . . . . . . . . . .
Notes payable and other borrowings:
Insurance and other . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . .
December 31, 2016
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations
and agencies . . . . . . . . . . . . . . . . . . . . . . .
States, municipalities and politicalsubdivisions . . . . . . . . . . . . . . . . . . . . . . .
Foreign governments . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . .
Investments in equity securities . . . . . . . . . . . . . . . .
Investment in Kraft Heinz common stock . . . . . . . . .
Loans and finance receivables . . . . . . . . . . . . . . . . . .
Derivative contract assets (1) . . . . . . . . . . . . . . . . . . .
Derivative contract liabilities:
Railroad, utilities and energy (1) . . . . . . . . . . .
Equity index put options . . . . . . . . . . . . . . . .
Notes payable and other borrowings:
Insurance and other . . . . . . . . . . . . . . . . . . . .
Railroad, utilities and energy . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . .
(1)

Carrying
Value

Fair Value

QuotedPrices(Level 1)

$

$

$

3,953

3,953

Significant Other
Observable Inputs(Level 2)

2,360$ 1,593

Significant
Unobservable Inputs(Level 3)

$

—

854
8,822
6,862
862
170,540
25,306
14,136
142

—
6,946
—
—
170,494
25,306
—
1

854
1,876
6,856
862
46
—
17
28

6
—
—
—
14,119
113

82
2,172

82
2,172

3
—

69
—

10
2,172

27,32462,17813,08528,18070,53813,582———

28,18070,538
13,577——3,099$ 1,428

$

854
8,822
6,862
862
170,540
17,635
13,748
142

4,527

$

4,527

$

—
—

5

$

—

1,216
9,001
7,604
1,084
139,288
15,345
13,300
142

1,216
9,001
7,604
1,084
139,288
28,41813,717
142

—
7,237
—
—
122,031
28,418
—
5

1,216
1,764
7,540
1,084
—
—
13
43

—
—
64
—
17,257—
13,704
94

145
2,890

145
2,890

3
—

114
—

28
2,890

27,17559,085
15,38427,712
65,774
15,825———27,712
65,774
15,469——356

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

K-92

Notes to Consolidated Financial Statements (Continued)(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 andyield 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 assets and liabilities measured and carried at fair value on a recurring basis with the use of significant
unobservable inputs (Level 3) for each of the three years ending December 31, 2017 follow (in millions).
Investments
in fixed
maturity
securities

Balance December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) included in:
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers into/out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) included in:
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers into/out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-93

Net
derivative
contract
liabilities8$ 21,996$(4,759)

—
(2)
—
101
(7)
—

—
(593)
—
—
—
—

1,080
(7)
(19)
—
(83)
3

100

21,403(3,785)

—
(4)
—
10
(41)
(1)

3,593
876
—
—
(8,615)
—

880
(2)
(11)
—
(101)
195

64

17,257(2,824)

—

—
1,156
—
—
(18,413)

888
(3)
(1)
(129)
—

$

Balance December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) included in:
Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers into/out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investmentsin equity
securities

1
—
(59)
—
$

6

$

—

$(2,069)

Notes to Consolidated Financial Statements (Continued)(18)

Fair value measurements (Continued)

Gains and losses included in earnings are included as components of investment gains/losses, derivative gains/losses and otherrevenues, as appropriate and are primarily related to changes in the values of derivative contracts and settlement transactions. Gains
and losses included in other comprehensive income are primarily the net change in unrealized appreciation of investments and thereclassification of investment appreciation in net earnings, as appropriate in our Consolidated Statements of Comprehensive Income.
As disclosed in Note 4, we exercised our BAC Warrants to acquire BAC common stock on August 24, 2017. As payment of thecost to acquire the BAC common stock, we surrendered substantially all of our BAC Preferred. Additionally, RBI redeemed our RBI
Preferred investment on December 12, 2017. In the second quarter of 2017, we concluded the Level 3 inputs used in the previous fairvalue determinations of the BAC Warrants, BAC Preferred Stock and RBI Preferred were not significant and we transferred thesemeasurements from Level 3 to Level 2. In 2016, our Wrigley preferred stock investment was disposed and our Dow preferred stock
investment was converted into Dow common stock.
Quantitative information as of December 31, 2017, with respect to assets and liabilities measured and carried at fair value on arecurring basis with the use of significant unobservable inputs (Level 3) follows (in millions).

Derivative liabilities:
Equity index put options . . . . . . . . . . . . . . .

Fair
Value

Principal Valuation
Techniques$ 2,172

Option pricing model

Unobservable Inputs

Volatility

Weighted
Average17%

Our equity index put option contracts are illiquid and contain contract terms that are not standard in derivatives markets. For
example, we are not required to post collateral under most of our contracts and certain of the contracts have relatively long durations.
For these and other reasons, we classified these contracts as Level 3. The methods we use to value these contracts are those that we
believe market participants would use in determining exchange prices with respect to our contracts.
We value equity index put option contracts based on the Black-Scholes option valuation model. Inputs to this model include
index price, contract duration and dividend and interest rate inputs (including a Berkshire non-performance input) which areobservable. However, we believe that the valuation of long-duration options using any model is inherently subjective and, given thelack of observable transactions and prices, acceptable values may be subject to wide ranges. Volatility inputs represent our
expectations, which consider the remaining duration of each contract and assume that the contracts will remain outstanding until the
expiration dates. Increases or decreases in the volatility inputs will produce increases or decreases in the fair values of the liabilities.

K-94

Notes to Consolidated Financial Statements (Continued)(19)

Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the three years ending December 31, 2017 areshown in the table below.
Class A, $5 Par Value(1,650,000 shares authorized)
IssuedTreasury

Outstanding

Balance December 31, 2014 . . . . . . . . . . .
Conversions of Class A common stock toClass B common stock and exercisesof replacement stock options issued ina business acquisition . . . . . . . . . . . . . .

838,019(11,680)(17,917)

Balance December 31, 2015 . . . . . . . . . . .
Conversions of Class A common stock toClass B common stock and exercisesof replacement stock options issued ina business acquisition . . . . . . . . . . . . . .

Class B, $0.0033 Par Value(3,225,000,000 shares authorized)
IssuedTreasury

Outstanding

826,339

1,226,265,250(1,409,762)

1,224,855,488—(17,917)

27,601,348

820,102(11,680)

808,422

1,253,866,598(32,044)—(32,044)

49,457,329

Balance December 31, 2016 . . . . . . . . . . .
Conversions of Class A common stock toClass B common stock and exercisesof replacement stock options issued ina business acquisition . . . . . . . . . . . . . .

788,058(11,680)

776,378

1,303,323,927(25,303)—(25,303)38,742,822

Balance December 31, 2017 . . . . . . . . . . .

762,755(11,680)

751,075

1,342,066,749—(1,409,762)—(1,409,762)—(1,409,762)

27,601,348
1,252,456,836

49,457,329
1,301,914,165

38,742,822
1,340,656,987

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
equivalent 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, atthe 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 1,644,846 shares outstanding as of December 31, 2017 and 1,644,321
shares outstanding as of December 31, 2016. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but
none are issued.
Berkshire’s Board of Directors has approved a common stock repurchase program permitting Berkshire to repurchase its
Class A and Class B shares at prices no higher than a 20% premium over the book value of the shares. The program allows 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 holdings below $20 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. There were no share
repurchases under the program over the last three years.

K-95

Notes to Consolidated Financial Statements (Continued)(20)

Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway
shareholders and significant amounts reclassified from accumulated other comprehensive income into net earnings for each of the three
years ending December 31, 2017 follows (in millions).

Unrealized
appreciation of
investments, net

Foreigncurrencytranslation

Prior service
and actuarial
gains/losses ofdefined benefit
pension plans

Balance December 31, 2014 . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications into net earnings . . . . . . . . . . . . . .

$ 45,636$ (1,957)$(1,039)(5,522)(1,516)(2,027)
128

Balance December 31, 2015 . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications into net earnings . . . . . . . . . . . . . .

38,598

Accumulated
othercomprehensive
incomeOther

92$ 42,732

191
86

(112)
22

(7,470)(1,280)(3,856)(762)

233,982

9,011(4,433)(1,412)
—

94
75

(48)
29

7,645
(4,329)Balance December 31, 2016 . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications into net earnings . . . . . . . . . . . . . .

43,176(5,268)

(593)

(17)

37,29819,826
(909)

2,151
3

65
108

16
13

22,058(785)

Balance December 31, 2017 . . . . . . . . . . . . . . . . . . .

$ 62,093$ (3,114)$ (420)$12$ 58,571

Reclassifications into net earnings:
Year ending December 31, 2015:
Investment gains/losses . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,332)
—

$

$

$

—
35

$ (2,135)
164

Reclassifications before income taxes . . .
Applicable income taxes . . . . . . . . . . . . .

(2,332)
(816)

35
13

(1,971)
(691)

197
—
197
69

—
129

$

129
43

$ (1,516)

$

128

$

86

$

22

$ (1,280)

Year ending December 31, 2016:
Investment gains/losses . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (6,820)
—

$

—
—

$

—
104

$

—
51

$ (6,820)
155

Reclassifications before income taxes . . .
Applicable income taxes . . . . . . . . . . . . .

(6,820)(2,387)51
22(6,665)(2,336)

—
—

104
29

$ (4,433)

$

—

$

75

$

29

$ (4,329)

Year ending December 31, 2017:
Investment gains/losses . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1,399)
—

$

—

$

—
155

$

—
19

$ (1,399)
177

Reclassifications before income taxes . . .
Applicable income taxes . . . . . . . . . . . . .

(1,399)
(490)

19
6

(1,222)
(437)

$

(909)

K-96

3
3

155
47

—
$

3

$

108

$

13

$

(785)

Notes to Consolidated Financial Statements (Continued)(21)

Pension plans

Several of our subsidiaries sponsor defined benefit pension plans covering certain employees. Benefits under the plans are
generally based on years of service and compensation, although benefits under certain plans are based on years of service and fixed
benefit rates. Our subsidiaries may make contributions to the plans to meet regulatory requirements and may also make discretionary
contributions. The components of our net periodic pension expense for each of the three years ending December 31, 2017 were as
follows (in millions).
2017

2016

2015

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial losses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 273
635
(939)
157

$ 282
691
(908)
148

$ 266
591
(782)
179

Net periodic pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 126

$ 213

$ 254

The accumulated benefit obligation is the actuarial present value of benefits earned based on service and compensation prior to
the valuation date. The projected benefit obligation (“PBO”) is the actuarial present value of benefits earned based upon service andcompensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels. Benefit
obligations under qualified U.S. defined benefit pension plans are funded through assets held in trusts. Pension obligations undercertain non-U.S. plans and non-qualified U.S. plans are unfunded and the aggregate PBOs of such plans were approximately$1.3 billion and $1.2 billion as of December 31, 2017 and 2016, respectively.
Reconciliations of the changes in plan assets and PBOs related to BHE’s pension plans and all other pension plans for each of
the two years ending December 31, 2017 are in the following tables (in millions). The costs of pension plans covering employees ofcertain regulated subsidiaries of BHE are generally recoverable through the regulated rate making process.
2017

2016

BHE

All other

Consolidated

BHE

All other

Consolidated

Benefit obligations
Accumulated benefit obligation end of year . . . . .

$ 4,920$12,604$17,524$ 4,787$11,912$16,699

PBO beginning of year . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .
Business acquisitions . . . . . . . . . . . . . . . . .
Actuarial (gains) or losses and other . . . . . .

$ 5,077
47
174
(271)
—
180

$12,673
226
461
(626)
—
883

$17,750
273
635
(897)
—
1,063

$ 5,076
49
198
(309)
—
63

$10,183
233
493
(705)
2,684
(215)

$15,259
282
691(1,014)
2,684
(152)

PBO end of year . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,207$13,617$18,824$ 5,077$12,673$17,750

Plan assets
Plan assets beginning of year . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . .
Business acquisitions . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,694
122
(271)
535
—
49

$10,703
159
(626)
1,601
—
48

$15,397
281
(897)
2,136
—
97

$ 4,765
133
(309)
512
—
(407)

$ 8,066
214
(705)
1,083
2,314
(269)

$12,831347(1,014)
1,595
2,314
(676)

Plan assets end of year . . . . . . . . . . . . . . . . . . . . . .

$ 5,129$11,885$17,014$ 4,694$10,703$15,397

Funded status – net liability . . . . . . . . . . . . . . . . . .

$$ 1,732$ 1,810$$ 1,970$ 2,353

78

383

The funded status of our defined benefit pension plans at December 31, 2017 reflected in assets was $1,176 million and in
liabilities was $2,986 million. At December 31, 2016, the funded status included in assets was $644 million and in liabilities was$2,997 million.

K-97

Notes to Consolidated Financial Statements (Continued)(21)

Pension plans (Continued)
Weighted average interest rate assumptions used in determining PBOs and net periodic pension expense were as follows.

Applicable to pension benefit obligations:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate applicable to net periodic pension expense . . . . . . . . . . . . . . . . .

2017

2016

2015

3.3%
6.4
2.8
3.9

3.8%
6.1
3.0
4.2

4.1%
6.5
3.4
3.8

Benefits payments expected over the next ten years are as follows (in millions): 2018 – $1,058; 2019 – $1,004; 2020 – $1,024;2021 – $1,019; 2022 – $1,019; and 2023 to 2027 – $5,095. Sponsoring subsidiaries expect to contribute $251 million to defined benefit
pension plans in 2018.
Fair value measurements of plan assets as of December 31, 2017 and 2016 follow (in millions).
Fair Value

December 31, 2017
Cash and equivalents . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . .
Government obligations . . . . . . . . .
Other fixed maturity securities . . . .
Investment funds and other . . . . . .
December 31, 2016
Cash and equivalents . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . .
Government obligations . . . . . . . . .
Other fixed maturity securities . . . .
Investment funds and other . . . . . .

$

Total

Level 1

Level 2

Level 3

Investment funds
and partnerships at
net asset value

738
9,824
1,536
799
4,117

$

$

144
23
39
619
1,501

$—
160
—
32
274

$ —
—
—
—
2,192

594
9,641
1,497
148
150

$17,014$12,030$ 2,326$466$2,192

$

$

$

210
27
215
595
1,434

$—
142
—
31
153

$ —
—
—
—
2,024

$ 2,481$326$2,024

847
8,645
1,291
770
3,844

$15,397

637
8,476
1,076
144
233

$10,566

Refer to Note 18 for a discussion of the three levels in the hierarchy of fair values. Plan assets are generally invested with thelong-term objective of producing earnings to adequately cover expected benefit obligations, while assuming a prudent level of risk.
Allocations may change as a result of changing market conditions and investment opportunities. The expected rates of return on plan
assets reflect subjective assessments of expected invested asset returns over a period of several years. Generally, past investment
returns are not given significant consideration when establishing assumptions for expected long-term rates of return on plan assets.
Actual experience will differ from the assumed rates.
A reconciliation of the pre-tax accumulated other comprehensive income (loss) related to defined benefit pension plans for eachof the two years ending December 31, 2017 follows (in millions).
2017

2016

Balance beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount included in net periodic pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gains and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (839)155
70$(1,193)104
250

Balance end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (614)$ (839)K-98

Notes to Consolidated Financial Statements (Continued)(21)

Pension plans (Continued)

Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee
contributions are subject to regulatory limitations and the specific plan provisions. Several plans provide for employer matching
contributions up to levels specified in the plans and provide for additional discretionary contributions as determined by management.
Employer contributions expensed with respect to our defined contribution plans were $1,001 million in 2017, $912 million in 2016 and$739 million in 2015.
(22)

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 byBerkshire 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 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 believethat 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.
We lease certain manufacturing, warehouse, retail and office facilities as well as certain equipment. Rent expense underoperating leases was $1,579 million in 2017, $1,573 million in 2016 and $1,516 million in 2015. Future minimum rental payments for
operating leases having non-cancellable terms in excess of one year are as follows (in millions).

2018

2019

2020

2021

2022

After
2022

Total

$1,330$1,192$1,067$872$709$3,316$8,486

Our subsidiaries regularly make commitments in the ordinary course of business to purchase goods and services used in theirbusinesses. The most significant of these relate to our railroad, utilities and energy businesses and our fractional aircraft ownershipbusiness. As of December 31, 2017, estimated future payments under such arrangements were as follows: $13.0 billion in 2018,$3.8 billion in 2019, $3.1 billion in 2020, $2.6 billion in 2021, $2.4 billion in 2022 and $15.0 billion after 2022.
In 2016, NICO entered into a definitive agreement to acquire Medical Liability Mutual Insurance Company (“MLMIC”), a
writer of medical professional liability insurance domiciled in New York. MLMIC reported assets and policyholders’ surplus
determined under statutory accounting principles as of September 30, 2017 were approximately $5.8 billion and $2.2 billion,
respectively. The acquisition price will be approximately $2.5 billion. The acquisition will involve the conversion of MLMIC from amutual company to a stock company. The closing of the transaction is subject to various regulatory approvals and customary closing
conditions and the approval of the MLMIC policyholders eligible to vote on the proposed demutualization and sale. We currently
expect this acquisition will be completed in the third quarter of 2018.
On October 3, 2017, we entered into an investment agreement and an equity purchase agreement whereby we acquired a 38.6%
interest in Pilot Travel Centers LLC, d/b/a Pilot Flying J (“Pilot Flying J”). Pilot Flying J, headquartered in Knoxville, Tennessee, is
one of the largest operators of travel centers in North America, with more than 27,000 team members, 750 locations across the U.S.
and Canada, and approximately $20 billion in annual revenues. The Haslam family currently owns a 50.1% interest in Pilot Flying J
and a third party owns the remaining 11.3% interest. We also entered into an agreement to acquire in 2023 an additional 41.4% interest
in Pilot Flying J with the Haslam family retaining a 20% interest. As a result, Berkshire will become the majority owner of Pilot
Flying J in 2023.
We own a 50% interest in a joint venture, Berkadia Commercial Mortgage LLC (“Berkadia”), with Leucadia National
Corporation (“Leucadia”) owning the other 50% interest. Berkadia is a servicer of commercial real estate loans in the U.S., performing
primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities
transactions, banks, insurance companies and other financial institutions. A significant source of funding for Berkadia’s operations isthrough the issuance of commercial paper, which is supported by a surety policy issued by a Berkshire insurance subsidiary. Leucadia
is obligated to indemnify us for one-half of any losses incurred under the policy. Berkadia’s maximum outstanding balance ofcommercial paper borrowings is currently limited to $1.5 billion. On December 31, 2017, Berkadia’s commercial paper outstanding
was $1.47 billion.

K-99

Notes to Consolidated Financial Statements (Continued)(22)

Contingencies and Commitments (Continued)

Pursuant to the terms of agreements with noncontrolling shareholders in our less than wholly-owned subsidiaries, we may be
obligated to acquire their equity interests. If we acquired all outstanding noncontrolling interests as of December 31, 2017, we estimate
the cost would have been approximately $5.3 billion. However, the timing and the amount of any such future payments that might berequired are contingent on future actions of the noncontrolling owners.

(23)

Business segment data

Our operating businesses include a large and diverse group of insurance, finance, manufacturing, service and retailingbusinesses. 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, marketing, selling anddistribution characteristics, even though those business units are operated under separate local management.
The tabular information that follows shows data of reportable segments reconciled to amounts reflected in our Consolidated
Financial Statements. Intersegment transactions are not eliminated from segment results when management considers thosetransactions in assessing the results of the respective segments. Furthermore, our management does not consider investment andderivative gains/losses, amortization of certain purchase accounting adjustments related to Berkshire’s business acquisitions or certain
other corporate income and expense items in assessing the financial performance of operating units. Collectively, these items areincluded in reconciliations of segment amounts to consolidated amounts.
Business Identity

Business Activity

Insurance:
GEICO

Underwriting private passenger automobile insurance mainly bydirect response methods

Berkshire Hathaway Reinsurance Group

Underwriting excess-of-loss, quota-share and facultativereinsurance worldwide (General Re Group and NICO Group)

Berkshire Hathaway Primary Group

Underwriting multiple lines of property and casualty insurance
policies for primarily commercial accounts

BNSF

Operation of one of the largest railroad systems in North America

Berkshire Hathaway Energy

Regulated electric and gas utility, including power generation anddistribution activities and real estate brokerage activities

Manufacturing

Manufacturers of numerous products including industrial,consumer and building products

McLane Company

Wholesale distribution of groceries and non-food items

Service and retailing

Providers of numerous services including fractional aircraft
ownership programs, aviation pilot training, electronic components
distribution and various retailing businesses, including automotive
dealerships

Finance and financial products

Manufactured housing and related consumer financing,transportation equipment, manufacturing and leasing and furnitureleasing

K-100

Notes to Consolidated Financial Statements (Continued)(23)

Business segment data (Continued)

A disaggregation of our consolidated data for each of the three most recent years is presented in the tables which follow (inmillions).
Revenues

Earnings before income taxes

2017

2016

2015

2017

Operating Businesses:
Insurance:
Underwriting:
GEICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Reinsurance Group . . .
Berkshire Hathaway Primary Group . . . . . .

$ 29,441
24,013
7,143$ 25,483
14,141
6,257$ 22,718
13,1825,394$ (310)(3,648)719

Insurance underwriting . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . .

60,597
4,911

45,881
4,522

41,294
4,562(3,239)
4,902

2,131
4,482

1,837
4,550

Total insurance . . . . . . . . . . . . . . . . . . . . . . . . . .

65,50850,40345,856

1,663

6,613

6,387

BNSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Energy . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . .
McLane Company . . . . . . . . . . . . . . . . . . . . . . . .
Service and retailing . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . .

21,387
18,93950,44549,77526,313
8,376

19,82917,85946,50648,07525,478
7,675

21,967
18,231
36,13648,223
23,466
6,964

6,328
2,584
6,861
299
2,083
2,058

5,693
2,973
6,211
431
1,820
2,130

6,775
2,851
4,893
502
1,720
2,086

240,743

215,825

200,843

21,87625,871

25,214

2,128
—
—
(734)

8,304
—
180
(705)

10,347—852(1,099)2,128(1,494)
2,938(1,610)

8,304
(230)
1,103
(1,381)

10,347
(374)
730
(971)

$242,137$223,604$210,943$23,838$33,667$34,946

2017

2016

2015

(55)
2,369
178
2,155
94
726
723

$1,585
2,124
403
1,945
169
669
702

$ 1,475
2,527
450
1,548
195
651
708

Reconciliation to consolidated amount:
Investment and derivative gains/losses . . . . . . . .
Interest expense, not allocated to segments . . . .
Investments in Kraft Heinz . . . . . . . . . . . . . . . . .
Corporate, eliminations and other . . . . . . . . . . . .

Interest expense

Operating Businesses:
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BNSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Energy . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . .
McLane Company . . . . . . . . . . . . . . . . . . . . . . . .
Service and retailing . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . .
Reconciliation to consolidated amount:
Investment and derivative gains/losses . . . . . . . .
Interest expense, not allocated to segments . . . . .
Investments in Kraft Heinz . . . . . . . . . . . . . . . . .
Income tax net benefit – Tax Cuts and Jobs Act
of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate, eliminations and other . . . . . . . . . . . .

2016

$

462
1,012
657

2015

$

460
553
824

Income tax expense

2017

2016

2015

$ —
1,016
2,254
189
19
56
397

$ —
992
1,715
164
—
50
411

$ —
928
1,830
50
13
40
384

3,931

3,332

3,245

6,190

7,597

7,554

—
1,494
—

—
230
—

—
374
—

742
(523)
832

1,807
(81)
397

3,622
(131)
(111)

—
(31)

—
(65)

—
(104)

(28,200)
(556)

—
(480)

—
(402)

$5,394$3,497$3,515$(21,515)$9,240$10,532

K-101$

Notes to Consolidated Financial Statements (Continued)(23)

Business segment data (Continued)
Capital expenditures
2017

Operating Businesses:
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BNSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Energy . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McLane Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and retailing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . . . . . . . .

$Depreciation of tangible assets

2016

170
3,256
4,571
1,905
289
587
930

$

$11,708

128
3,819
5,090
1,813
258
804
1,042

$

$12,954

2015

2017

2016

2015

115
5,651
5,875
1,292
338
574
2,237

$

84
2,304
2,548
1,357
193
583
650

$

85
2,079
2,560
1,287
165
611
624

$

$7,719$7,411$6,673$16,082

Goodwill
at year-end

Operating Businesses:
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BNSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway Energy . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McLane Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and retailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance and financial products . . . . . . . . . . . . . . . . . . . . . . . . .

77
1,932
2,451
938
161
504
610

Identifiable assets
at year-end

2017

2016

2017

2016

2015

$15,499
14,845
9,935
32,981
734
5,771
1,493

$15,474
14,8459,266
32,041
734
5,745
1,381

$297,048
69,43880,19572,6306,090
18,21540,392$234,037
69,27776,42869,9005,896
17,45040,329$219,451
66,61374,22134,141
5,871
16,29937,621$81,258$79,486

584,008

513,317454,217

36,82981,25828,051
79,48635,33262,708$702,095$620,854$552,257

Reconciliation to consolidated amount:
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Premiums written and earned by the property/casualty and life/health insurance businesses are summarized below (in millions).
Property/Casualty

Premiums Written:
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums Earned:
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Life/Health

2017

2016

2015

$ 39,377
17,815(694)$34,001
8,037
(798)

$30,544
7,049
(877)

$

866
4,925
(47)

$ 1,060
4,672
(62)

$

$ 56,498$41,240$36,716$ 5,744$ 5,670$ 5,951$ 37,755
17,813(677)$33,207
7,848
(843)

$29,608
6,584
(854)

$

866
4,866
(26)

$ 1,060
4,671
(62)

$

$ 54,891$40,212$35,338$ 5,706$ 5,669$ 5,956

K-102

2017

2016

2015

821
5,187
(57)

821
5,192
(57)

Notes to Consolidated Financial Statements (Continued)(23)

Business segment data (Continued)

Insurance premiums written by geographic region (based upon the domicile of the insured or reinsured) are summarized below.
Dollars are in millions.
Property/Casualty

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Western Europe . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Life/Health

2017

2016

2015

2017

2016

2015

$50,604
3,307
1,516
1,071

$35,878
3,616
1,406
340

$31,171
3,472
1,638
435

$3,320879
909
636$3,473715
822
660$3,247
673
1,263
768

$56,498$41,240$36,716$5,744$5,670$5,951

Consolidated sales and service revenues were $132.9 billion in 2017, $125.7 billion in 2016 and $112.4 billion in 2015. In 2017and 2016, 85% of such revenues were attributable to the United States compared to 87% in 2015. The remainder of sales and service
revenues were primarily in Europe, Canada and the Asia Pacific. Consolidated sales and service revenues included sales to Walmart
Stores, Inc. of approximately $14 billion in 2017 and 2016 and $13 billion in 2015. Approximately 95% of our revenues for each of thelast three years from railroad, utilities and energy businesses were in the United States. At December 31, 2017, approximately 89% of
our consolidated net property, plant and equipment was located in the United States with the remainder primarily in Canada andEurope.
(24)

Quarterly data

A summary of revenues and net earnings by quarter for each of the last two years follows. This information is unaudited.
Amounts are in millions, except per share amounts.

2017
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Berkshire shareholders * . . . . . . . . . . . .
Net earnings attributable to Berkshire shareholders per equivalentClass A common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Berkshire shareholders * . . . . . . . . . . . .
Net earnings attributable to Berkshire shareholders per equivalentClass A common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1stQuarter

2nd
Quarter

3rd
Quarter

4th
Quarter$65,187
4,060$57,518
4,262$60,525
4,067$58,907
32,551

2,469

2,592

2,473

19,790$52,1635,589$54,254
5,001$58,843
7,198$58,344
6,286

3,401

3,042

4,379

3,823

* Includes after-tax investment and derivative gains/losses and a one-time income tax net benefit attributable to the enactment of the
Tax Cuts and Jobs Act of 2017 as follows:

Investment and derivative gains/losses – 2017 . . . . . . . . . . . . . . . . . . . . . . . .
Investment and derivative gains/losses – 2016 . . . . . . . . . . . . . . . . . . . . . . . .
Income tax net benefit – Tax Cuts and Jobs Act of 2017 . . . . . . . . . . . . . . . . .

K-103

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

$ 504
1,852
—

$143
394
—

$ 623
2,347
—

$ 107
1,904
28,200Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None
Item 9A.

Controls and Procedures

At the end of the period covered by this Annual Report on Form 10-K, the Corporation carried out an evaluation, under thesupervision and with the participation of the Corporation’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 Corporation’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 Corporation’s disclosure controls and procedures are
effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to
be included in the Corporation’s periodic SEC filings. The report called for by Item 308(a) of Regulation S-K is incorporated herein byreference to Management’s Report on Internal Control Over Financial Reporting, included on page K-60 of this report. The attestation
report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to Report of Independent Registered Public
Accounting Firm, included on page K-61 of this report. There has been no change in the Corporation’s internal control over financial
reporting during the quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, theCorporation’s internal control over financial reporting.
Item 9B.

Other Information

None

Part III
Except for the information set forth under the caption “Executive Officers of the Registrant” in Part I hereof, information
required by this Part (Items 10, 11, 12, 13 and 14) is incorporated by reference from the Registrant’s definitive proxy statement, filed
pursuant to Regulation 14A, for the Annual Meeting of Shareholders of the Registrant to be held on May 5, 2018, which meeting will
involve the election of directors.

K-104

Part IV
Item 15.

Exhibits and Financial Statement Schedules(a)1. Financial Statements
The following Consolidated Financial Statements, as well as the Report of Independent Registered Public Accounting Firm, areincluded in Part II Item 8 of this report:
PAGE

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets—
December 31, 2017 and December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Earnings—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income—Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Shareholders’ Equity—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows—
Years Ended December 31, 2017, December 31, 2016, and December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Financial Statement Schedule
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule I—Parent Company Condensed Financial Information
Balance Sheets as of December 31, 2017 and 2016, Statements of Earnings and Comprehensive Income and Cash
Flows for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 and Note to Condensed
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

K-61
K-62
K-64
K-65
K-65
K-66
K-67

K-105

K-106

Other schedules are omitted because they are not required, information therein is not applicable, or is reflected in theConsolidated Financial Statements or notes thereto.
(b) Exhibits
See the “Exhibit Index” at page K-108.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors ofBerkshire Hathaway Inc.
Omaha, Nebraska
We have audited the consolidated financial statements of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as ofDecember 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the Company’s internal
control over financial reporting as of December 31, 2017, and have issued our report thereon dated February 23, 2018; suchconsolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the financial
statement schedule of the Company listed in the Index at Item 15. This financial statement schedule is the responsibility of theCompany’s management. Our responsibility is to express an opinion on the Company’s financial statements schedules based on our
audits. In our opinion, such financial statement schedules, when considered in relation to the financial statements taken as a whole,present fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
February 23, 2018

K-105

BERKSHIRE HATHAWAY INC.
(Parent Company)
Condensed Financial Information(Dollars in millions)
Schedule I
Balance Sheets
December 31,
2017

Assets:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments in U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in fixed maturity and equity securities and other assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and advances to/from consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in The Kraft Heinz Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$Liabilities and Shareholders’ Equity:
Accounts payable, accrued interest and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, principally deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Berkshire Hathaway shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2016

4,039
13,132
79335,668
17,635

$

3,221
8,220
59
276,467
15,345$370,553$303,312

$

196
3,294
18,767$22,257348,296

21,242282,070$370,553$303,312

182
3,357
17,703

Statements of Earnings and Comprehensive Income
Year ended December 31,
2017

2016

2015

Income items:
From consolidated subsidiaries:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,367
37,832$ 9,862
13,264$10,519
8,508

Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment holding gain in The Kraft Heinz Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net earnings of The Kraft Heinz Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,199
(1)
—
2,938
350

23,126
700
—
923
262

19,027
16
6,838
(122)
963

46,48625,011

26,722

159
1,530
(143)

80
208
649

73
302
2,264

1,546

937

2,639

Net earnings attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . .

44,94021,27324,074
3,316

24,083(8,750)Comprehensive income attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . . . . . . .

$66,213$27,390$15,333

Cost and expense items:
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See Note to Condensed Financial Information
K-106

BERKSHIRE HATHAWAY INC.
(Parent Company)
Condensed Financial Information(Dollars in millions)
Schedule I (continued)
Statements of Cash Flows
Year ended December 31,

Cash flows from operating activities:
Net earnings attributable to Berkshire Hathaway shareholders . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net earnings to cash flows from operating activities:
Investment gains/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash dividends from consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2017

2016

2015

$ 44,940$ 24,074$24,0831(37,832)—(135)(1,234)(700)(13,264)
—
629
(161)

(6,854)(8,508)(3,938)2,227
222

Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,740

10,578

7,232

Cash flows from investing activities:
Redemption (purchase) of Kraft Heinz Company investments . . . . . . . . . . . . . . . . . . . . . .
Investments in and advances to/repayments from consolidated subsidiaries, net . . . . . . . .
Purchases of U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and maturities of U.S. Treasury Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—(239)(19,663)
14,847

8,320(26,398)(9,350)1,145(5,258)(2,274)——

Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,055)(26,283)(7,532)

Cash flows from financing activities:
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,201(1,145)77

9,278(1,125)
164

3,165(1,775)70

Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133

8,317

1,460

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

818
3,221

(7,388)
10,609

1,160
9,449

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,039$ 3,221$10,609

Other cash flow information:
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investments in consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,076386—$ 3,583307—$ 3,180206
3,938

Note to Condensed Financial Information
In December 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted, which reduced the Parent Company’s income tax
expense in 2017 by $550 million, primarily due to the reduction in deferred tax liabilities attributable to the lower U.S. statutory rate,
partly offset by a one-time income tax expense on certain accumulated undistributed earnings of foreign subsidiaries. The effects of the
TCJA on income tax expense of consolidated subsidiaries is included in undistributed earnings in consolidated subsidiaries.
In 2013, the Parent Company invested $12.25 billion in H.J. Heinz Holding Corporation (“Heinz Holding”), an entity formed toacquire H.J. Heinz Company, which included common stock and warrants and cumulative compounding preferred stock. After a seriesof transactions in 2015, Berkshire’s interests in Heinz Holding became a 26.8% ownership of outstanding common stock of The Kraft
Heinz Company (“Kraft Heinz”) and is currently 26.7% of such shares. Reference is made to Note 5 to the Consolidated Financial
Statements for additional information concerning Berkshire’s investments in Kraft Heinz.
In January 2017, Berkshire issued €1.1 billion in senior notes consisting of €550 million of 0.25% notes due in 2021 and€550 million of 0.625% notes due in 2023, which increased Euro denominated notes to €6.85 billion. In 2017, the carrying value ofBerkshire’s Euro denominated senior notes increased $990 million due to changes in the Euro/U.S. Dollar exchange rates. This
increase produced a corresponding charge to pre-tax earnings of $990 million in 2017. Parent Company debt maturities over the next
five years are as follows: 2018—$1,550 million; 2019—$753 million; 2020—$1,203 million; 2021—$2,160 million and 2022—$613 million. Berkshire guarantees debt obligations of certain of its subsidiaries, which as of December 31, 2017, totaled
approximately $14.8 billion. Such guarantees are an absolute, unconditional and irrevocable guarantee for the full and prompt payment
when due of all present and future payment obligations. Berkshire also provides guarantees in connection with equity index put option
contracts and certain retroactive reinsurance contracts of subsidiaries. The amounts of subsidiary payments under these contracts, ifany, is contingent upon the outcome of future events.
K-107

EXHIBIT INDEXExhibit No.

2(i)
2(ii)
2(iii)

3(i)
3(ii)
4.1

4.2

4.3

4.4
4.5

10.1

12
14
18
21
23
31.1
31.2
32.1
32.2
95
101

Agreement and Plan of Merger dated as of June 19, 1998 between Berkshire and General Re Corporation.
Incorporated by reference to Annex I to Registration Statement No. 333-61129 filed on Form S-4.
Agreement and Plan of Merger dated as of November 2, 2009 by and among Berkshire, R Acquisition Company, LLC
and BNSF. Incorporated by reference to Annex A to Registration Statement No. 333-163343 on Form S-4.
Agreement and Plan of Merger dated August 8, 2015, by and among Berkshire, NW Merger Sub Inc. and Precision
Castparts Corporation (“PCC”)
Incorporated by reference to Exhibit 2.1 to PCC’s Current Report on Form 8-K filed on August 10, 2015 (SEC File
No. 001-10348)
Restated Certificate of Incorporation
Incorporated by reference to Exhibit 3(i) to Form 10-K filed on March 2, 2015.
By-Laws
Incorporated by reference to Exhibit 3(ii) to Form 8-K filed on May 4, 2016.
Indenture, dated as of December 22, 2003, between Berkshire Hathaway Finance Corporation, Berkshire Hathaway Inc.
and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National
Association), as trustee.
Incorporated by reference to Exhibit 4.1 on Form S-4 of Berkshire Hathaway Finance Corporation and Berkshire
Hathaway Inc. filed on February 4, 2004. SEC File No. 333-112486
Indenture, dated as of February 1, 2010, among Berkshire Hathaway Inc., Berkshire Hathaway Finance Corporation and
The Bank of New York Mellon Trust Company, N.A., as trustee.
Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on February 1,
2010. SEC File No. 333-164111
Indenture, dated as of January 26, 2016, by and among Berkshire Hathaway Inc., Berkshire Hathaway FinanceCorporation and The Bank of New York Mellon Trust Company, N.A., as trustee.
Incorporated by reference to Exhibit 4.1 to Berkshire’s Registration Statement on Form S-3 filed on January 26,
2016. SEC File No. 333-209122
Indenture, dated as of December 1, 1995, between BNSF and The First National Bank of Chicago, as trustee.
Incorporated by reference to Exhibit 4 on Form S-3 of BNSF filed on February 8, 1999.
Indenture, dated as of October 4, 2002, by and between MidAmerican Energy Holdings Company and The Bank of New
York, Trustee.
Incorporated by reference to Exhibit 4.1 to the Berkshire Hathaway Energy Company Registration Statement
No. 333-101699 dated December 6, 2002.
Other instruments defining the rights of holders of long-term debt of Registrant and its subsidiaries are not being
filed since the total amount of securities authorized by all other such instruments does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis as of December 31, 2017. The Registrant hereby
agrees to furnish to the Commission upon request a copy of any such debt instrument to which it is a party.
Equity Commitment Letter of Berkshire Hathaway Inc. with Hawk Acquisition Holding Corporation dated February 13,
2013.
Incorporated by reference to Exhibit 10.1 on Form 8-K of Berkshire Hathaway Inc. filed on February 14, 2013.
Calculation of Ratio of Consolidated Earnings to Consolidated Fixed Charges
Code of Ethics
Berkshire’s Code of Business Conduct and Ethics is posted on its Internet website at www.berkshirehathaway.com
Letter re change in accounting principle
Subsidiaries of Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a—14(a)/15d-14(a) Certification
Rule 13a—14(a)/15d-14(a) Certification
Section 1350 Certification
Section 1350 Certification
Mine Safety Disclosures
The following financial information from Berkshire Hathaway Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2017, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated
Balance Sheets as of December 31, 2017 and 2016, (ii) the Consolidated Statements of Earnings for each of the three
years ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income for each of thethree years ended December 31, 2017, 2016 and 2015, (iv) the Consolidated Statements of Changes in Shareholders’Equity for each of the three years ended December 31, 2017, 2016 and 2015, (v) the Consolidated Statements of Cash
Flows for each of the three years ended December 31, 2017, 2016 and 2015 and (vi) the Notes to Consolidated Financial
Statements and Schedule I, tagged in summary and detail.
K-108

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.
BERKSHIRE HATHAWAY INC.
Date: February 23, 2018

/S/

MARC D. HAMBURG

Marc D. Hamburg
Senior Vice President andPrincipal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
/S//S/

WARREN E. BUFFETT
Warren E. Buffett

Chairman of the Board of
Directors—Chief Executive Officer

February 23, 2018
Date

GREGORY E. ABEL

Director—Vice Chairman—Non Insurance Operations

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director—Vice Chairman—Insurance Operations

February 23, 2018
Date

Director—Vice Chairman

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Director

February 23, 2018
Date

Senior Vice President—Principal Financial Officer

February 23, 2018
Date

Vice President—Principal Accounting Officer

February 23, 2018
Date

Gregory E. Abel/S/

HOWARD G. BUFFETT
Howard G. Buffett/S/

STEPHEN B. BURKE
Stephen B. Burke/S/

SUSAN L. DECKER
Susan L. Decker/S/

WILLIAM H. GATES III
William H. Gates III/S/

DAVID S. GOTTESMANDavid S. Gottesman/S/

CHARLOTTE GUYMAN
Charlotte Guyman/S/

AJIT JAIN
Ajit Jain/S/

CHARLES T. MUNGERCharles T. Munger/S/

THOMAS S. MURPHY
Thomas S. Murphy/S/

RONALD L. OLSON
Ronald L. Olson/S/

WALTER SCOTT, JR.
Walter Scott, Jr.

/S/

MERYL B. WITMER
Meryl B. Witmer/S/

MARC D. HAMBURG
Marc D. Hamburg/S/

DANIEL J. JAKSICH
Daniel J. Jaksich

K-109

BERKSHIRE HATHAWAY INC.
OPERATING COMPANIESRAILROAD,UTILITIESAND
ENERGY
BUSINESSES:
Employees
BNSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,000Berkshire Hathaway Energy Company:
Corporate Office . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
PacifiCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,436
MidAmerican Energy . . . . . . . . . . . . . . . . . . . . . . . .
3,311
NV Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,451
Northern Powergrid . . . . . . . . . . . . . . . . . . . . . . . . .
2,492
Northern Natural Gas . . . . . . . . . . . . . . . . . . . . . . .
908
Kern River Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
AltaLink . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
752
BHE Renewables . . . . . . . . . . . . . . . . . . . . . . . . . . .
326
BHE U.S. Transmission . . . . . . . . . . . . . . . . . . . . . .
14
CalEnergy Philippines . . . . . . . . . . . . . . . . . . . . . . .
55
MidAmerican Energy Services . . . . . . . . . . . . . . . .
125
HomeServices of America . . . . . . . . . . . . . . . . . . . .
6,729
63,773SERVICE AND RETAILING BUSINESSES:
Affordable Housing Partners, Inc. . . . . . . . . . . . . . . .
18
Ben Bridge Jeweler . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,128Berkshire Hathaway Automotive . . . . . . . . . . . . . . . .
11,003BH Media Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,719
Borsheims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152
Business Wire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
486
Charter Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . .
163
Dairy Queen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
464
Detlev Louis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,293
FlightSafety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,468
Helzberg Diamonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,252
Jordan’s Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,100
McLane Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,859Nebraska Furniture Mart . . . . . . . . . . . . . . . . . . . . . .
4,645
NetJets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,314
Oriental Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,523
Pampered Chef . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
373
Precision Steel Warehouse . . . . . . . . . . . . . . . . . . . . . .
126
R.C.Willey Home Furnishings . . . . . . . . . . . . . . . . . . .
2,782
See’s Candies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,439
Star Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
673
The Buffalo News . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
618
TTI, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,591
WPLG, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185
75,374
FINANCE BUSINESSES:
Clayton Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,362CORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,487
Marmon – UTLX (1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,346
XTRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
389
25,584
Berkshire Hathaway Corporate Office . . . . . . . . . . . . . .
26377,291

INSURANCE BUSINESSES:
Employees
GEICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,690Berkshire Hathaway Reinsurance Group . . . . . . . . .
562
General Re . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,006
Berkshire Hathaway Homestate Companies . . . . . . .
1,004
Berkshire Hathaway Specialty . . . . . . . . . . . . . . . . . . .
890
Berkshire Hathaway GUARD Insurance Companies . .
689
MedPro Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
896
National Indemnity Primary Group . . . . . . . . . . . . . .
673
United States Liability Insurance Companies . . . . . .
893
Applied Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . .
753
Central States Indemnity . . . . . . . . . . . . . . . . . . . . . . .
5247,108MANUFACTURING BUSINESSES:
Acme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,408
Benjamin Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,772
Brooks Sports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
638
CTB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,886
Duracell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,875Fechheimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
407
Forest River . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,185
Fruit of the Loom Companies:
Fruit of the Loom . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,219Russell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,020
Vanity Fair Brands . . . . . . . . . . . . . . . . . . . . . . . . . .
209
Garan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,630
H. H. Brown Shoe Group . . . . . . . . . . . . . . . . . . . . . . .
950
IMC International Metalworking Companies . . . . . .
12,749Johns Manville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,309
Justin Brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
735
Larson-Juhl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,273
LiquidPower Specialty Products, Inc. . . . . . . . . . . . . .
259
Lubrizol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,046
MiTek Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,738
Precision Castparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,984Richline Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,128
Scott Fetzer Companies:
Adalet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
164
Altaquip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166
Carefree of Colorado . . . . . . . . . . . . . . . . . . . . . . . .
336
Cleveland Wood Products . . . . . . . . . . . . . . . . . . . .
39
Douglas/Quikut . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95Halex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Kirby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
344
Stahl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134
United Consumer Financial Services . . . . . . . . . . .
197
Wayne Water Systems . . . . . . . . . . . . . . . . . . . . . . .
101
Western Enterprises . . . . . . . . . . . . . . . . . . . . . . . . .
232
World Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
Other Scott Fetzer Companies . . . . . . . . . . . . . . . .
320
Shaw Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,867The Marmon Group (1) . . . . . . . . . . . . . . . . . . . . . . . . .
12,763
165,426(1)

The Marmon Group consists of approximately 175 manufacturing and service businesses that operate within 15 business sectors.

A-1

BERKSHIRE HATHAWAY INC.
STOCK TRANSFER AGENT
EQ Shareowner Services (“EQ”), a division of Equiniti Trust Company., P. O. Box 64854, St. Paul, MN 55164-0854
serves as Transfer Agent and Registrar for the Company’s common stock. Correspondence may be directed to EQ at the address
indicated or at www.shareowneronline.com. Telephone inquiries should be directed to the Shareowner Relations Department at
1-877-602-7411 between 7:00 A.M. and 7:00 P.M. Central Time. Certificates for re-issue or transfer should be directed to the Transfer
Department at the address indicated.
Berkshire has two classes of common stock designated Class A common stock and Class B common stock. Each share ofClass A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Shares of Class B
common stock are not convertible into shares of Class A common stock.
Shareholders of record wishing to convert Class A common stock into Class B common stock may contact EQ in writing.
Along with the underlying stock certificate, shareholders should provide EQ with specific written instructions regarding the number ofshares to be converted and the manner in which the Class B shares are to be registered. We recommend that you use certified orregistered mail when delivering the stock certificates and written instructions.
If Class A shares are held in “street name,” shareholders wishing to convert all or a portion of their holding should contact
their broker or bank nominee. It will be necessary for the nominee to make the request for conversion.

BERKSHIRE HATHAWAY INC.
REAL ESTATE BROKERAGE BUSINESSES *
Brand

State

Major Cities Served

RealtySouth
Roberts Brothers Inc.
Long Companies
Guarantee Real Estate
Intero Real Estate Services
Berkshire Hathaway HomeServices California
Properties
Kentwood Real Estate
Berkshire Hathaway HomeServices New
England Properties
Houlihan Lawrence

Alabama
Alabama
Arizona
California
California
California

Birmingham
MobileTucsonFresnoSilicon Valley
San Diego/Los Angeles

776
245
751
446
1,123
2,419

Colorado
Connecticut,
Rhode Island
Connecticut, NewYork
Delaware, New Jersey,
Pennsylvania
FloridaFloridaGeorgia
Georgia

DenverHartford; Westerly

235
1,315

Darien; Westchester

1,430

Wilmington; Ocean City; Philadelphia

5,130Jacksonville
Miami
AtlantaAtlanta

416
749
874
1,617

Illinois, Michigan

Chicago; New Buffalo

1,418

Indiana, Kentucky
Iowa
Iowa

New Albany; Louisville
Des Moines
Des Moines

471
759
72

KentuckyKentucky

Lexington
Louisville

217
47

Berkshire Hathaway HomeServices
Fox & Roach
Berkshire Hathaway Florida Network Realty
EWM REALTORS®
Harry Norman, REALTORS®
Berkshire Hathaway HomeServices Georgia
Properties
Berkshire Hathaway HomeServices KoenigRubloff
Realty Group
Semonin REALTORS®
Iowa Realty
Berkshire Hathaway HomeServices
First Realty
Rector-Hayden REALTORS®
Wakefield Reutlinger Realtors(continued on next page)
A-2

Number of Agents

BERKSHIRE HATHAWAY INC.
REAL ESTATE BROKERAGE BUSINESSES *
Brand

State

Major Cities ServedChampion Realty Inc.
Edina Realty
Carol Jones REALTORS®
ReeceNichols
Berkshire Hathaway HomeServices Kansas
City Realty
CBSHOME Real Estate
HOME Real Estate
Woods Bros. Realty
Gloria Nilson & Co. Real Estate

Maryland
Minnesota, Wisconsin
Missouri
Missouri, Kansas
MissouriAnnapolis
Minneapolis/St. Paul; Eau Claire
Springfield/Branson
Kansas City
Kansas City

197
2,402
237
2,141
75

Nebraska
Nebraska
Nebraska
New Jersey

348
175
173
567

New York

Omaha
Lincoln
LincolnCentral New Jersey; Bucks County
Pennsylvania
Manhattan

New York
North Carolina
North Carolina
North Carolina

Westchester
Charlotte/Winston-Salem
Pinehurst/Southern Pines
Raleigh

89
334
46
319

North Carolina

Greensboro

199

North Carolina
Ohio
Oregon,Washington
Oregon
Texas
Virginia, West
Virginia, Maryland,
Delaware, New Jersey,
Pennsylvania, North
Carolina, Washington
D.C.
Wisconsin

RaleighCincinnati
Portland; Seattle

740
407
772

Berkshire Hathaway HomeServices
New York Properties
Berkshire Hathaway Westchester Properties
Berkshire Hathaway HomeServices Carolinas Realty
Berkshire Hathaway HomeServices Pinehurst Realty
Berkshire Hathaway HomeServices York Simpson
Underwood Realty
Berkshire Hathaway HomeServices
Yost & Little
Fonville MoriseyRealty (A Long & Foster Company)
Huff Realty
Berkshire Hathaway HomeServices Northwest Real
EstateBerkshire Hathaway Real Estate Professionals
Allie Beth Allman & Associates
Long & Foster Real Estate

First Weber Group REALTORS®

Number of Agents

24

Salem
DallasPhiladelphia; Richmond; Baltimore;
Annapolis; Raleigh; Washington D.C.

178
320
9,567

Milwaukee; Madison

1,130* The list of real estate brokerage businesses does not include over 365 real estate brokerage franchisees with over 48,000 agents located in 47 states
and currently operating under three primary brand names including Berkshire Hathaway HomeServices. In exchange for certain fees, thesefranchisees are provided the right to use the three brand names.

A-3

BERKSHIRE HATHAWAY INC.
AUTOMOBILE DEALERSHIPS
Dealership Name

City, State

Dealership Name

City, State

Arrowhead Cadillac
Superstition Springs Lexus
Acura Of Peoria
Infiniti of Peoria
Peoria Ford

Glendale, AZ
Mesa, AZ
Peoria, AZ
Peoria, AZ
Peoria, AZ

Evansville, IN
Evansville, IN
Kansas City, MO
Springfield, MO
Springfield, MO

Peoria Nissan
ABC Nissan
Bell Honda
Camelback Ford Lincoln
Camelback Hyundai
Camelback Kia
Camelback Volkswagen Subaru Mazda
Camelback Toyota
Infiniti on Camelback
Midway Chevrolet
Midway Nissan
Showcase Honda
Volvo Cars of Phoenix
Airpark Dodge Chrysler Jeep
Alfa Romeo of Scottsdale/Fiat of
Scottsdale
Infiniti of Scottsdale
Pinnacle Nissan
Van Chevrolet/Van Buick GMC
Surprise Ford
Cerritos Nissan
Serramonte Ford
South County Lexus
Frontier Ford
Toyota of Deerfield Beach
Delray Honda
David Maus Volkswagen NorthDavid Maus Volkswagen SouthDavid Maus Chevrolet
David Maus Toyota
Mercedes-Benz of South Atlanta
Mall of Georgia Ford
Gwinnett Place Ford Lincoln
Gwinnett Place Nissan
Crown Nissan
Crown Toyota
Miles Chevrolet
Kenny Kent Chevrolet

Peoria, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Scottsdale, AZ
Scottsdale, AZ

Kenny Kent Lexus
Kenny Kent Toyota
Van Chevrolet Cadillac Subaru
Audi of Springfield/BMW of Springfield
Reliable Chevrolet/Infiniti of Springfield/
Elite Automotive Group
Reliable Imports
Reliable Toyota Lexus
BMW of Lincoln/Husker Auto Group
Husker Chevrolet Cadillac GMC
Village Pointe Toyota
Reliable Chevrolet
Reliable Nissan
Vandergriff Acura
Vandergriff Chevrolet
Vandergriff Honda
Vandergriff Hyundai
Vandergriff Toyota
Van Hyundai
Toyota of Dallas
Crest Nissan

Scottsdale, AZ
Crest Cadillac
Scottsdale, AZ
Crest Infiniti
Scottsdale, AZ
Stonebriar Chevrolet
Surprise, AZ
Honda of Fort WorthCerritos, CA
Grand Prairie Ford
Colma, CA
Grapevine Ford Lincoln
Mission Viejo, CA Texas Nissan of Grapevine
Santa Clara, CA
Texas Toyota of Grapevine
Deerfield Beach, FL Joe Myers Ford Lincoln
Joe Myers Mazda Kia
Delray Beach, FL
Joe Myers Toyota
Orlando, FL
Westway Ford
Orlando, FL
McKinney Buick GMC
Sanford, FL
Nissan of McKinney
Sanford, FL
Town East Ford
Atlanta, GA
Trophy Nissan
Buford, GA
Crest Volvo Cars
Duluth, GA
Reliable Chevrolet
Duluth, GA
Richardson Chrysler Jeep Dodge Ram
Decatur, IL
Toyota of Richardson
Decatur, IL
North Park Toyota of San Antonio
Decatur, IL
Evansville, IN

A-4Springfield, MO
Springfield, MO
Lincoln, NE
Lincoln, NE
Omaha, NE
Albuquerque, NM
Albuquerque, NM
Arlington, TX
Arlington, TX
Arlington, TX
Arlington, TX
Arlington, TX
Carrollton, TX
Dallas, TX
Frisco, TX
Frisco, TX
Frisco, TX
Frisco, TX
Ft. Worth, TX
Grand Prairie, TX
Grapevine, TX
Grapevine, TX
Grapevine, TX
Houston, TX
Houston, TX
Houston, TX
Irving, TX
McKinney, TX
McKinney, TX
Mesquite, TX
Mesquite, TX
Plano, TX
Richardson, TX
Richardson, TX
Richardson, TX
San Antonio, TX

BERKSHIRE HATHAWAY INC.
DAILY NEWSPAPERS
Circulation
Publication

AlabamaOpelika Auburn News
Dothan Eagle
Iowa
The Daily Nonpareil
Nebraska
York News-Times
The North Platte TelegraphKearney HubStar-Herald
The Grand Island Independent
Omaha World-Herald
New Jersey
The Press of Atlantic City
New York
Buffalo News
North Carolina
The McDowell NewsThe News Herald
Statesville Record and Landmark
Hickory Daily Record
Winston-Salem Journal
Greensboro News & Record
Oklahoma
Tulsa World
Tulsa Business & Legal News
South Carolina
Morning News
Texas
The Eagle
Tribune-Herald
Virginia
Culpeper Star Exponent
The News Virginian
Danville Register and Bee
The Daily Progress
Bristol Herald Courier
The News and Advance
Richmond Times-Dispatch
The Roanoke Times
Martinsville Bulletin
Free Lance-Star

City

Daily

SundayOpelika/Auburn
Dothan8,995
16,212

10,074
18,070Council Bluffs

7,145

7,575

York
North Platte
Kearney
Scottsbluff
Grand Island
Omaha

2,536
7,003
7,860
8,519
13,67793,653

—
7,073
—
8,817
14,690115,417

Atlantic City32,19038,982

Buffalo

104,346

163,074

MarionMorganton
Statesville
Hickory
Winston-Salem
Greensboro

3,047
5,303
6,863
11,271
37,83735,448

3,225
5,904
8,121
13,873
46,76348,547

Tulsa
Tulsa

52,408234

68,009—Florence

13,10917,128

Bryan/College Station
Waco

10,99919,43012,41523,555

CulpeperWaynesboro
Danville
Charlottesville
Bristol
Lynchburg
Richmond
Roanoke
MartinsvilleFredericksburg

3,128
3,835
8,771
14,072
16,566
17,21682,64243,0258,960
25,7643,451
4,013
11,087
16,167
19,556
21,226
102,791
52,132
10,23229,800A-5

BERKSHIRE HATHAWAY INC.
DIRECTORSOFFICERSWARREN E. BUFFETT,
Chairman and CEO of Berkshire

WARREN E. BUFFETT, Chairman and CEO

CHARLES T. MUNGER,
Vice Chairman of Berkshire

GREGORY E. ABEL, Vice Chairman

GREGORY E. ABEL,
Vice Chairman of Berkshire

MARC D. HAMBURG, Senior Vice President and CFO

AJIT JAIN,
Vice Chairman of Berkshire

MARK D. MILLARD, Vice President

HOWARD G. BUFFETT,
Sheriff of Macon County, Illinois

KERBY S. HAM, Treasurer

CHARLES T. MUNGER, Vice Chairman

AJIT JAIN, Vice Chairman

DANIEL J. JAKSICH, Vice President, Controller

JO ELLEN RIECK, Vice President

REBECCA K. AMICK, Director of Internal Auditing

STEPHEN B. BURKE,
Chief Executive Officer of NBCUniversal, a media andentertainment company.
SUSAN L. DECKER,
Former President of Yahoo! Inc., an internet company.
WILLIAM H. GATES III,
Co-Chair of the Bill and Melinda Gates Foundation
DAVID S. GOTTESMAN,
Senior Managing Director of First Manhattan
Company, an investment advisory firm.
CHARLOTTE GUYMAN,
Former Chairman of the Board of Directors of
UW Medicine, an academic medical center.
THOMAS S. MURPHY,
Former Chairman of the Board and CEO of Capital
Cities/ABC
RONALD L. OLSON,
Partner of the law firm of Munger, Tolles & Olson LLPWALTER SCOTT, JR.,Former Chairman of Level 3 Communications, a
successor to certain businesses of Peter Kiewit Sons’
Inc. which is engaged in telecommunications andcomputer outsourcing.
MERYL B. WITMER,Managing member of the General Partner of Eagle
Capital Partners L.P., an investment partnership.
Letters from Annual Reports (1977 through 2017), quarterly reports, press releases and other information about
Berkshire may be obtained on the Internet at www.berkshirehathaway.com.

BERKSHIRE HATHAWAY INC.
Executive Offices — 3555 Farnam Street, Omaha, Nebraska 68131