A summary follows of underwriting results from Berkshire's insurance businesses for the past three years.
Losses and loss adjustment expenses incurred increased 26.1% to $4,809 million in 2000. GEICO's loss ratio, which measures the portion of premiums earned that is paid or reserved for losses and related claims handling expenses, was 85.7% in 2000 compared to 80.2% in 1999 and 73.8% in 1998. The increased ratio in 2000 reflects higher severity of losses related to personal injury protection coverages and increasing cost trends for medical payments and automobile repair costs. The increases in severity were greater than anticipated resulting in larger than expected underwriting losses. As mentioned previously, GEICO has filed for rate increases to reflect the increased average severity of claims.
GEICO's insurance subsidiaries are defendants in several class action lawsuits related to the use of collision repair parts not produced by the original auto manufacturers. Management intends to vigorously defend GEICO's position over the use of these after-market parts. However, these lawsuits are in early stages of development and the ultimate outcome cannot be reasonably determined.
General Re was acquired by Berkshire effective December 21, 1998. General Re's results of operations are included in Berkshire's consolidated results beginning as of that date. The historical results for all of 1998 are presented for comparative purposes, although the full-year results are not included in Berkshire's 1998 consolidated results.
Otherwise, General Re's results for 2000 were improved over 1999. The improvement is believed to be a result of the actions already taken both in the North American and international businesses, as well as signs of improvement in certain segments of the reinsurance market. However, the impact of underwriting initiatives on international business may take longer to become effective than on U.S. business. Absent large property/catastrophe losses or adverse development with respect to existing loss reserves, Berkshire expects that General Re's underwriting results will continue to improve in 2001. Additional information and analysis with respect to each of General Re's underwriting units is presented below. In the tables that follow, dollar amounts are in millions.
General Re's North American property/casualty operations underwrite predominantly excess reinsurance across multiple lines of business. Premiums earned in 2000 exceeded premiums earned in 1999 by $552 million or 19.5%. Premiums earned in 1999 increased over 1998 levels by $129 million or 4.8%. A single large aggregate excess reinsurance contract affected premiums earned in the past two years. This reinsurance contract accounted for earned premiums of $404 million in 2000 and $154 million in 1999. The contract was not renewed in 2001. Excluding the effects of this contract, the growth in North American premiums during 2000 was primarily due to net increases in the national accounts, excess and surplus reinsurance lines and individual risk businesses. This net growth resulted from a combination of new business, the effects of rate increases on existing business, and was partially offset by the non-renewal of significantly under-performing business. In addition, the net increase in premiums in 2000 was partially due to reductions in reinsurance premiums ceded to the Berkshire Hathaway Reinsurance Group.
Underwriting results from North American property/casualty operations for 2000 and 1999 produced underwriting losses of $626 million and $584 million, respectively. Underwriting results for 2000 include $239 million of net underwriting loss from assumption of the aggregate excess reinsurance contract referenced above. The effect of this aggregate excess reinsurance agreement on the 1999 net underwriting results was not significant due to a retrocession to the Berkshire Hathaway Reinsurance Group. Although, this contract produced a sizable net loss, it is expected to provide more than commensurate investment benefits in future years due to the large amount of float generated. Notwithstanding, this large excess contract added 5.5 points to the combined loss and expense ratio in 2000.
The improvement in property lines in 2000 was partially offset by adverse development of reserves established for prior years' claims. The adverse loss development in 2000 arose primarily in the medical malpractice, commercial umbrella and casualty treaty reinsurance lines. In 1999 and 1998, General Re's North American property/casualty loss reserves experienced favorable reserve development, although the amount of favorable development in 1999 was considerably less than in 1998.
Premiums earned in the twelve months of 2000 exceeded 1999 amounts by 5.8%, whereas 1999 premiums earned exceeded 1998 levels by 11.8%. Adjusting for the effects of overall declining foreign exchange rates, earned premiums in local currencies grew 16.7% during 2000 and 12.0% during 1999. The growth in 2000 earned premiums was primarily due to increased premiums in European markets outside Germany, premiums which became due in 2000 to reinstate coverage as a result of fourth quarter 1999 European winter storm losses, new business in South America, and the effect of increased volume and participation in DP Mann's Syndicate 435 at Lloyd's of London. This growth was partially offset by the cancellation of some significant quota-share treaties.
General Re's Global life/health underwriting results for the years ending December 31, 2000, 1999 and 1998 are summarized below.
Net underwriting losses with respect to retroactive reinsurance contracts were $191 million in 2000, $97 million in 1999 and $90 million in 1998. The net underwriting losses from this business reflect the amortization of deferred charges on retroactive reinsurance as well as the accretion of discounted structured settlement liabilities. The amortization and accretion charges are reported as losses incurred and, because there are no offsetting premiums, as underwriting losses. Due to the magnitude of the retroactive reinsurance contracts entered into during the past two years, deferred charges increased significantly. Consequently, as a result of the periodic amortization of deferred charges, underwriting losses are expected to increase in future periods.
Premiums earned from non-catastrophe reinsurance contracts totaled $447 million in 2000, $560 million in 1999 and $310 million in 1998. In each of the last three years, the premiums earned from this business were derived predominantly from a small number of sizable contracts. Premiums earned in 2000 and 1999 included $58 million and $113 million, respectively, from contracts with General Re's North American property/casualty operations.
Berkshire Hathaway Direct Insurance Group The Berkshire Hathaway Direct Insurance Group is comprised of a wide variety of smaller property/casualty businesses. These businesses include: National Indemnity Company's traditional commercial motor vehicle and specialty risk operations ("NICO"); several companies collectively referred to as the "homestate" operations, which provide primarily standard commercial coverages to insureds and Central States Indemnity Company ("CSI"), a provider of credit card credit insurance to individuals nationwide through financial institutions. In August 2000, this group of businesses was expanded as a result of Berkshire's acquisition of United States Investment Corporation ("USIC"), whose insurance subsidiaries underwrite specialty insurance coverage in the United States.
Collectively, direct insurance businesses produced earned premiums of $332 million in 2000, $262 million in 1999 and $328 million in 1998. In 2000, premiums earned increased primarily due to the inclusion of USIC and to comparatively greater amounts earned by CSI. The decrease in premiums earned in 1999 compared to 1998 was principally attributed to lower premiums at CSI. Net underwriting gains of the direct businesses totaled $38 million in 2000, $22 million in 1999 and $17 million in 1998. The increase in underwriting profits in 2000 over 1999 was primarily due to underwriting gains from USIC and an increase in underwriting gains at NICO.
At December 31, 2000, cash and invested assets totaled approximately $76.5 billion, an increase of approximately $4.1 billion from December 31, 1999. Insurance invested assets grew by about $25 billion in 1998 as a result of the General Re acquisition.
Berkshire's insurance businesses generate large amounts of investment income derived from shareholder capital, as well as policyholder float. Float represents an estimate of the amount of funds ultimately payable to policyholders that is available for investment. Float denotes the sum of net loss and loss adjustment expense reserves, unearned premiums, and funds held under reinsurance agreements, less premiums receivable, deferred acquisition costs, deferred charges on retroactive reinsurance and prepaid income taxes. The aggregate float was approximately $27.9 billion at December 31, 2000 and $25.3 billion at December 31, 1999. Most of the increase in float during 2000 was generated by BHRG.
A summary follows of results from Berkshire's non-insurance businesses for the past three years.
Revenues from Berkshire's numerous and diverse non-insurance businesses of $7,886 million in 2000 increased $1,844 million (30.5%) from the prior year. The aggregate operating profits from these businesses of $1,291 million in 2000 increased $454 million (54.2%). Revenues and operating results for Berkshire's non-insurance business activities will change considerably in 2001. Just prior to the end of 2000, Berkshire acquired Benjamin Moore, a leading formulator and manufacturer of architectural and industrial coatings. Additionally, during the first two months of 2001, Berkshire acquired 87.3% of Shaw Industries, the world's largest producer of tufted broadloom carpet and rugs and Johns Manville, a leading producer of insulation and building products. These three businesses generated approximately $7 billion in sales revenues in 2000.
These businesses include four independently managed retailers of home furnishings (Nebraska Furniture Mart, R.C. Willey Home Furnishings, Star Furniture and Jordan's Furniture) and three independently managed retailers of fine jewelry (Borsheim's, Helzberg's Diamond Shops and Ben Bridge Jeweler). Two of these businesses were acquired during the past two years (Jordan's Furniture - - November, 1999 and Ben Bridge Jeweler - July, 2000). Revenues of these businesses in 2000 increased $462 million (33.0%) as compared to 1999 and operating profits in 2000 increased $45 million (34.6%) as compared to 1999. Approximately 70% of the increase in revenues and 80% of the increase in operating profits in 2000 was due to the inclusion of the results of Jordan's for the full year in 2000 and to the inclusion of Ben Bridge from the date of its acquisition.
Goodwill amortization and other purchase-accounting adjustments reflect the after-tax effect on net earnings with respect to the amortization of goodwill of acquired businesses and the amortization of fair value adjustments to certain assets and liabilities which were recorded at the business acquisition dates. The increase in 2000 as compared to 1999 is primarily due to the inclusion of a charge of $219 million related to the write-off of goodwill related to Dexter Shoe (see Note 1(g) to the Consolidated Financial Statements). The significant increase in such charges during 1999 as compared to 1998 periods is primarily due to the acquisition of General Re at the end of 1998.
Realized investment gain has been a recurring element in Berkshire's net earnings for many years. The amount -- recorded when investments are sold, other-than-temporarily impaired or in certain situations, as required by GAAP, when investments are marked-to-market with the corresponding gain or loss included in earnings -- may fluctuate significantly from period to period, with a meaningful effect upon Berkshire's consolidated net earnings. However, the amount of realized investment gain or loss for any given period has no predictive value, and variations in amount from period to period have no practical analytical value, particularly in view of the net unrealized price appreciation now existing in Berkshire's consolidated investment portfolio.
In addition to its equity investments, Berkshire's obligations with respect to the 1% Senior Exchangeable Notes are subject to equity price risks. See Note 10 to the Consolidated Financial Statements for information regarding the Exchange Notes. The Exchange Notes had a carrying value of $235 million at December 31, 2000 and $449 million at December 31, 1999. For purposes of this discussion, these amounts have been deducted from the fair value of equity securities.
The fair values of Berkshire's fixed maturity investments and borrowings under investment agreements and other debt will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the credit worthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions.
The finance and financial products operations are subject to market risk principally through Gen Re Securities Holdings Limited ("GRS"). GRS monitors its market risk on a daily basis across all swap and option products by calculating the effect on operating results of potential changes in market variables over a one week period, based on historical market volatility, correlation data and informed judgment. This evaluation is done on an individual trading book basis, against limits set by individual book, to a 99% probability level. GRS sets market risk limits for each type of risk, and for an aggregate measure of risk, based on a 99% probability that movements in market rates will not affect the results from operations in excess of the risk limit over a one week period. GRS's weekly aggregate market risk limit was $22 million in 2000 and $15 million in 1999. During 1999, the actual losses exceeded the market risk limit on one occasion. In addition to these daily and weekly assessments of risk, GRS prepares periodic stress tests to assess its exposure to extreme movements in various market risk factors.
The table below shows the highest, lowest and average value at risk, as calculated using the above methodology, by broad category of market risk to which GRS is exposed. Dollars are in millions.
Berkshire's balance sheet continues to reflect significant liquidity and a strong capital base. Consolidated shareholders' equity at December 31, 2000 totaled $61.7 billion. Consolidated cash and invested assets, excluding assets of finance and financial products businesses totaled approximately $77.1 billion at December 31, 2000. Berkshire has deployed about $7.7 billion in cash for business acquisitions and investments in MidAmerican during 2000 and the first two months of 2001. Cash utilized in these acquisitions was generated internally.
Investors are cautioned that certain statements contained in this document, as well as some statements by the Company in periodic press releases and some oral statements of Company officials during presentations about the Company, 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, and possible future Company 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 the Company, economic and market factors and the industries in which the Company does business, among other things. These statements are not guaranties of future performance and the Company has no specific intention to update these statements.
We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of earnings, cash flows and changes in shareholders' equity for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Berkshire Hathaway Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
BERKSHIRE HATHAWAY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in millions except per share amounts)
Berkshire Hathaway Inc. ("Berkshire" or "Company") is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these are property and casualty insurance businesses conducted on both a direct and reinsurance basis. Further information regarding these businesses and Berkshire's other reportable business segments is contained in Note 16. Berkshire initiated and/or consummated several business acquisitions over the past three years. The significant business acquisitions are described more fully in Note 2. The accompanying consolidated financial statements include the accounts of Berkshire consolidated with accounts of all its subsidiaries. Intercompany accounts and transactions have been eliminated.
Accounting policies and practices for investments held by finance and financial products businesses are described in Note 7.
Revenues from product or merchandise sales are recognized upon passage of title to the customer, which coincides with customer pickup, product shipment, delivery or acceptance, depending on terms of the sales arrangement. Service revenues are generally 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 of the contract.
Certain costs of acquiring insurance premiums are deferred, subject to ultimate recoverability, and charged to income as the premiums are earned. The recoverability of premium acquisition costs of direct insurance businesses is determined without regard to investment income. The recoverability of premium acquisition costs from reinsurance assumed businesses, generally, reflects anticipation of investment income. The unamortized balances of deferred premium acquisition costs are included in other assets and were $916 million and $791 million at December 31, 2000 and 1999, respectively.
Liabilities for unpaid losses and loss adjustment expenses represent estimated claim and claim settlement costs of property/casualty insurance and reinsurance contracts. The liabilities for losses and loss adjustment expenses are recorded at the estimated ultimate payment amounts, except amounts arising from certain reinsurance assumed businesses are discounted. Estimated ultimate payment amounts are based upon (1) individual case estimates, (2) estimates of incurred-but-not-reported losses, based upon past experience and (3) reports of losses from ceding insurers.
The excess of estimated liabilities for claims and claim costs over the consideration received with respect to retroactive property and casualty reinsurance contracts that provide for indemnification of insurance risk is established as a deferred charge at inception of such contracts. The deferred charges are subsequently amortized using the interest method over the expected settlement periods of the claim liabilities. The periodic amortization charges are reflected in the accompanying Consolidated Statements of Earnings as losses and loss adjustment expenses. The unamortized balance of deferred charges is included in other assets and was $2,593 million at December 31, 2000 and $1,518 million at December 31, 1999.
Provisions for losses and loss adjustment expenses are reported in the accompanying Consolidated Statements of Earnings after deducting amounts recovered and estimates of amounts that will be ultimately recoverable under 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. Estimated losses and loss adjustment expenses recoverable under reinsurance contracts are included in receivables and totaled $2,997 million and $2,331 million at December 31, 2000 and 1999, respectively.
During 2000, Berkshire initiated and/or consummated eight significant business acquisitions. Six of the acquisitions were completed in 2000 and the other two were completed in early 2001. Information concerning seven of these acquisitions follows. Information concerning the other acquisition is contained in Note 3 (Investment in MidAmerican Energy Holdings Company).
Effective August 1, 2000, Berkshire acquired 100% of the outstanding shares of Justin. Principal businesses of Justin include: Acme Building Brands, a leading manufacturer and producer of face brick, concrete masonry products and ceramic and marble floor and wall tile and Justin Brands, a leading manufacturer of Western footwear under a number of brand names.
Effective December 18, 2000, Berkshire acquired Benjamin Moore. Benjamin Moore is a formulator, manufacturer and retailer of a broad range of architectural and industrial coatings, available principally in the United States and Canada.
Aggregate consideration paid for the five business acquisitions consummated in 2000 totaled $2,370 million, consisting of $2,146 million in cash and the remainder in Berkshire Class A and Class B common stock.
Johns Manville is a leading manufacturer of insulation and building products. Johns Manville manufactures and markets products for building and equipment insulation, commercial and industrial roofing systems, high-efficiency filtration media, and fibers and non-woven mats used as reinforcements in building and industrial applications. Johns Manville operates manufacturing facilities in North America, Europe and China.
Effective August 7, 1998, Berkshire acquired all of the outstanding common shares of Executive Jet, Inc. ("Executive Jet"). Executive Jet is the world's leading provider of fractional ownership programs for general aviation aircraft. Executive Jet currently operates its fractional ownership programs in the United States and Europe.
In addition, General Re affiliates write excess and surplus lines insurance, provide reinsurance brokerage services, manage aviation insurance risks, act as business development consultants and reinsurance intermediaries and provide specialized investment services to the insurance industry. General Re also operates as a dealer in the swap and derivatives market through Gen Re Securities Holdings Limited (formerly General Re Financial Products Corporation).
In November 1999, Berkshire acquired Jordan's Furniture, Inc. ("Jordan's"). Jordan's operates a furniture retail business from four locations and is believed to be the largest furniture retailer in the Massachusetts and New Hampshire areas.
Berkshire's aggregate investments in MidAmerican are included in the Consolidated Balance Sheet as Investments in MidAmerican Energy Holdings Company. Berkshire is accounting for the common and non-dividend paying convertible preferred stock pursuant to the equity method. The carrying value of these equity method investments totaled $1,264 million at December 31, 2000.
The amortized cost and estimated fair values of investments in securities with fixed maturities as of December 31, 2000 and 1999 are as follows (in millions):
(2) In connection with the acquisition of General Re on December 21, 1998, fixed maturity securities with a fair value of $17.6 billion were acquired. Such amount was approximately $1.2 billion in excess of General Re's historical amortized cost. The unamortized excess amount was $680 million at December 31, 2000 and $940 million at December 31, 1999.
* Common shares of American Express Company ("AXP") owned by Berkshire and its subsidiaries possessed approximately 11% of the voting rights of all AXP shares outstanding at December 31, 2000. The shares are held subject to various agreements with certain insurance and banking regulators which, among other things, prohibit Berkshire from (i) seeking representation on the Board of Directors of AXP (Berkshire may agree, if it so desires, at the request of management or the Board of Directors of AXP to have no more than one representative stand for election to the Board of Directors of AXP) and (ii) acquiring or retaining shares that would cause its ownership of AXP voting securities to equal or exceed 17% of the amount outstanding (should Berkshire have a representative on the Board of Directors, such amount is limited to 15%). In connection therewith, Berkshire has entered into an agreement with AXP which became effective when Berkshire's ownership interest in AXP voting securities reached 10% and will remain effective so long as Berkshire owns 5% or more of AXP's voting securities. The agreement obligates Berkshire, so long as Kenneth Chenault is chief executive officer of AXP, to vote its shares in accordance with the recommendations of AXP's Board of Directors. Additionally, subject to certain exceptions, Berkshire has agreed not to sell AXP common shares to any person who owns 5% or more of AXP voting securities or seeks to control AXP, without the consent of AXP.
** Net of unrealized losses of $77 million and $131 million as of December 31, 2000 and 1999, respectively.
Berkshire's finance and financial products businesses consist primarily of the financial products businesses of General Re, the consumer finance business of Scott Fetzer Financial Group, the real estate finance business of Berkshire Hathaway Credit Corporation, the financial instrument trading business of BH Finance and a life insurance subsidiary in the business of selling annuities. General Re's financial products businesses consist of the Gen Re Securities Holdings Limited ("GRS") group. Significant accounting policies and disclosures for these businesses are discussed below.
Investment securities (principally fixed maturity and equity investments) that are acquired for purposes of selling them in the near term are classified as trading securities. Such assets are carried at fair value. Realized and unrealized gains and losses from trading activities are included in income from finance and financial products businesses. Trading account assets and liabilities are marked-to-market on a daily basis and represent the estimated fair values of derivatives in net gain positions (assets) and in net loss positions (liabilities). The net gains and losses reflect reductions permitted under master netting agreements with counterparties.
A summary of notional amounts of derivative contracts at December 31, 2000 and 1999 is included in the table below. For these transactions, the notional amount represents the principal volume, which is referenced by the counterparties in computing payments to be exchanged, and are not indicative of the Company's exposure to market or credit risk, future cash requirements or receipts from such transactions.
The balances of unpaid losses and loss adjustment expenses are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet dates. Considerable judgment is required to evaluate claims and establish estimated claim liabilities, particularly with respect to certain lines of business, such as reinsurance assumed, or certain types of claims, such as environmental or latent injury liabilities.
The liabilities for environmental and latent injury claims and claim expenses net of related reinsurance recoverables were $4,444 million and $3,211 million, respectively, at December 31, 2000 and 1999. The liabilities recorded for environmental and latent injury claims and claim expenses are management's best estimate of future ultimate claim and claim expense payments and recoveries and are expected to develop over the next several decades.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are shown below (in millions):
Commercial paper and other short-term borrowings are obligations of several Berkshire subsidiaries that utilize short-term borrowings as part of their day-to-day business operations. The obligations are, in most instances, guaranteed by Berkshire. Berkshire affiliates have approximately $4 billion available unused lines of credit to support their short-term borrowing programs and, otherwise, provide additional liquidity.
Changes in issued and outstanding common stock of the Company during the three years ended December 31, 2000 are shown in the table below.
The estimated fair values of Berkshire's financial instruments as of December 31, 2000 and 1999, are as follows (in millions):
In determining fair value of financial instruments, Berkshire used quoted market prices when available. For instruments where quoted market prices were not available, independent pricing services or appraisals by Berkshire's management were used. Those services and appraisals reflected the estimated present values utilizing current risk adjusted market rates of similar instruments. The carrying values of cash and cash equivalents, receivables and accounts payable, accruals and other liabilities are deemed to be reasonable estimates of their fair values.
Berkshire and its subsidiaries are parties in a variety of legal actions arising out of the normal course of business. In particular, and in common with the insurance industry in general, such legal actions affect Berkshire's insurance and reinsurance businesses. Such litigation generally seeks to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. Berkshire does not believe that such normal and routine litigation will have a material effect on its financial condition or results of operations.
(1) Prior to 1999, Berkshire's insurance premium revenues were predominantly derived in the United States. Insurance premiums written by geographic region (based upon the domicile of the ceding company) are summarized below.
* Premiums attributed to Western Europe include $2,438 million from a single reinsurance policy.
(2) See Note 1(a) for information related to General Re's international property/casualty and global life/health business.
A summary of supplemental cash flow information is presented in the following table (in millions):
General Re's reinsurance business is included as a separate reportable segment beginning in 1999.
** See Note 1(a) for additional information concerning the reporting of General Re's international property/casualty and global life/health businesses.
* The amount of realized gain for any given period has no predictive value and variations in amount from period to period have no practical analytical value particularly in view of the unrealized appreciation now existing in Berkshire's consolidated investment portfolio.
The $6 billion term loan will be made by Berkadia LLC, an entity formed for this purpose and owned jointly by BH Finance, an indirect wholly-owned subsidiary of Berkshire and a wholly-owned subsidiary of Leucadia. Berkadia has received a $60 million commitment fee and, in addition to certain other fees, will receive an additional $60 million fee upon funding of the loan. Berkadia's commitment for the loan has been guaranteed by Berkshire and Leucadia and expires on August 31, 2001, or earlier, if certain conditions are not satisfied. Berkadia expects to finance its funding commitment and Berkshire will provide Berkadia's lenders with a 90% primary guarantee of such financing, with Leucadia providing a 10% primary guarantee and Berkshire providing a secondary guarantee of Leucadia's guarantee.
* Other receivables include receivables from affiliates of $39 million at December 31, 2000 and $40 million at December 31, 1999.