As shown in the table above, GEICO's premium volume grew significantly during the last two years. Premiums earned by GEICO in 1998 exceeded amounts earned in 1997 by 15.8% and amounts earned in 1997 surpassed 1996 by 12.6%. The increases in premium volume were attributed to growth in voluntary auto insurance, partially mitigated by premium rate reductions taken in certain states during 1998 and 1997. Such rate reductions were intended to better align premium rates with pricing targets, and will result in lower premiums earned per policy in the future. The growth in voluntary auto premium volume in each of the past two years was also offset by declines in homeowners and residual auto market business. In-force policy growth for GEICO's core preferred-risk auto business was 17.2% in 1998 and 12.8% in 1997. Policy growth in standard and non-standard auto markets was 40.4% in 1998 and 36.6% in 1997. In-force policy growth reflects GEICO's continued marketing efforts and competitive prices. Sales of new voluntary policies increased 44.3% in 1998 as compared to 1997 and followed growth of 47.8% in 1997 as compared to 1996.
Losses and loss expenses incurred during 1998 were 13.2% greater than amounts incurred during 1997. This followed an 8.1% increase in such costs during 1997 as compared to 1996. The loss and loss expense ratio, a measurement of the portion of earned premiums that were paid or reserved for losses and related claims handling expenses, was 73.8% in 1998, 75.5% in 1997 and 78.7% in 1996. These lower than expected loss and loss expense ratios reflect the declining severity of auto liability claims and generally mild weather conditions. Catastrophe losses added 0.7% to the loss and loss expense ratio in 1998 compared to 0.3% in 1997 and 1.7% in 1996. As a result of GEICO's diminishing homeowners business, risks of weather related catastrophe losses are currently lower than in years prior to 1996.
GEICO's underwriting results have been above expectations in recent years and the private passenger auto insurance industry as a whole had generally good results due to favorable claims experience. However, premium rates are subject to downward pressure from competition and through the ordinary rate regulation processes of state insurance departments. The rate reductions taken by GEICO in 1998 were greater than 1997's reductions and will be fully reflected in earned premiums in 1999. GEICO currently anticipates that there will be some further rate reductions in 1999. In addition, while the level of claim costs (including catastrophe losses) in recent years have been relatively low, there is no assurance that these favorable conditions will continue. Accordingly, management expects that GEICO's underwriting profit margins will return to more normal levels as costs increase faster than premiums. Notwithstanding, Berkshire's management believes that GEICO's underwriting results will remain better than industry averages.
The Berkshire Hathaway Reinsurance Group underwrites principally excess-of-loss reinsurance coverages for insurers and reinsurers world wide. This Group is believed to be one of the world leaders in providing catastrophe excess-of-loss reinsurance.
Premiums earned from retroactive reinsurance and structured settlement contracts were $343 million in 1998 and $144 million in 1997. Minor amounts of premiums were earned from such contracts in 1996. These contracts provide excess of loss coverage with respect to past loss events or periodic payments to claimants in connection with settled claims. Underwriting losses occur from such policies as a result of the recurring recognition of time value of money concepts--the amortization of deferred charges re reinsurance assumed and the accretion of discounted structured settlement liabilities. The amortization and accretion charges are reported as losses incurred, and because there is no offsetting premium income, as underwriting losses. Underwriting losses from retroactive reinsurance and structured settlement contracts were $90 million in 1998, $82 million in 1997 and $74 million in 1996.
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; five companies collectively referred to as "homestate" operations that provide primarily standard commercial coverages to insureds in an increasing number of states; Cypress Insurance Company, a provider of workers' compensation insurance in California and other states; Central States Indemnity Company, a provider of credit card credit insurance to individuals nationwide through financial institutions; Kansas Bankers Surety Company, an insurer for primarily small and medium size banks located in the midwest; and Berkshire Hathaway International, a London-based writer of personal and commercial auto insurance.
On December 21, 1998, General Re became a wholly owned subsidiary of Berkshire upon completion of the merger of the two companies. Berkshire's results of operations in 1998 include the results of General Re for the last ten days of 1998. Although the revenues and operating results of General Re for that ten-day period are not significant to Berkshire for the full year, General Re will have a major impact on Berkshire's results in future periods. For purposes of this discussion, General Re's results for the last ten days of 1998 are included in other sources of earnings.
North American property/casualty operations underwrite predominantly excess-of-loss reinsurance across various lines of business. The international property/casualty operations write quota-share and excess-of-loss reinsurance for risks throughout the world. The global life/health operations reinsure such risks in North America and throughout the world. The international property/casualty and global life/health businesses are primarily conducted through German-based Cologne Re and its subsidiaries. As of December 31, 1998, General Re, directly and indirectly through a joint venture arrangement, maintained an 82% economic interest in Cologne Re.
* Includes a pre-tax loss of $275 million related to estimated losses incurred by a Cologne Re U.S. based life insurance subsidiary. Such losses were incurred with respect to U.S. workers' compensation reinsurance written through an underwriting facility in the London market.
Investment income of the insurance businesses in 1998 exceeded amounts earned in 1997 by $92 million (10.4%) and 1997 income earned exceeded 1996 by $156 million (21.5%). Investment income earned in 1998 reflects increased taxable interest income, partially offset by lower tax-exempt interest and dividend income. Dividends earned from the investment in US Airways Group, Inc. ("US Airways") Cumulative Convertible Preferred Stock, including amounts previously in arrears, were $78 million in 1997 and $46 million in 1996. During the first quarter of 1998, Berkshire converted the US Airways preferred shares into common shares of that company.
The Buffalo News revenues were relatively unchanged in 1998 as compared to 1997. Operating profits in 1998 of $53 million decreased $3 million (5.4%) from the comparable 1997 amount. Much of the decrease arose as a result of a special non recurring charge related to workers' compensation insurance. Without the charge, operating profits in 1998 would have been comparable to the prior year.
At the beginning of 1998, Berkshire completed the acquisition of Dairy Queen. Dairy Queen develops, licenses and services a system of approximately 5,900 Dairy Queen stores located throughout the United States, Canada and other foreign countries. Dairy Queen stores feature hamburgers, hot dogs, various dairy desserts and beverages. Dairy Queen also develops, licenses and services other stores and shops operating under the names of Orange Julius and Karmelkorn which feature blended fruit drinks, popcorn and other snacks. Dairy Queen's results for 1998 were in line with management's plan and continued positive results are expected from this business.
This segment includes H. H. Brown Shoe Company, Inc., Lowell Shoe, Inc. and Dexter Shoe Companies. These businesses manufacture and distribute work, dress, casual and athletic footwear. In addition, over 100 retail shoe stores are included in this segment. Revenues for this segment decreased by $42 million (7.7%) in 1998 as compared to 1997. Operating profits of $33 million in 1998 decreased $16 million (32.7%) from the prior year. The unfavorable results represent a continuation of a trend which began three years ago. Manufacturers such as Brown, Lowell and Dexter are facing reduced demand for their products. Additionally, major retailers are offering promotions to generate sales which is resulting in an ongoing margin squeeze. Management of these businesses is working to align production activity to the reduced sales levels.
The Consolidated Statement of Earnings for 1997 reflects a pre-tax realized investment gain of $1.1 billion ($704 million after-tax). A significant portion ($678 million pre-tax) of this gain resulted from Travelers Group Inc.'s acquisition of Salomon Inc. The Consolidated Statement of Earnings for 1996 reflects a pre-tax realized investment gain of $2.5 billion ($1.6 billion after-tax). Most of this gain resulted from The Walt Disney Company's acquisition of Capital Cities/ABC, Inc. See Note 5 to Consolidated Financial Statements for additional details regarding these transactions.
Berkshire's Consolidated Balance Sheet includes a substantial amount of assets and liabilities whose fair values are subject to market risks. Due to Berkshire's significant level of investments in equity securities, fluctuations in equity prices represent the largest market risk factor affecting Berkshire's consolidated financial position. The following sections address the significant market risks associated with Berkshire's business activities as of year end 1998 and 1997.
Strategically, Berkshire strives to invest in businesses that possess excellent economics, with able and honest management and at sensible prices. Berkshire's management prefers to invest a meaningful amount in each investee. Accordingly, Berkshire's equity investments are concentrated in relatively few investees. At year-end 1998 and 1997, approximately 60% of the total fair value of investments in equity securities was concentrated in three investees.
The table below summarizes Berkshire's equity price risks as of December 31, 1998 and 1997 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios. Indeed, results could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in Berkshire's investment portfolio.
The table below summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets and liabilities that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. The hypothetical fair values are based upon the same prepayment assumptions utilized in computing fair values at year-end 1998 and 1997. Significant variations in market interest rates could produce changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table which follows.
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 GRFP is exposed.
GRFP evaluates and records a fair-value adjustment to recognize counterparty credit exposure and future costs associated with administering each contract. The expected credit exposure for each trade is initially established on the trade date and is determined through the use of a proprietary credit exposure model that is based on historical default probabilities, market volatilities and, if applicable, the legal right of setoff. These exposures are continually monitored and adjusted due to changes in the credit quality of the counterparty, changes in interest and currency rates or changes in other factors affecting credit exposure. Since inception, GRFP has not experienced any credit losses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Although Berkshire's business operations are diverse, they all rely on computers to conduct daily business activities. Because of the diversity of those operations, Year 2000 issues are independently managed at each of the Company's operating units. Berkshire and its subsidiaries have been working on Year 2000 readiness issues in varying degrees for several years.
Generally, the stages involved in managing Year 2000 issues include (a) identifying the IT and non-IT systems that are non-compliant, (b) formulating strategies to remedying the problems, (c) making the changes necessary through purchasing compliant systems or fixing existing systems, (d) testing the changes and (e) developing contingency plans. The identification and formulation stages are nearly complete at all significant operating units. Many systems have been purchased, upgraded or corrected to make them Year 2000 compliant. In certain instances the Company has obtained certifications of Year 2000 compliance from the manufacturers of systems used by the Company. Management expects that by the end of 1999, all critical systems that are not currently Year 2000 compliant will be corrected or replaced.
The Company has begun the testing of several systems that are believed to be Year 2000 compliant. Significant levels of testing will continue throughout 1999. In addition, Berkshire has contacted a large number of its business partners to obtain information regarding their own progress on Year 2000 issues. While all business partners have not fully completed their own Year 2000 projects, Berkshire is currently not aware of any significant business partner whose Year 2000 issues will not be resolved in a timely manner. However, there is no assurance that significant Year 2000 related problems will not ultimately arise with its business partners.
Investors are cautioned that certain statements contained in this document, including but not limited to those under the caption Year 2000 Issues 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.
Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements, include, but are not limited to, changes in market prices of Berkshire's significant equity investees, the ability of the Company and its significant business partners and equity investees to successfully implement timely Year 2000 solutions, the occurrence of one or more catastrophic events, such as an earthquake or hurricane that causes losses insured by Berkshire's insurance subsidiaries, changes in insurance laws or regulations, changes in Federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which Berkshire and its affiliates do business, especially those affecting the property and casualty insurance industry.
* Class B Common Stock has economic rights equal to one-thirtieth (1/30) of the economic rights of Class A Common Stock. Accordingly, on an equivalent Class A Common Stock basis, there are 1,518,548 shares outstanding at December 31, 1998 versus 1,234,127 outstanding at December 31, 1997.
BERKSHIRE HATHAWAY INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998
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 $666 million and $127 million at December 31, 1998 and 1997, respectively.
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 $2,167 million and $274 million at December 31, 1998 and 1997, respectively.
During 1998, the Financial Accounting Standards Board ("FASB") and the Accounting Standards Executive Committee ("AcSEC") issued the following new accounting standards that become effective after December 31, 1998:
(ii) AcSEC issued Statement of Position ("SOP") No. 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". SOP No. 98-1 provides guidance on the recognition and measurement of costs incurred in connection with the acquisition or development of computer software used in the business activities of a company. This SOP is effective for fiscal years beginning after December 15, 1998 and will be adopted by Berkshire as of the beginning of 1999.
(iii) AcSEC issued Statement of Position ("SOP") No. 98-7 "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk". SOP No. 98-7 provides guidance on accounting and disclosure for insurance and reinsurance contracts that do not transfer insurance risk. This SOP is effective for fiscal years beginning after June 15, 1999. Berkshire expects to adopt this pronouncement as of the beginning of 2000.
The Company does not believe that adoption of these new accounting principles will have a material effect on the Company's financial position or the results of operations.
On July 23, 1998, Berkshire signed a merger agreement with Executive Jet and on August 7, 1998, the merger was consummated. Under the terms of the Executive Jet agreement, shareholders of Executive Jet received total consideration of approximately $700 million, consisting of $350 million in cash and the remainder in Class A and Class B Common Stock.
Under the terms of the merger agreement, General Re shareholders received at their election either 0.0035 shares of Berkshire Class A Common Stock or 0.105 shares of Berkshire Class B Common Stock for each share of General Re common stock they owned. Berkshire issued approximately 272,200 Class A equivalent shares in exchange for the General Re shares outstanding as of December 21, 1998. The total consideration for the transaction, based upon the closing prices of Berkshire Class A Common Stock for the 10-day period ending June 26, 1998, was approximately $22 billion.
General Re is a holding company for global reinsurance and related risk management operations. It owns General Reinsurance Corporation and National Reinsurance Corporation, the largest professional property and casualty reinsurance group domiciled in the United States. General Re also owns a controlling interest in Kolnische Ruckversicherungs- Gesellschaft AG (Cologne Re), a major international reinsurer. Together, General Re and Cologne Re transact reinsurance business as "General & Cologne Re".
In addition, General Re writes excess and surplus lines insurance through General Star Management Company, provides alternative risk solutions through Genesis Underwriting Management Company, provides reinsurance brokerage services through Herbert Clough, Inc., manages aviation insurance risks through United States Aviation Underwriters, Inc., and acts as a business development consultant and reinsurance intermediary through Ardent Risk Services, Inc. General Re also operates as a dealer in the swap and derivatives market through General Re Financial Products Corporation, and provides specialized investment services to the insurance industry through General Re-New England Asset Management, Inc.
The results of operations for each of these entities are included in Berkshire's consolidated results of operations from the dates of each merger. The following table sets forth certain consolidated earnings data for the years ended December 31, 1998 and 1997, as if the Dairy Queen, Executive Jet and General Re acquisitions had been consummated on the same terms at the beginning of 1997. Dollars in millions except per share amounts.
The amortized cost and estimated fair values of investments in securities with fixed maturities as of December 31, 1998 and 1997 are as follows (in millions):
Amounts above exclude securities with fixed maturities held by finance businesses. See Note 6.
* 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, 1998. 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 Harvey Golub 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.
* In November 1997, the merger of Salomon Inc ("Salomon") with and into a subsidiary of Travelers Group Inc. ("Travelers") was completed. Berkshire subsidiaries received common and preferred stock of Travelers in exchange for common and preferred shares of Salomon then owned. The value of the Travelers shares received was approximately $1.8 billion. Realized investment gains for 1997 include $678 million with respect to the transaction. The gain is net of a charge of $298 million for the contingent value associated with Berkshire's Exchange Notes. See Note 9 for additional information regarding the Exchange Notes.
Assets and liabilities of Berkshire's finance and financial products businesses are summarized below (in millions). Amounts as of December 31, 1998 include the financial products business of General Re, which merged with Berkshire on December 21, 1998. See Note 2.
A summary of notional amounts of derivative contracts at December 31, 1998 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.
With respect to Berkshire's life insurance business, annuity reserves and policyholder liabilities are carried at the present value of the actuarially determined ultimate payment amounts discounted at market interest rates existing at the inception of the contracts. Periodic accretions of the discounted liabilities are charged against income from finance and financial products businesses.
Investments in securities with fixed maturities held by Berkshire's life insurance business are classified as held-to- maturity. Investments classified as held-to-maturity are carried at amortized cost reflecting the company's ability and intent to hold such investments to maturity. Such items consist predominantly of mortgage loans and collateralized mortgage obligations.
Incurred losses "all prior accident years" reflects the amount of estimation error charged or credited to earnings in each year with respect to the liabilities established as of the beginning of that year. This amount includes amortization of deferred charges re reinsurance and accretion of discounted liabilities. See Note 1 for additional information regarding these items. Additional information regarding incurred losses will be revealed over time and the estimates will be revised resulting in gains or losses in the periods made.
reserves estimates related to these exposures may be considerably less reliable than for other lines of business (e.g., automobile). The effect of joint and several liability claims severity and a provision for inflation have been included in the loss development estimate. The Company has also established a liability for litigation costs associated with coverage disputes arising out of direct insurance policies.
The gross liabilities for environmental and latent injury claims and claim expenses and the related reinsurance recoverable were $2,329 million and $416 million, respectively, at December 31, 1998. 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, 1998 and 1997, are shown below (in millions):
Borrowings under investment agreements are made pursuant to contracts calling for interest payable, normally semiannually, at fixed rates ranging from 3% to 9% per annum. No materially restrictive covenants are included in any of the various debt agreements. Payments of principal amounts expected during the next five years are as follows (in millions):
Payments of dividends by Insurance Group members are restricted by insurance statutes and regulations. Without prior regulatory approval in 1999, Berkshire can receive up to approximately $4 billion as dividends from insurance subsidiaries.
Combined shareholders' equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Statutory Surplus as Regards Policyholders) was approximately $45 billion at December 31, 1998. This amount differs from the corresponding amount determined on the basis of GAAP. The major differences between statutory basis accounting and GAAP are that deferred income tax assets and liabilities, deferred charges re reinsurance assumed, and unrealized gains and losses on investments in securities with fixed maturities are recognized under GAAP but not for statutory reporting purposes. In addition, the GAAP amount includes goodwill of acquired businesses.
On May 6, 1996, Berkshire shareholders approved a recapitalization plan which created a new class of common stock, designated as Class B Common Stock. In connection therewith, Berkshire's then existing common stock was redesignated as Class A Common Stock. Each share of Class A Common Stock is convertible, at the option of the holder, into thirty shares of Class B Common Stock. Class B Common Stock is not convertible into Class A Common Stock. Each share of Class B Common Stock possesses voting rights equivalent to one-two-hundredth (1/200) of the voting rights of a share of Class A Common Stock. Class A and Class B common shares vote together as a single class.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" requires certain fair value disclosures. Fair value disclosures are required for most investment securities as well as other contractual assets and liabilities. Certain financial instruments, including insurance contracts, are excluded from SFAS 107 disclosure requirements due to perceived difficulties in measuring fair value. Accordingly, an estimation of fair value was not made with respect to unpaid losses and loss adjustment expenses.
In determining fair value, the Company used quoted market prices when available. For instruments where quoted market prices were not available, the Company used independent pricing services or appraisals by the Company's management. Those services and appraisals reflected the estimated present values utilizing current risk adjusted market rates of similar instruments.
Considerable judgement is necessarily required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.
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. The estimated fair values of the Company's other financial instruments as of December 31, 1998 and 1997, are as follows (in millions):
Berkshire adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" as of December 31, 1998. SFAS No. 131 requires certain disclosures about operating segments in a manner that is consistent with how management evaluates the performance of the segment. Information related to Berkshire's reportable operating segments is shown below. Prior years' presentations are restated to conform to current year presentations.
** Amounts of interest expense represent those for borrowings under investment agreements and other debt exclusive of that of finance businesses and interest allocated to certain identified segments.
* Includes the assets of General Re's reinsurance business which will be included as a reportable segment in 1999.
The condensed consolidated statement of earnings of OBH Inc. for the year ended December 31, 1998 is as follows (in millions):
The consolidated balance sheet of OBH Inc. at December 31, 1997 and consolidated statements of earnings for the years ended December 31, 1997 and 1996 are identical to the accompanying Consolidated Balance Sheet and Consolidated Statements of Earnings of Berkshire Hathaway Inc.
The summarized financial data of the finance and financial products businesses (See Note 6) includes the activities conducted by the Scott Fetzer Financial Group and its subsidiaries ("SFFG"). Assets and liabilities of SFFG are summarized below (in millions).