FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM10-Q~~

(Mark One)

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

For the quarterly period ended September 30, ~~2018~~2019

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

For the transition period from to

Commission file number001-14905

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

Delaware

47-0813844

~~(State~~(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

3555 Farnam Street, Omaha, Nebraska 68131

(Address of principal executive office)

~~(Zip~~ (Zip Code)

(402)346-1400

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Class A Common Stock

Class B Common Stock

0.750% Senior Notes due 2023

1.125% Senior Notes due 2027

1.625% Senior Notes due 2035

0.500% Senior Notes due 2020

1.300% Senior Notes due 2024

2.150% Senior Notes due 2028

0.250% Senior Notes due 2021

0.625% Senior Notes due 2023

2.375% Senior Notes due 2039

2.625% Senior Notes due 2059

BRK.A

BRK.B

BRK23

BRK27

BRK35

BRK20

BRK24

BRK28

BRK21

BRK23A

BRK39

BRK59

New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Rule12b-2 of the Exchange Act.


Large accelerated filer	☒	☒	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 for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of October ~~25, 2018:~~24, 2019:


Class A —	~~733,152~~	707,755
Class B —	~~1,362,792,906~~	1,383,414,987

BERKSHIRE HATHAWAY INC.


				Page No.

Part I – Financial Information


Item 1. Financial Statements
		Consolidated Balance Sheets—September 30, ~~2018~~2019 and December 31, ~~2017~~2018			2-3
		Consolidated Statements of Earnings—Third Quarter and First Nine Months ~~2018~~2019 and ~~2017~~2018			4
		Consolidated Statements of Comprehensive Income—Third Quarter and First Nine Months ~~2018~~2019 and ~~2017~~2018			5
		Consolidated Statements of Changes in Shareholders’ Equity—Third Quarter and First Nine Months ~~2018~~2019 and ~~2017~~2018			5	6
		Consolidated Statements of Cash Flows—First Nine Months ~~2018~~2019 and ~~2017~~2018			6	7
		Notes to Consolidated Financial Statements			~~7-25~~	8-27
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			~~26-44~~	28-48
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			45	48
Item 4.		Controls and Procedures			45
			48

Part II – Other Information				45
			49
~~Item 1.~~		~~Legal Proceedings~~			45
Item ~~1A.~~1.	Legal Proceedings	~~Risk Factors~~			45	49
Item 1A.	Risk Factors	49
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities			45	49
Item 3.		Defaults Upon Senior Securities			46	49
Item 4.		Mine Safety Disclosures			46	49
Item 5.		Other Information			46	49
Item 6.	Exhibits	~~Exhibits~~			46
			50
~~Signature~~
Signature			46	50

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(Unaudited)				(Unaudited)
ASSETS
*Insurance and Other:*
Cash and cash equivalents*	$	36,506	$	25,460	$	71,064	$	27,749
Short-term investments in U.S. Treasury Bills		59,947		78,515		53,378		81,506
Investments in fixed maturity securities		18,271		21,353		19,172		19,898
Investments in equity securities		201,226		164,026		220,051		172,757
Investment in The Kraft Heinz Company		17,453		17,635
Receivables		31,884		28,578
Equity method investments						17,535		17,325
Loans and finance receivables						17,135		16,280
Other receivables						34,511		31,564
Inventories		16,793		16,187		19,951		19,069
Property, plant and equipment		24,357		20,104		21,230		20,628
Equipment held for lease						14,934		14,298
Goodwill		54,985		54,985		56,478		56,323
Other intangible assets		31,626		32,518		30,788		31,499
Deferred charges under retroactive reinsurance contracts		14,451		15,278		13,359		14,104
Other		13,250		11,158		13,430		9,307
						603,016		532,307
		520,749		485,797

*Railroad, Utilities and Energy:*
Cash and cash equivalents*		3,297		2,910		3,712		2,612
Receivables						3,756		3,666
Property, plant and equipment		130,387		128,184		135,326		131,780
Goodwill		24,790		24,780		24,750		24,702
Regulatory assets		2,928		2,950		3,007		3,067
Other		16,020		15,589		14,915		9,660
						185,466		175,487
		177,422		174,413	$	788,482	$	707,794

*Finance and Financial Products:*
Cash and cash equivalents*		1,635		3,213
Short-term investments in U.S. Treasury Bills		2,258		5,856
Loans and finance receivables		14,477		13,748
Property, plant and equipment and assets held for lease		10,273		9,931
Goodwill		1,552		1,493
Other		8,093		7,644

		38,288		41,885

	$	736,459	$	702,095

*	Cash and cash equivalents ~~includes~~included U.S. Treasury Bills with maturities of three months or less when purchased of ~~$14.7~~$40.6 billion at September 30, ~~2018~~2019 and ~~$5.7~~$3.9 billion at December 31, ~~2017.~~2018.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)


	September 30, 2018		December 31, 2017		September 30, 2019			December 31, 2018
	(Unaudited)				(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
*Insurance and Other:*
Unpaid losses and loss adjustment expenses	$	64,263	$	61,122	$	71,997		$	68,458
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		41,935		42,937		41,364			41,834
Unearned premiums		19,011		16,040		20,764			18,093
Life, annuity and health insurance benefits		18,368		17,608		19,422			18,632
Other policyholder liabilities		6,692		7,654		7,686			7,675
Accounts payable, accruals and other liabilities		27,178		23,099		25,880			23,696
Payable for purchases of U.S. Treasury Bills						8,123			2,080
Derivative contract liabilities						1,236			2,452
Aircraft repurchase liabilities and unearned lease revenues						5,106			4,593
Notes payable and other borrowings		24,271		27,324		37,176			34,975

		201,718		195,784
						238,754			222,488
*Railroad, Utilities and Energy:*
Accounts payable, accruals and other liabilities		11,269		11,334		15,309			11,410
Regulatory liabilities		7,723		7,511		7,454			7,506
Notes payable and other borrowings		62,599		62,178		65,018			62,515
						87,781			81,431
		81,591		81,023

*Finance and Financial Products:*
Accounts payable, accruals and other liabilities		1,752		1,470
Derivative contract liabilities		1,869		2,172
Notes payable and other borrowings		10,770		13,085

		14,391		16,727

Income taxes, principally deferred		59,340		56,607		60,389			51,375

Total liabilities		357,040		350,141		386,924			355,294

Shareholders’ equity:
Common stock		8		8		8			8
Capital in excess of par value		35,713		35,694		35,612			35,707
Accumulated other comprehensive income		(3,927)		58,571		(5,408	)		(5,015	)
Retained earnings		346,503		255,786		373,334			321,112
Treasury stock, at cost		(2,691)		(1,763)		(5,937	)		(3,109	)

Berkshire Hathaway shareholders’ equity		375,606		348,296		397,609			348,703
Noncontrolling interests		3,813		3,658		3,949			3,797

Total shareholders’ equity		379,419		351,954		401,558			352,500
					$	788,482		$	707,794
	$	736,459	$	702,095

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)


	Third Quarter				First Nine Months				Third Quarter				First Nine Months
	2018		2017		2018		2017		2019		2018		2019		2018
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
*Insurance and Other:*
Insurance premiums earned	$	14,333	$	13,349	$	41,855	$	47,469	$	15,323	$	14,333	$	44,505	$	41,855
Sales and service revenues		33,249		32,055		98,128		94,017		34,026		33,832		100,563		99,492
Leasing revenues										1,438		1,474		4,365		4,378
Interest, dividend and other investment income		1,619		1,320		4,468		3,804		2,483		1,993		6,895		5,583
										53,270		51,632		156,328		151,308
		49,201		46,724		144,451		145,290

*Railroad, Utilities and Energy operating and other revenues*		11,818		10,633		32,815		29,833

*Finance and Financial Products:*
Sales and service revenues		2,057		1,790		5,742		4,936
Interest, dividend and other investment income		374		360		1,115		1,074

		2,431		2,150		6,857		6,010
Railroad, Utilities and Energy:
Freight rail transportation revenues										5,982		6,112		17,558		17,547
Energy operating revenues										4,338		4,419		11,729		11,818
Service revenues and other income										1,382		1,287		3,633		3,450
										11,702		11,818		32,920		32,815
Total revenues		63,450		59,507		184,123		181,133		64,972		63,450		189,248		184,123

Investment and derivative contract gains/losses:
Investments gains (losses)		14,569		657		12,750		1,262
Investment and derivative contract gains (losses):
Investment gains (losses)										10,692		14,569		40,079		12,750
Derivative contract gains (losses)		137		308		303		703		234		137		1,217		303

		14,706		965		13,053		1,965
										10,926		14,706		41,296		13,053
Costs and expenses:
*Insurance and Other:*
Insurance losses and loss adjustment expenses		9,932		12,137		28,296		39,450		10,858		9,932		31,701		28,296
Life, annuity and health insurance benefits		1,448		1,213		4,153		3,703		1,176		1,448		3,245		4,153
Insurance underwriting expenses		2,352		2,207		7,079		6,924		2,708		2,352		8,033		7,079
Cost of sales and services		26,789		25,815		78,684		75,594		26,950		27,084		79,764		79,254
Cost of leasing										1,010		978		3,030		2,949
Selling, general and administrative expenses		3,984		3,965		12,158		12,101		4,384		4,494		13,645		13,434
Interest expense		116		435		246		1,405		261		252		790		772
										47,347		46,540		140,208		135,937
		44,621		45,772		130,616		139,177

*Railroad, Utilities and Energy:*
Cost of sales and operating expenses		8,087		6,984		23,451		20,678
Freight rail transportation expenses										3,839		4,012		11,706		11,838
Utilities and energy cost of sales and other expenses										2,981		2,981		8,503		8,637
Other expenses										1,162		1,094		2,990		2,976
Interest expense		698		700		2,110		2,090		724		698		2,178		2,110
										8,706		8,785		25,377		25,561
		8,785		7,684		25,561		22,768

*Finance and Financial Products:*
Cost of sales and services		1,273		1,062		3,519		2,891
Selling, general and administrative expenses		564		531		1,549		1,442
Interest expense		82		98		253		305

		1,919		1,691		5,321		4,638

Total costs and expenses		55,325		55,147		161,498		166,583		56,053		55,325		165,585		161,498

Earnings before income taxes and equity method earnings		22,831		5,325		35,678		16,515
Earnings (loss) before income taxes and equity method earnings										19,845		22,831		64,959		35,678
Equity method earnings		316		305		1,044		932		644		316		936		1,044

Earnings before income taxes		23,147		5,630		36,722		17,447
Income tax expense		4,440		1,427		7,009		4,750

Net earnings		18,707		4,203		29,713		12,697
Earnings (loss) before income taxes										20,489		23,147		65,895		36,722
Income tax expense (benefit)										3,832		4,440		13,333		7,009
Net earnings (loss)										16,657		18,707		52,562		29,713
Earnings attributable to noncontrolling interests		167		136		300		308		133		167		304		300

Net earnings attributable to Berkshire Hathaway shareholders	$	18,540	$	4,067	$	29,413	$	12,389

Net earnings per average equivalent Class A share*	$	11,280	$	2,473	$	17,885	$	7,533
Net earnings per average equivalent Class B share*	$	7.52	$	1.65	$	11.92	$	5.02
Average Class A shares outstanding		736,262		756,528		744,126		766,245
Average Class B shares outstanding		1,360,940,890		1,332,192,917		1,350,588,758		1,317,463,821
Net earnings (loss) attributable to Berkshire Hathaway shareholders									$	16,524	$	18,540	$	52,258	$	29,413
Net earnings (loss) per average equivalent Class A share									$	10,119	$	11,280	$	31,944	$	17,885
Net earnings (loss) per average equivalent Class B share*									$	6.75	$	7.52	$	21.30	$	11.92
Average equivalent Class A shares outstanding										1,633,002		1,643,556		1,635,903		1,644,519
Average equivalent Class B shares outstanding										2,449,502,430		2,465,333,662		2,453,854,768		2,466,777,764

Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings per average equivalent Class B share outstanding is equal toone-fifteen-hundredth of the equivalent Class A amount. See Note ~~19.~~20.

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

	Third Quarter						First Nine Months
	2019			2018			2019			2018
	(Unaudited)						(Unaudited)
Net earnings (loss)	$	16,657		$	18,707		$	52,562		$	29,713
Other comprehensive income:
Net change in unrealized appreciation of investments		18			5			232			(132	)
Applicable income taxes		(2	)		(1	)		(51	)		19
Reclassification of investment appreciation in net earnings		(57	)		(34	)		(53	)		(299	)
Applicable income taxes		12			7			11			63
Foreign currency translation		(700	)		(79	)		(534	)		(842	)
Applicable income taxes		6			9			3			46
Defined benefit pension plans		(45	)		(13	)		47			50
Applicable income taxes		7			3			(16	)		-
Other, net		10			(21	)		(35	)		(57	)
Other comprehensive income, net		(751	)		(124	)		(396	)		(1,152	)
Comprehensive income		15,906			18,583			52,166			28,561
Comprehensive income attributable to noncontrolling interests		112			162			301			271
Comprehensive income attributable to Berkshire Hathaway shareholders	$	15,794		$	18,421		$	51,865		$	28,290

See accompanying Notes to Consolidated Financial Statements

   Third Quarter    First Nine Months
   2018    2017    2018    2017


(Unaudited)
   (Unaudited)
Net earnings
   $ 18,707    $ 4,203    $ 29,713    $ 12,697








Other comprehensive income:

Net change in unrealized appreciation of investments
   5    4,952    (132)    18,040
Applicable income taxes
   (1)    (1,716)    19    (6,247)
Reclassification of investment appreciation in net earnings
   (34)    (646)    (299)    (1,235)
Applicable income taxes
   7    226    63    432
Foreign currency translation
   (79)    771    (842)    2,127
Applicable income taxes
   9    (24)    46    (116)
Prior service cost and actuarial gains/losses of defined benefit pension plans
   (13)    (3)    50    (57)
Applicable income taxes
   3    6    —    31
Other, net
   (21)    32    (57)    38








Other comprehensive income, net
   (124)    3,598    (1,152)    13,013








Comprehensive income
   18,583    7,801    28,561    25,710
Comprehensive income attributable to noncontrolling interests
   162    203    271    436








Comprehensive income attributable to Berkshire Hathaway shareholders
   $     18,421    $     7,598    $     28,290    $     25,274

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in millions)

													Berkshire Hathaway shareholders’ equity
	Berkshire Hathaway shareholders’ equity										Total		Common stock and capital in excess of par value			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non- controlling interests			Total
	Common stock and capital in excess of par value		Accumulated other comprehensive income		Retained earnings		Treasury stock		Non- controlling interests		Total
First nine months 2017:
Balance at December 31, 2016	$	35,689	$	37,298	$	210,846	$	(1,763)	$	3,358	$	285,428
Net earnings		—		—		12,389		—		308		12,697
Other comprehensive income, net		—		12,885		—		—		128		13,013
Issuance of common stock		58		—		—		—		—		58
Transactions with noncontrolling interests		(55)		—		—		—		(220)		(275)

Balance at September 30, 2017	$	35,692	$	50,183	$	223,235	$	(1,763)	$	3,574	$	310,921

First nine months 2018:
Balance at December 31, 2017	$	35,702	$	58,571	$	255,786	$	(1,763)	$	3,658	$	351,954	$	35,702		$	58,571		$	255,786		$	(1,763	)	$	3,658		$	351,954
Adoption of new accounting pronouncements		—		(61,375)		61,304		—		—		(71)		—			(61,375	)		61,304			—			—			(71	)
Net earnings		—		—		29,413		—		300		29,713
Net earnings (loss)														—			—			(1,138	)		—			67			(1,071	)
Other comprehensive income, net		—		(1,123)		—		—		(29)		(1,152)		—			327			—			—			8			335
Issuance (acquisition) of common stock		54		—		—		(928)		—		(874)		24			—			—			—			—			24
Transactions with noncontrolling interests		(35)		—		—		—		(116)		(151)		(37	)		—			—			—			(82	)		(119	)

Balance at March 31, 2018														35,689			(2,477	)		315,952			(1,763	)		3,651			351,052
Net earnings (loss)														—			—			12,011			—			66			12,077
Other comprehensive income, net														—			(1,331	)		—			—			(32	)		(1,363	)
Issuance (acquisition) of common stock														8			—			—			—			—			8
Transactions with noncontrolling interests														5			—			—			—			(21	)		(16	)
Balance at June 30, 2018														35,702			(3,808	)		327,963			(1,763	)		3,664			361,758
Net earnings (loss)														—			—			18,540			—			167			18,707
Other comprehensive income, net														—			(119	)		—			—			(5	)		(124	)
Issuance (acquisition) of common stock														22			—			—			(928	)		—			(906	)
Transactions with noncontrolling interests														(3	)		—			—			—			(13	)		(16	)
Balance at September 30, 2018	$	35,721	$	(3,927)	$	346,503	$	(2,691)	$	3,813	$	379,419	$	35,721		$	(3,927	)	$	346,503		$	(2,691	)	$	3,813		$	379,419

Balance at December 31, 2018													$	35,715		$	(5,015	)	$	321,112		$	(3,109	)	$	3,797		$	352,500
Net earnings (loss)														—			—			21,661			—			71			21,732
Other comprehensive income, net														—			288			—			—			22			310
Issuance (acquisition) of common stock														13			—			—			(1,690	)		—			(1,677	)
Transactions with noncontrolling interests														(98	)		—			—			—			(176	)		(274	)
Balance at March 31, 2019														35,630			(4,727	)		342,773			(4,799	)		3,714			372,591
Net earnings (loss)														—			—			14,073			—			100			14,173
Other comprehensive income, net														—			49			—			—			(4	)		45
Issuance (acquisition) of common stock														8			—			—			(443	)		—			(435	)
Transactions with noncontrolling interests														(20	)		—			—			—			37			17
Balance at June 30, 2019														35,618			(4,678	)		356,846			(5,242	)		3,847			386,391
Net earnings (loss)														—			—			16,524			—			133			16,657
Other comprehensive income, net														—			(730	)		—			—			(21	)		(751	)
Issuance (acquisition) of common stock														—			—			—			(695	)		—			(695	)
Transactions with noncontrolling interests and other														2			—			(36	)		—			(10	)		(44	)
Balance at September 30, 2019													$	35,620		$	(5,408	)	$	373,334		$	(5,937	)	$	3,949		$	401,558

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)


	First Nine Months				First Nine Months
	2018		2017		2019			2018
	(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net earnings	$	29,713	$	12,697
Adjustments to reconcile net earnings to operating cash flows:
Investment gains/losses		(12,750)		(1,262)
Net earnings (loss)					$	52,562		$	29,713
Adjustments to reconcile net earnings (loss) to operating cash flows:
Investment (gains) losses						(40,079	)		(12,750	)
Depreciation and amortization		7,169		6,835		7,407			7,169
Other		(677)		1,110		(1,740	)		(677	)
Changes in operating assets and liabilities:
Losses and loss adjustment expenses		2,272		22,615		3,252			2,272
Deferred charges reinsurance assumed		827		(5,525)		745			827
Unearned premiums		2,974		2,253		2,663			2,974
Receivables and originated loans		(4,781)		(2,890)		(3,618	)		(4,781	)
Other assets		(1,788)		(1,287)		(2,419	)		(1,788	)
Other liabilities		805		360		(889	)		805
Income taxes		2,791		2,593		8,726			2,791

Net cash flows from operating activities		26,555		37,499		26,610			26,555


Cash flows from investing activities:
Purchases of U.S. Treasury Bills and fixed maturity securities		(85,502)		(106,597)		(72,189	)		(85,502	)
Purchases of equity securities		(38,552)		(14,936)		(15,090	)		(38,552	)
Sales of U.S. Treasury Bills and fixed maturity securities		26,903		35,143		13,602			26,903
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities		83,742		65,666		94,742			83,742
Sales and redemptions of equity securities		14,164		10,572		7,127			14,164
Purchases of loans and finance receivables		(1,748)		(1,392)		(57	)		(1,748	)
Collections of loans and finance receivables		266		1,599		259			266
Acquisitions of businesses, net of cash acquired		(521)		(2,640)		(732	)		(521	)
Purchases of property, plant and equipment		(10,040)		(8,411)
Purchases of property, plant and equipment and equipment held for lease						(11,139	)		(10,040	)
Other		257		(150)		(1,067	)		257

Net cash flows from investing activities		(11,031)		(21,146)		15,456			(11,031	)


Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		55		1,321		8,141			2,394
Proceeds from borrowings of railroad, utilities and energy businesses		7,019		2,812		4,163			7,019
Proceeds from borrowings of finance businesses		2,339		1,298
Repayments of borrowings of insurance and other businesses		(2,661)		(1,763)		(5,046	)		(7,322	)
Repayments of borrowings of railroad, utilities and energy businesses		(3,658)		(1,944)		(1,766	)		(3,658	)
Repayments of borrowings of finance businesses		(4,661)		(3,605)
Changes in short term borrowings, net		(2,754)		122		165			(2,754	)
Acquisition of treasury stock		(928)		—		(2,807	)		(928	)
Other		(277)		(108)		(341	)		(277	)

Net cash flows from financing activities		(5,526)		(1,867)		2,509			(5,526	)

Effects of foreign currency exchange rate changes		(109)		222		(95	)		(109	)

Increase in cash and cash equivalents and restricted cash		9,889		14,708		44,480			9,889
Cash and cash equivalents and restricted cash at beginning of year		32,212		28,643		30,811			32,212

Cash and cash equivalents and restricted cash at end of third quarter *	$	42,101	$	43,351	$	75,291		$	42,101

*Cash and cash equivalents and restricted cash are comprised of the following:
Beginning of year—
Insurance and Other	$	25,460	$	23,581	$	27,749		$	28,673
Railroad, Utilities and Energy		2,910		3,939		2,612			2,910
Finance and Financial Products		3,213		528
Restricted cash, included in other assets		629		595		450			629

	$	32,212	$	28,643

					$	30,811		$	32,212
End of third quarter—
Insurance and Other	$	36,506	$	35,247	$	71,064		$	38,141
Railroad, Utilities and Energy		3,297		4,448		3,712			3,297
Finance and Financial Products		1,635		3,011
Restricted cash, included in other assets		663		645		515			663
					$	75,291		$	42,101
	$	42,101	$	43,351

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2018~~2019

Note 1. General

The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (“Berkshire” or “Company”) consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds controlling financial interests as of the financial statement date. In these notes, the terms “us,” “we” or “our” refer to Berkshire and its consolidated subsidiaries. Reference is made to Berkshire’s most recently issued Annual Report on Form10-K (“Annual Report”), which includes information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. Our significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report. As described in the Annual Report, we modified certain presentations to our Consolidated Financial Statements. Presentations in these interim Consolidated Financial Statements conform to the presentations in the Annual Report. Changes to those policies due to the adoption of a new accounting ~~standards effective January 1, 2018~~standard are described in Note 2. ~~Certain immaterial amounts related to equity method earnings were reclassified in the accompanying 2017 Consolidated Financial Statements to conform to current presentations.~~

Financial information in this Quarterly Report reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States (“GAAP”). For a number of reasons, our results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be more significant to results of interim periods than to results for a full year. ~~Changes~~In light of the size of our equity security investment portfolio, changes in market prices ofand the related changes in unrealized gains on equity securities ~~we own can~~will produce significant ~~effects on our consolidated shareholders’ equity. Beginning in 2018, those effects are included~~volatility in our ~~Consolidated Statements of Earnings, whereas inpre-2018~~ ~~periods, such effects were included in other comprehensive income.~~interim and annual earnings. In addition, changes in the fair values of certain derivative contract liabilities and gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies can cause significant variations in ~~our~~ periodic net earnings.

Note 2. New Accounting Pronouncements

Berkshire adopted Accounting Standards Codification (“ASC”) 842 “Leases” on January 1, 2019. Most significantly, ASC 842 requires a lessee to recognize a liability to make lease payments and an asset with respect to its right to use the underlying asset for the lease term. Upon the adoption of ASC 842, we recognized operating lease assets of approximately $6.2 billion and lease liabilities of $5.9 billion. We also reduced other assets by approximately $300 million. Consequently, our consolidated assets and liabilities increased by approximately $5.9 billion.

We are party to contracts where we lease property from others (“lessee” contracts) and where we lease property to others (“lessor” contracts). In adopting and applying ASC 842, we elected to use practical expedients, including but not limited to, not reassessing past lease and easement accounting, not separating lease components from non-lease components by class of asset and not recording assets or liabilities for leases with terms of one year or less. We adopted ASC 842 as of January 1, 2019 with regard to leases in effect as of that date and elected to not restate prior period financial statements. ASC 842 did not have a material effect on our accounting for lessor contracts or for lessee contracts classified as financing leases.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. In this regard, lease payments include fixed payments and variable payments that depend on an index or rate. The lease term is generally the non-cancellable lease period. Certain lease contracts contain renewal options or other terms that provide for variable payments based on performance or usage or changes in an index or interest rates. Options are not included in determining right-of-use assets or lease liabilities unless it is reasonably certain that options will be exercised. Generally, incremental borrowing rates are used in measuring lease liabilities. Right-of-use assets are subject to review for impairment.

Notes to Consolidated Financial Statements(Continued)

Note 2. New Accounting Pronouncements(Continued)

On January 1, 2018, we adopted Accounting Standards Update (“ASU”)2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial ~~Liabilities” (“~~Liabilities,” ASU~~2016-01”),~~ ~~ASU~~2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” ~~(“ASU2018-02”)~~and ~~Accounting Standards Codification (“ASC”)~~ASC 606 – “Revenues from Contracts with ~~Customers” (“ASC 606”).~~Customers.” Prior year financial statements were not restated. A summary of the effects of the initial adoption of ASU2016-01, ASU2018-02 and ASC 606 on our shareholders’ equity follows (in millions).


	ASU 2016-01		ASU 2018-02		ASC 606		Total		ASU 2016-01			ASU 2018-02			ASC 606			Total
Increase (decrease):
Assets	$	—	$	—	$	3,382	$	3,382
Liabilities		—		—		3,453		3,453
Accumulated other comprehensive income		(61,459)		84		—		(61,375)	$	(61,459	)	$	84		$	—		$	(61,375	)
Retained earnings		61,459		(84)		(71)		61,304		61,459			(84	)		(70	)		61,305
Shareholders’ equity		—		—		(71)		(71)		—			—			(70	)		(70	)

With respect to ASU2016-01, beginning in 2018, ~~we are including~~ unrealized gains and losses ~~arising~~ from the changes in the fair values of our equity securities during the period ~~as a component of~~are included within investment gains (losses) in the Consolidated Statements of Earnings. For periods ending prior to January 1, 2018, we recognized gains and losses in earnings when we sold equity securities, based on the difference between the sale proceeds and the cost of the securities, and for other-than-temporary impairment losses. We recorded unrealized gains and losses from the changes in fair value of~~available-for-sale~~ equity securities in other comprehensive income. We continue to carry our investments in equity securities at fair value and there is no change to the asset values or total shareholders’ equity amounts we would have otherwise recorded. ASU~~2016-01~~ ~~prohibited the restatement of prior year financial statements. However, as~~As of January 1, 2018, we reclassified netafter-tax unrealized gains on equity securities from accumulated other comprehensive income to retained earnings.

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 2. New Accounting Pronouncements~~~~(Continued)~~

In ~~connection with our adoption of~~adopting ASU2018-02, we reclassified the stranded deferred income tax effects ~~that were included in accumulated other comprehensive income as of January 1, 2018 to retained earnings. These stranded income tax effects arose~~arising from the reduction in the U.S. statutory income tax rate under the U.S. Tax Cuts and Jobs Act ~~enacted on December 22, 2017. The effect of the reduction~~that were included in ~~the statutory income tax rate on~~ accumulated other comprehensive income ~~items was recorded in earnings in December 2017. Prior year financial statements were not restated.~~

We adopted ASC 606 using the modified retrospective method, whereby the cumulative effect of the adoption was recorded as an adjustment to retained earnings. Prior year financial statements were not restated. The initial adoption of ASC 606 as of January 1, 2018 ~~resulted in~~to retained earnings.

In adopting ASC 606, we recorded increases to certain assets and other liabilities, with ~~a relatively minor reduction in~~the cumulative net effect recorded to retained earnings. Prior to January 1, 2018, we recognized revenues from the sales of fractional ownership interests in aircraft over the term of the related management services agreements, as the transfers of the ownership interests were inseparable from the management services agreements. These agreements also include provisions that require us to repurchase the fractional interest at fair market value at contract termination or upon the customer’s request following the end of a minimum commitment period. ASC 606 provides that such contracts are subject to accounting guidance for lease ~~contracts and not ASC 606.~~contracts. The principal effects of thisre-characterization were to increase ~~both property, plant~~equipment held for lease and ~~equipment~~aircraft repurchase liabilities and ~~other liabilities~~unearned lease revenues by approximately $3.5 billion. ~~There-characterization~~ ~~of these fractional ownership interests as operating leases did not have a material effect on our consolidated revenues or earnings for the first nine months of 2018.~~

In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU~~2016-02~~ “Leases,” which together with subsequent amendments is included in ASC 842. Most significantly, ASC 842 requires a lessee to recognize a liability to make lease payments and an asset with respect to its right to use the underlying asset for the lease term. ASC 842 also addresses accounting and reporting by lessors, which is not significantly different from current accounting and reporting, and further provides for qualitative and quantitative disclosures. We intend to adopt ASC 842 as of January 1, 2019 under the modified retrospective method.

We are party to contracts where we are the lessee and other contracts where we are the lessor. For contracts where we are the lessee, we will record lease liabilities and right of use assets for contracts in effect on January 1, 2019 based on the facts and circumstances as of that date. While we continue to evaluate certain provisions of ASC 842, based on our current estimates, we expect to recognize right of use assets and lessee lease liabilities of approximately $6 billion with respect to operating leases. We do not believe the adoption of ASC 842 will have a material effect on our consolidated financial position, results of operations or cash flows.

~~In June 2016, the FASB issued ASU~~2016-13 “Financial Instruments—Credit Losses,” which provides for the recognition and measurement at the reporting date of all expected credit losses for financial assets held at amortized cost and for available-for-sale debt securities. Currently, credit losses are recognized and measured when such losses become probable based on the prevailing facts and circumstances. ASU2016-13 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.

In January 2017, the FASB issued ASU2017-04 “Simplifying the Test for Goodwill Impairment.” ASU2017-04 eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption of ASU2017-04, the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over its fair value and will be limited to the carrying value of goodwill. ASU2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted.

In August 2018, the FASB issued ASU2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts.” ASU2018-12 requires periodic reassessment of actuarial and discount rate assumptions used ~~in the valuation of~~to value policyholder liabilities and deferred acquisition costs arising from the issuance of long-duration insurance and reinsurance contracts, with the effects of changes in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. ~~Under current accounting guidance,~~Currently, the actuarial and discount rate assumptions are set at the contract inception date and not subsequently changed, except under limited circumstances. ASU2018-12 ~~also requires~~ provides for new disclosures and is expected to be effective for fiscal years beginning after December 15, ~~2020,~~2021 as a result of a recent decision by the FASB, with early adoption permitted. We are evaluating the effect this standard will have on our Consolidated Financial Statements.

Notes to Consolidated Financial Statements(Continued)

Note 3. ~~Revenues from contracts with customers~~Investments in fixed maturity securities

~~As discussed~~Investments in ~~Note 2, on January 1,~~fixed maturity securities as of September 30, 2019 and December 31, 2018 ~~we adopted ASC 606 “Revenues from Contracts with Customers.” Except~~are summarized by type below (in millions).

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2019
U.S. Treasury, U.S. government corporations and agencies	$	3,760	$	47	$	(2	)	$	3,805
States, municipalities and political subdivisions		152		5		—			157
Foreign governments		7,962		70		(9	)		8,023
Corporate bonds		6,230		477		(3	)		6,704
Mortgage-backed securities		419		66		(2	)		483
	$	18,523	$	665	$	(16	)	$	19,172
December 31, 2018
U.S. Treasury, U.S. government corporations and agencies	$	4,223	$	22	$	(22	)	$	4,223
States, municipalities and political subdivisions		182		7		—			189
Foreign governments		7,480		50		(28	)		7,502
Corporate bonds		7,055		408		(23	)		7,440
Mortgage-backed securities		487		59		(2	)		544
	$	19,427	$	546	$	(75	)	$	19,898

Investments in foreign governments include securities issued by national and provincial government entities as ~~described in Note 2, our revenue recognition practices for contracts with customers under ASC 606 do not differ significantly from prior practices. Under ASC 606, revenues~~well as instruments that are recognized when a good or service is transferred to a customer. A good or service is transferred when (or as) the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. Our accounting policies related to revenue from contracts with customers follow.

We manufacture and/or distribute a wide variety of industrial, building and consumer products. Our sales contracts provide customers with these products through wholesale and retail channels in exchange for consideration specified under the contracts. Contracts generally represent customer orders for individual products at stated prices. Sales contracts may contain either single or multiple performance obligations. In instances where contracts contain multiple performance obligations, we allocate the revenue to each obligation based on the relative stand-alone selling prices of each product or service.

Sales revenue reflects reductions for returns, allowances, volume discounts and other incentives, some of which may be contingent on future events. In certain customer contracts of our grocery distribution business, sales revenue includes certain state and local excise taxes billed to customers on specified products when those taxes are levied directly upon usunconditionally guaranteed by the taxing authorities. Sales revenue excludes sales taxes and value-added taxes collected on behalf of taxing authorities. Sales revenue includes consideration for shipping and other fulfillment activities performed prior to the customer obtaining control of the goods. We also elect to treat consideration for such ~~services performed after control has passed to the customer as sales revenue.~~

Our product sales revenues are generally recognized at a point in time when control of the product transfers to the customer, which coincides with customer pickup or product delivery or acceptance, depending on terms of the arrangement. We recognize sales revenues and related costs with respect to certain contracts over time, primarily from certain castings, forgings and aerostructures contracts. Control of the product units under these contracts transfers continuously to the customer as the product is manufactured. These products generally have no alternative use and the contract requires the customer to provide reasonable compensation if terminated for reasons other than breach of contract.

Our energy revenue derives primarily from tariff based sales arrangements approved by various regulatory bodies. These tariff based revenues are mainly comprised of energy, transmission, distribution and natural gas and have performance obligations to deliver energy products and services to customers which are satisfied over time as energy is delivered or services are provided. Our nonregulated energy revenue primarily relates to our renewable energy business. Energy revenues are equivalent to the amounts we have the right to invoice and correspond directly with the value to the customer of the performance to date and include billed and unbilled amounts.entities. As of September 30, ~~2018 and December 31, 2017, trade receivables were~~2019, approximately ~~$2.2 billion and $2.0 billion, respectively, and were included in other assets~~88% of our ~~railroad, utilities and energy businesses on~~foreign government holdings were rated AA or higher by at least one of the Consolidated Balance Sheets. Such amounts substantially relate to customer revenue and included unbilled revenue of $624 million as of September 30, 2018 and $665 million as of December 31, 2017. Payments from customers are generally due from the customer within 30 days of billing. Rates charged for energy products and services are established by regulators or contractual arrangements that establish the transaction price, as well as the allocation of price amongst the separate performance obligations. When preliminary regulated 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 accrued.major rating agencies.

The ~~primary performance obligation under our freight rail transportation service contracts is to move freight from a point~~amortized cost and estimated fair value of origin to a point of destination. The performance obligations are represented by bills of lading which create a series of distinct services that have a similar pattern of transfer to the customer. The revenues for each performance obligation are based on various factors including the product being shipped, the origin and destination pair, and contract incentives which are outlined in various private rate agreements, common carrier public tariffs, interline foreign road agreements and pricing quotes. The transaction price is generally a per car amount to transport railcars from a specified origin to a specified destination. Freight revenues are recognized over time as the service is performed because the customer simultaneously receives and consumes the benefits of the service. Revenues recognized represent the proportion of the service completed as of the balance sheet date. Receivables related to customer contracts were approximately $1.3 billionfixed maturity securities at September 30, ~~2018 and $1.2 billion at December 31, 2017 and were included in other assets of our railroad, utilities and energy businesses. Invoices for freight transportation services~~2019 are generally issued to customers and paid within thirty days or less. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as a reduction to revenue on a~~pro-rata~~ ~~basis based on actual or projected future customer shipments.~~

Other service revenues derive from contracts with customers in which performance obligations are satisfied over time, where customers receive and consume benefits as we perform the services, or at a point in time when the services are provided. Other service revenues primarily derive from real estate brokerage, automotive repair, aircraft management, aviation training, franchising and news distribution services.

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 3. Revenues from contracts with customers~~~~(Continued)~~

~~The following table summarizes customer contract revenues disaggregated~~summarized below by ~~reportable segment and the source of the revenue for the three and nine months ending September 30, 2018~~contractual maturity dates (in millions). Other revenues included in our consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and lease income which are not within the scope of ASC 606.Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.

   Manufacturing    McLane
    Company        Service and
Retail        BNSF        Berkshire
Hathaway
Energy    Finance and
Financial
Products    Insurance,
Corporate
and other        Total
Three months ending September 30, 2018

Manufactured products:

Industrial and commercial products
   $ 6,384    $ —    $ 47    $ —    $ —    $ 82    $ —    $ 6,513
Building products
   3,473    —    —    —    —    4    —    3,477
Consumer products
   2,838    —    —    —    —    1,170    —    4,008
Grocery and convenience store distribution
   —    8,709    —    —    —    —    —    8,709
Food and beverage distribution
   —    4,079    —    —    —    —    —    4,079
Auto sales
   —    —    2,083    —    —    —    —    2,083
Other retail and wholesale distribution
   521    —    3,117    —    —    23    —    3,661
Service
   262    16    965    6,099    1,140    148    —    8,630
Electricity and natural gas
   —    —    —    —    4,267    —    —    4,267
















Total
   13,478    12,804    6,212    6,099    5,407    1,427    —    45,427
Other revenue
   51    18    743    13    299    1,004    15,895    18,023
















   $ 13,529    $ 12,822    $ 6,955    $ 6,112    $ 5,706    $ 2,431    $   15,895    $ 63,450
















   Manufacturing    McLane
Company    Service and
Retail    BNSF    Berkshire
Hathaway
Energy    Finance and
Financial
Products    Insurance,
Corporate
and other        Total
Nine months ending September 30, 2018

Manufactured products:

Industrial and commercial products
   $ 19,306    $ —    $ 155    $ —    $ —    $ 503    $ —    $ 19,964
Building products
   9,817    —    —    —    —    11    —    9,828
Consumer products
   8,734    —    —    —    —    3,124    —    11,858
Grocery and convenience store distribution
   —    25,128    —    —    —    —    —    25,128
Food and beverage distribution
   —    12,203    —    —    —    —    —    12,203
Auto sales
   —    —    6,087    —    —    —    —    6,087
Other retail and wholesale distribution
   1,533    —    8,734    —    —    65    —    10,332
Service
   759    53    2,912    17,510    3,026    174    —    24,434
Electricity and natural gas
   —    —    —    —    11,357    —    —    11,357
















Total
   40,149    37,384    17,888    17,510    14,383    3,877    —    131,191
Other revenue
   132    54    2,664    37    885    2,980    46,180    52,932
















   $ 40,281    $ 37,438    $ 20,552    $   17,547    $   15,268    $ 6,857    $   46,180    $   184,123

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of September 30, 2018 follows (in millions).

       Performance obligations
expected to be satisfied:
   Less than
12 months    Greater than
12 months            Total
Manufactured products:

Industrial and commercial products
   $ 50    $ 2,549    $ 2,599
Electricity and natural gas
   1,011    5,879    6,890

Due in one

year or less

Due after one

year through

five years

Due after five

years through

ten years

Due after

ten years

Mortgage-

backed

securities

Total

Amortized cost

6,864

10,503

301

436

419

18,523

Fair value

6,889

10,650

351

799

483

19,172

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

Note 4. Investments in ~~fixed maturity securities~~

~~Our investments in fixed maturity securities as of September 30, 2018 and December 31, 2017 are summarized by type below (in millions).~~

     Amortized
Cost    Unrealized
Gains    Unrealized
Losses    Fair
    Value
September 30, 2018

U.S. Treasury, U.S. government corporations and agencies
   $ 3,626    $ 8    $ (35)    $ 3,599
U.S. states, municipalities and political subdivisions
   276    15    (1)    290
Foreign governments
   7,362    45    (37)    7,370
Corporate bonds
   6,029    436    (7)    6,458
Mortgage-backed securities
   502    56    (4)    554








   $ 17,795    $ 560    $ (84)    $ 18,271








December 31, 2017

U.S. Treasury, U.S. government corporations and agencies
   $ 3,975    $ 4    $ (26)    $ 3,953
U.S. states, municipalities and political subdivisions
   847    19    (12)    854
Foreign governments
   8,572    274    (24)    8,822
Corporate bonds
   6,279    588    (5)    6,862
Mortgage-backed securities
   772    92    (2)    862








   $ 20,445    $ 977    $ (69)    $     21,353

Investments in foreign government securities include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of September 30, 2018, approximately 89% of foreign government holdings were rated AA or higher by at least one of the major rating agencies.

The amortized cost and estimated fair value of fixed maturity securities at September 30, 2018 are summarized below by contractual maturity dates. Amounts are in millions. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers.

   Due in one
  year or less      Due after one
year through
five years    Due after five
years through
ten years    Due after
    ten years        Mortgage-
backed
    securities                Total
Amortized cost
   $     7,275    $ 9,057    $ 387    $ 574    $ 502    $ 17,795
Fair value
   7,274    9,108    435    900    554    18,271

~~Note 5. Investments in~~ equity securities

~~Our investments~~Investments in equity securities as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 are summarized based on the primary industry of the investee ~~as follows~~in the table below (in millions).

							Cost Basis		Net Unrealized Gains		Fair Value
	Cost Basis		Net Unrealized Gains		Fair Value
September 30, 2018 *
September 30, 2019*
Banks, insurance and finance	$	42,010	$	51,499	$	93,509	$	44,694	$	51,804	$	96,498
Consumer products		38,793		39,858		78,651		38,928		43,087		82,015
Commercial, industrial and other		21,035		14,137		35,172		28,585		12,953		41,538
							$	112,207	$	107,844	$	220,051
	$	101,838	$	105,494	$	207,332

Approximately ~~69%~~66% of the aggregate fair value was concentrated in ~~five~~5 companies (American Express Company – ~~$16.1~~$17.9 billion; Apple Inc. – ~~$57.6~~$57.0 billion; Bank of America Corporation – ~~$26.5~~$27.8 billion; The Coca-Cola Company – ~~$18.5~~$21.8 billion and Wells Fargo & Company – ~~$24.4~~$20.2 billion).

Notes to Consolidated Financial Statements(Continued)

Note 5.4. Investments in equity securities(Continued)

On April 30, 2019, Berkshire committed to invest a total of $10 billion in connection with Occidental Petroleum Corporation’s (“Occidental”) proposal to acquire Anadarko Petroleum Corporation (“Anadarko”). The Anadarko shareholders approved the acquisition by Occidental on August 8, 2019 and the acquisition and our investment in Occidental closed on August 8, 2019.

Berkshire’s investments in Occidental include newly issued Occidental Cumulative Perpetual Preferred Stock with an aggregate liquidation value of $10 billion, together with warrants to purchase up to 80 million shares of Occidental common stock at an exercise price of $62.50 per share. The preferred stock accrues dividends at 8% per annum and is redeemable at the option of Occidental commencing on the tenth anniversary of issuance at a redemption price equal to 105% of the liquidation preference plus any accumulated and unpaid dividends, or mandatorily under certain specified capital return events. Dividends on the preferred stock may be paid in cash or, at Occidental’s option, in shares of Occidental common stock. The warrants are exercisable in whole or in part until one year after the redemption of the preferred stock. Our investments in Occidental are included in the commercial, industrial and other category in the preceding table.

							Cost Basis		Net Unrealized Gains		Fair Value
	Cost Basis		Net Unrealized Gains		Fair Value
December 31, 2017 *
December 31, 2018*
Banks, insurance and finance	$	25,783	$	55,026	$	80,809	$	44,332	$	38,260	$	82,592
Consumer products		25,177		25,698		50,875		38,783		22,838		61,621
Commercial, industrial and other		23,716		15,140		38,856		19,752		8,792		28,544
							$	102,867	$	69,890	$	172,757
	$	74,676	$	95,864	$	170,540

Approximately ~~65%~~68% of the aggregate fair value was concentrated in ~~five~~5 companies (American Express Company – ~~$15.1~~$14.5 billion; Apple Inc. – ~~$28.2~~$40.3 billion; Bank of America Corporation – ~~$20.7~~$22.6 billion; The Coca-Cola Company – ~~$18.4~~$18.9 billion and Wells Fargo & Company – ~~$29.3~~$20.7 billion).

~~Investments~~Note 5. Equity method investments

Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). 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.

Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares. Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $9.1 billion at September 30, 2019 and $14.0 billion at December 31, 2018. The carrying value of our investment was approximately $13.8 billion at both September 30, 2019 and December 31, 2018.

As discussed in Berkshire’s first and second quarter Form 10-Qs, Kraft Heinz’s financial statements for the first and second quarters of 2019 were not available and thus we excluded our share of Kraft Heinz’s earnings and other comprehensive income from our consolidated results during those periods. On August 13, 2019, Kraft Heinz filed financial statements for the first and second quarters of 2019 with the Securities and Exchange Commission. Kraft Heinz has also made its financial results for the third quarter of 2019 available to Berkshire. Accordingly, Berkshire’s equity method earnings in the third quarter and first nine months of 2019 included $467 million attributable to Kraft Heinz’s results for the first nine months of 2019 , of which $228 million was attributable to Kraft Heinz’s results for the first six months. Equity method earnings from Kraft Heinz for the third quarter and first nine months of 2018 were $168 million and $635 million, respectively. Dividends received from Kraft Heinz in the first nine months of 2019 and 2018 were $391 million and $610 million, respectively, which were recorded as reductions to the carrying value of our investment.

We evaluated our investment in Kraft Heinz for impairment as of September 30, 2019. Based on the available facts and information, the length of time that fair value was less than carrying value and our ability and intent to hold the investment until recovery, we concluded that recognition of an impairment loss in earnings at September 30, 2019 was not required. However, we will continue to monitor this investment and it is possible that an impairment loss will be recorded in earnings in future periods based on changes in facts and circumstances or intentions.

Notes to Consolidated Financial Statements(Continued)

Note 5. Equity method investments (Continued)

Summarized consolidated financial information of Kraft Heinz follows (in millions).

September 28,

2019

December 29,

2018

Assets

102,822

103,461

Liabilities

51,016

51,683

	Third Quarter				First Nine Months
	2019		2018		2019		2018
Sales	$	6,076	$	6,383	$	18,441	$	19,377
Net earnings attributable to Kraft Heinz common shareholders		899		619		1,753		2,376

Other investments accounted for pursuant to the equity method include our investments in Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC, d/b/a Pilot Flying J (“Pilot Flying J”), and Electric Transmission Texas, LLC (“ETT”). The carrying value of our investments in these entities was approximately $3.7 billion as of September 30, 2019 and $3.5 billion as of December 31, 2018. Our equity method earnings in these entities in the first nine months were $491 million in 2019 and $409 million in 2018. Additional information concerning these investments follows.

We own a 50% interest in Berkadia, with Jefferies Financial Group Inc. (“Jefferies”) 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 source of funding for Berkadia’s operations is through its issuance of commercial paper, which is currently limited to $1.5 billion. On September 30, 2019, Berkadia’s commercial paper outstanding was $1.47 billion. The commercial paper is supported by a surety policy issued by a Berkshire insurance subsidiary. Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy. In addition, a Berkshire Hathaway Energy Company subsidiary owns a 50% interest in ETT, an owner and operator of electric transmission assets in the Electric Reliability Council of Texas footprint. American Electric Power owns the other 50% interest.

On October 3, 2017, we entered into an investment agreement and an equity purchase agreement whereby we acquired a 38.6% interest in Pilot Flying J, headquartered in Knoxville, Tennessee. Pilot Flying J is one of the largest operators of travel centers in North America, with more than 28,000 team members, 750 locations across the U.S. and Canada, and nearly $30 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.

Note 6. Investment gains/losses

Investment gains/losses in the third quarter and first nine months of 2019 and 2018 are ~~reflected in our Consolidated Balance Sheets~~summarized as follows (in millions).

       September 30,
2018        December 31,
2017
Insurance and other
   $ 201,226    $ 164,026
Railroad, utilities and energy *
   1,616    1,961
Finance and financial products *
   4,490    4,553




   $ 207,332    $ 170,540

`	Third Quarter						First Nine Months
	2019			2018			2019			2018
Equity securities:
Unrealized investment gains (losses) on securities held at the end of the period	$	10,489		$	14,294		$	39,546		$	12,126
Investment gains (losses) during the period		135			244			464			307
		10,624			14,538			40,010			12,433
Fixed maturity securities:
Gross realized gains		59			44			71			451
Gross realized losses		(2	)		(10	)		(18	)		(152	)
Other		11			(3	)		16			18
	$	10,692		$	14,569		$	40,079		$	12,750

~~Included in other assets.~~

Notes to Consolidated Financial Statements (Continued)

Note 6. Investment gains/losses (Continued)

Prior to 2018, we recognized investment gains and losses in earnings when we sold equity securities based on the difference between the sale proceeds and the cost of the securities and also when we recognized other-than-temporary impairment losses. Beginning in 2018, equity securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own. Prior to 2018, we recorded the changes in unrealized gains and losses on our investments in equity securities in other comprehensive income.

In the first nine months of 2019 and 2018, as reflected in the Consolidated Statements of Cash Flows, we received proceeds of approximately $7.1 billion and $14.2 billion, respectively, from sales of equity securities. In the preceding table, investment gains/losses on equity securities sold in each period reflect the difference between proceeds from sales and the fair value of the equity security sold at the beginning of the period or the purchase date, if later. Our taxable gains on equity securities sold are generally the difference between the proceeds from sales and original cost. Taxable gains in the third quarter and first nine months of 2019 were $609 million and $1,959 million, respectively, and in the third quarter and first nine months of 2018 were $1,329 million and $2,688 million, respectively.

Note 7. Loans and finance receivables

Loans and finance receivables are summarized as follows (in millions).

	September 30, 2019			December 31, 2018
Loans and finance receivables before allowances and discounts	$	17,462		$	16,622
Allowances for uncollectible loans		(183	)		(177	)
Unamortized acquisition discounts		(144	)		(165	)
	$	17,135		$	16,280

Loans and finance receivables are principally installment loans originated or acquired by our manufactured housing business. Provisions for loan losses for the first nine months were $109 million in both 2019 and 2018. Loan charge-offs, net of recoveries in the first nine months, were $103 million in 2019 and $106 million in 2018. At September 30, 2019, approximately 98% of the manufactured housing loan balances were evaluated collectively for impairment, with the remainder evaluated individually. As part of the evaluation process, credit quality indicators are reviewed and loans are designated as performing or non-performing. At September 30, 2019, we considered approximately 99% of the loan balances to be performing and approximately 96% of the loan balances to be current as to payment status.

Additionally, during 2018, an insurance subsidiary entered into an agreement with Seritage Growth Properties to provide a $2.0 billion term loan facility, which matures on July 31, 2023. As of September 30, 2019 and December 31, 2018, the outstanding loans under the facility were approximately $1.6 billion.

Note 8. Other receivables

Other receivables of insurance and other businesses are comprised of the following (in millions).

	September 30, 2019			December 31, 2018
Insurance premiums receivable	$	13,906		$	12,452
Reinsurance recoverable on unpaid losses		3,105			3,060
Trade receivables		12,852			12,617
Other		5,035			3,823
Allowances for uncollectible accounts		(387	)		(388	)
	$	34,511		$	31,564

Receivables of railroad and utilities and energy businesses are comprised of the following (in millions).

	September 30, 2019			December 31, 2018
Trade receivables	$	3,551		$	3,433
Other		342			362
Allowances for uncollectible accounts		(137	)		(129	)
	$	3,756		$	3,666

Notes to Consolidated Financial Statements (Continued)

Note 8. Other receivables (Continued)

Trade receivables include unbilled revenue of $657 million and $554 million as of September 30, 2019 and December 31, 2018, respectively, attributable to the regulated utility businesses.

Note 9. Inventories

Inventories are comprised of the following (in millions).

	September 30, 2019		December 31, 2018
Raw materials	$	4,430	$	4,182
Work in process and other		2,695		2,625
Finished manufactured goods		4,737		4,541
Goods acquired for resale		8,089		7,721
	$	19,951	$	19,069

Note 10. Property, plant and equipment

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

	September 30, 2019			December 31, 2018
Land	$	2,557		$	2,536
Buildings and improvements		10,530			9,959
Machinery and equipment		23,409			22,574
Furniture, fixtures and other		5,064			4,758
		41,560			39,827
Accumulated depreciation		(20,330	)		(19,199	)
	$	21,230		$	20,628

A summary of property, plant and equipment of railroad and utilities and energy businesses follows (in millions). The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.

	September 30, 2019			December 31, 2018
Railroad:
Land, track structure and other roadway	$	61,345		$	59,509
Locomotives, freight cars and other equipment		13,381			13,016
Construction in progress		788			664
		75,514			73,189
Accumulated depreciation		(11,512	)		(10,004	)
		64,002			63,185
Utilities and energy:
Utility generation, transmission and distribution systems		78,596			77,288
Interstate natural gas pipeline assets		7,637			7,524
Independent power plants and other assets		8,572			8,324
Construction in progress		5,313			3,110
		100,118			96,246
Accumulated depreciation		(28,794	)		(27,651	)
		71,324			68,595
	$	135,326		$	131,780

Notes to Consolidated Financial Statements(Continued)

Note 10. Property, plant and equipment (Continued)

Depreciation expense for the first nine months of 2019 and 2018 is summarized below (in millions).

	First Nine Months
	2019		2018
Insurance and other	$	1,660	$	1,622
Railroad, utilities and energy		3,881		3,678
	$	5,541	$	5,300

Note 11. Equipment held for lease

Equipment held for lease includes railcars, aircraft, over-the-road trailers, intermodal tank containers, cranes, storage units and furniture. Equipment held for lease is summarized below (in millions).

	September 30, 2019			December 31, 2018
Railcars	$	9,211		$	8,862
Aircraft		7,907			7,376
Other equipment held for lease		4,802			4,379
		21,920			20,617
Accumulated depreciation		(6,986	)		(6,319	)
	$	14,934		$	14,298

Depreciation expense for equipment held for lease in the first nine months was $880 million in 2019 and $817 million in 2018. Operating lease revenues by type for the third quarter and first nine months of 2019 were as follows (in millions).

Fixed lease

revenue

Variable lease

revenue

Total

Third quarter

1,097

341

1,438

First nine months

3,289

1,076

4,365

Future operating lease rentals to be received on assets we lease to others at September 30, 2019 are as follows (in millions).

2019				2020				2021				2022				2023				Thereafter				Total
$	674			$	2,245			$	1,659			$	1,134			$	726			$	590			$	7,028

Note 12. Leases

We are party to contracts where we lease property from others. As a lessee, we primarily lease office and operating facilities, locomotives, freight cars, energy generation facilities and transmission assets. Operating lease right-of-use assets and lease liabilities as of September 30, 2019 were $5,996 million and $5,852 million, respectively, and were included in other assets and accounts payable, accruals and other liabilities in our Consolidated Balance Sheet. The weighted average term of these leases was approximately 7.5 years and the weighted average discount rate used to measure lease liabilities was approximately 3.9%. A summary of our remaining operating lease payments as of September 30, 2019 and December 31, 2018 follows (in millions).

2019

2020

2021

2022

2023

Thereafter

Total lease

payments

Amount

representing

interest

Lease

liabilities

September 30, 2019

296

1,363

1,140

915

732

2,423

6,869

(1,017

)

5,852

December 31, 2018

1,310

1,268

1,048

820

658

2,079

7,183

Components of operating lease costs for the third quarter and first nine months of 2019 by type were as follows (in millions).

Operating

lease cost

Short-term

lease cost

Variable

lease cost

Sublease

income

Total

lease cost

Third quarter

355

)

451

First nine months

1,083

118

202

(18

)

1,385

Notes to Consolidated Financial Statements(Continued)

Note ~~6. Equity Method Investments~~13. Goodwill and other intangible assets

~~Berkshire holds investments in certain businesses that are accounted for pursuant to~~Reconciliations of the ~~equity method. Currently, the most significant of these is our investment~~changes in the common stock of The Kraft Heinz Company (“Kraft Heinz”). 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. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.7% of the outstanding shares. The carrying value ~~and fair value~~ of this investment at September 30, 2018 was approximately $17.5 billion and $17.9 billion, respectively, and at December 31, 2017 was $17.6 billion and $25.3 billion, respectively. Our earnings determined under the equity method duringgoodwill for the first nine months of 2019 and for the year ended December 31, 2018 follows (in millions).

	September 30, 2019			December 31, 2018
Balance at beginning of year	$	81,025		$	81,258
Acquisitions of businesses		279			376
Other, including foreign currency translation		(76	)		(609	)
Balance at end of period	$	81,228		$	81,025

Other intangible assets and ~~2017 were $635 million and $800 million, respectively. We received dividends on the common stock of $610 million~~related accumulated amortization are summarized as follows (in millions).

	September 30, 2019				December 31, 2018
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other:
Trademarks and trade names	$	5,145	$	743	$	5,152	$	727
Patents and technology		4,524		2,973		4,446		2,790
Customer relationships		27,786		4,874		27,697		4,287
Other		3,169		1,246		3,198		1,190
	$	40,624	$	9,836	$	40,493	$	8,994

Railroad, utilities and energy:
Trademarks and trade names	$	216	$	27	$	216	$	23
Customer relationships		678		315		678		286
Other		117		56		117		53
	$	1,011	$	398	$	1,011	$	362

Intangible asset amortization expense in the first nine months was $986 million in 2019 and $1,052 million in 2018. Intangible assets with indefinite lives were $18.8 billion as of September 30, 2019 and $18.9 billion as of December 31, 2018 and ~~$594 million in the first nine months of 2017, which we recorded as reductions~~primarily related to certain customer relationships and trademarks and trade names.

Note 14. Derivative contracts

We are party to derivative contracts through certain of our ~~investment.~~

~~Summarized consolidated financial information~~subsidiaries. Currently, the most significant derivative contracts consist of ~~Kraft Heinz~~equity index put option contracts. The liabilities and related notional values of these contracts follows (in millions).

                       September 29,
2018      December 30,
2017
Assets
   $ 119,730    $ 120,232
Liabilities
   54,152    53,985
Third Quarter    First Nine Months
        2018                 2017                    2018                    2017
Sales
$ 6,378 $ 6,280    $ 19,368    $ 19,241





Net earnings attributable to Kraft Heinz common shareholders
$ 630 $ 944    $ 2,379    $ 2,996

Liabilities

Notional

Value

September 30, 2019

1,236

23,042

December 31, 2018

2,452

26,759

~~Other investments accounted for pursuant to~~

Notional value represents the ~~equity method include our investments~~aggregate undiscounted amounts payable assuming the value of each index is zero at each contract’s expiration date. Certain contracts are denominated in ~~Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC, d/b/a Pilot Flying J (“Pilot Flying J”),~~foreign currencies and ~~Electric Transmission Texas, LLC (“ETT”). Our investments in these entities were approximately $3.6 billion~~the related notional amounts are based on the foreign currency exchange rates as of ~~September 30, 2018~~the balance sheet date. Pre-tax gains from equity index put option contracts were $234 million and ~~$3.4 billion as of December 31, 2017 and were included in other assets. Our equity method earnings in these entities for the first nine months were $409~~$1,217 million ~~in 2018 and $132 million in 2017. Additional information concerning these investments follows.~~

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 6. Equity Method Investments~~~~(Continued)~~

We own a 50% interest in Berkadia with Jefferies Financial Group Inc. (“Jefferies”), formerly known as Leucadia National Corporation, 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 source of funding for Berkadia’s operations is through its issuance of commercial paper, which is currently limited to $1.5 billion. The commercial paper is supported by a surety policy issued by a Berkshire insurance subsidiary. Jefferies is obligated to indemnify us for~~one-half~~ of any losses incurred under the policy. In addition, a Berkshire Hathaway Energy Company subsidiary owns a 50% interest in ETT, an owner and operator of electric transmission assets in the Electric Reliability Council of Texas footprint. American Electric Power owns the other 50% interest.

On October 3, 2017, we entered into an investment agreement and an equity purchase agreement whereby we acquired a 38.6% interest in Pilot Flying J, headquartered in Knoxville, Tennessee. Pilot Flying J is one of the largest operators of travel centers in North America, with more than 28,000 team members, 750 locations across the U.S. and Canada and more than $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.

~~Note 7. Income taxes~~

~~Our consolidated effective income tax rates for the third quarter and first nine months of 2018 were 19.2% and 19.1%, respectively, and 25.3% and 27.2%~~ in the third quarter and first nine months of ~~2017, respectively. Our effective income tax rate normally reflects recurring benefits from: (a) dividends received deductions applicable to certain investments in equity securities~~2019, respectively, and (b) income production tax credits related to wind-powered electricity generation placed in service in the U.S. In 2018, our effective income tax rate reflects the current U.S. statutory rate of 21%, while the rate for 2017 reflects the then current U.S. statutory rate of 35%. The relative mix of~~pre-tax~~ ~~earnings or losses~~$137 million and ~~underlying income tax rates applicable to the various taxing jurisdictions can also affect our periodic consolidated effective income tax rate.~~

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”) to provide clarification in implementing the Tax Cuts and Jobs Act of 2017 (“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 be reasonably estimated. We recorded income tax expense of approximately $1.4 billion in the fourth quarter of 2017, representing our provisional estimate of the U.S. Federal and state income taxes on the deemed repatriation of accumulated undistributed earnings of foreign subsidiaries. We continue to consider this estimate to be provisional and subject to remeasurement when we obtain the necessary additional information to complete the measurement. As of September 30, 2018, we had not finalized the inputs to the foreign earnings and profits calculations, the basis on which income taxes are determined. Our accounting for the repatriation tax under the TCJA will be completed during the fourth quarter of 2018. We do not anticipate significant adjustments to the provisional estimates.

~~Note 8. Investment gains/losses~~

~~A summary of investment gains and losses~~$303 million in the third quarter and first nine months of 2018, ~~and 2017 follows (in millions).~~respectively.

   Third Quarter    First Nine Months
       2018            2017            2018            2017
Equity securities:

Unrealized investment gains/losses on securities held at the end of the period
   $ 14,294    $ —    $ 12,126    $ —
Investment gains/losses during 2018 on securities sold in 2018
   244    —    307    —
Gross realized gains
   —    1,011    —    1,795
Gross realized losses
   —    (419)    —    (626)








   14,538    592    12,433    1,169








Fixed maturity securities:

Gross realized gains
   44    56    451    82
Gross realized losses
   (10)    (2)    (152)    (16)
Other
   (3)    11    18    27








   $     14,569    $ 657    $     12,750    $     1,262

Notes to Consolidated Financial Statements(Continued)

Note ~~8. Investment gains/losses~~14. Derivative contracts (Continued)

~~Prior~~The equity index put option contracts are European style options written prior to ~~2018,~~March 2008 on four major equity indexes. The remaining contracts expire between October 2019 and October 2025. The weighted average life of unexpired contracts at September 30, 2019 was approximately 1.3 years. Contracts with notional values of $9.0 billion will expire in the fourth quarter of 2019. Future payments, if any, under any given contract will be required if the prevailing index value is below the contract strike price at the expiration date. We received aggregate premiums of $3.6 billion on the contract inception dates with respect to unexpired contracts at September 30, 2019 and we ~~recognized investment gains and losses in earnings when we sold or otherwise disposed of equity securities~~have 0 counterparty credit risk. The aggregate intrinsic value (the undiscounted liability assuming the contracts are settled based on the ~~difference between~~index values and foreign currency exchange rates as of the ~~proceeds from~~balance sheet date) was $626 million at September 30, 2019 and $1,653 million at December 31, 2018. These contracts may not be unilaterally terminated or fully settled before the ~~sale~~expiration dates and the ~~cost~~ultimate amount of ~~the securities and also when we recognized other-than-temporary impairment losses. Beginning in 2018, equity securities~~cash basis gains ~~and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own. Prior to 2018, we recorded the changes in unrealized gains and~~or losses on these contracts will not be determined until the contract expiration dates.

A limited number of our ~~investments~~equity index put option contracts contain collateral posting requirements with respect to changes in ~~equity securities in other comprehensive income. See Note 2.~~

During the first nine months of 2018, as reflected on the Consolidated Statement of Cash Flows, we received proceeds of approximately $14.2 billion from sales of equity securities. In the table above, investment gains/losses on equity securities sold during 2018 reflect the difference between proceeds from sales and the fair value or intrinsic value of the ~~equity security sold at the beginning~~contracts and/or a downgrade of ~~the period~~Berkshire’s credit ratings. As of September 30, 2019, we did not have 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 ~~the purchase date, if later.~~ A3 by Moody’s, collateral of up to $1.1 billion could be required to be posted.

Our ~~taxable gains on equity securities sold during the third quarter and first nine months of 2018, which~~regulated utility subsidiaries are ~~generally the difference between the proceeds from sales and our original cost, were $1,329 million and $2,688 million, respectively.~~

~~Note 9. Receivables~~

~~Receivables of insurance and other businesses are comprised of the following (in millions).~~

   September 30,
2018    December 31,
2017
Insurance premiums receivable
   $ 13,002    $ 11,058
Reinsurance recoverable on unpaid losses
   2,944    3,201
Trade receivables
   13,197    11,756
Other
   3,121    2,925
Allowances for uncollectible accounts
   (380)    (362)




   $ 31,884    $ 28,578

~~A summary of loans and finance receivables of our finance and financial products businesses follows (in millions).~~

   September 30,
2018    December 31,
2017
Loans and finance receivables before allowances and discounts
   $ 14,832    $ 14,126
Allowances for uncollectible loans
   (183)    (180)
Unamortized acquisition discounts
   (172)    (198)




   $ 14,477    $ 13,748

~~Loans and finance receivables are predominantly installment loans originated or acquired by our manufactured housing business. Provisions for loan losses~~exposed to variations in the ~~first nine months~~prices of ~~2018~~fuel required to generate electricity, wholesale electricity purchased and 2017 were $109 million and $124 million, respectively. Loan charge-offs, net of recoveries, in the first nine months were $106 million in 2018 and $126 million in 2017. At September 30, 2018, we evaluated approximately 98% of the loan balances collectively for impairment. As part of the evaluation process, credit quality indicators were reviewed and loans were designated as performing or~~non-performing.~~ ~~At September 30, 2018, we considered approximately 99% of the loan balances to be performing and approximately 95% of the loan balances to be current as to payment status.~~

~~Note 10. Inventories~~

~~Inventories are comprised of the following (in millions).~~

   September 30,
2018    December 31,
2017
Raw materials
   $ 3,326    $ 2,997
Work in process and other
   2,232    2,315
Finished manufactured goods
   4,150    4,179
Goods acquired for resale
   7,085    6,696




   $ 16,793    $ 16,187

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 11. 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).~~

   September 30,
2018    December 31,
2017
Land
   $ 2,272    $ 2,292
Buildings and improvements
   9,034    8,810
Machinery and equipment
   28,594    21,935
Furniture, fixtures and other
   4,972    4,387




   44,872    37,424
Accumulated depreciation
   (20,515)    (17,320)




   $ 24,357    $ 20,104

~~In conjunction with the adoption of ASC 606, we recorded a net asset of approximately $3.5 billion related to aircraft~~ sold under fractional aircraft ownership programs in machinery and equipment. Such amount included cost of approximately $5.3 billion, net of accumulated depreciation of $1.8 billion. We also recorded other liabilities of approximately $3.5 billion for estimated aircraft repurchase obligations and unearned lease revenues, substantially offsetting the amount recorded in machinery and equipment. See Note 2.

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.~~

   September 30,
2018    December 31,
2017
Railroad:

Land, track structure and other roadway
   $ 58,755    $ 57,408
Locomotives, freight cars and other equipment
   12,731    12,543
Construction in progress
   910    989




   72,396    70,940
Accumulated depreciation
   (9,596)    (8,627)




   62,800    62,313




Utilities and energy:

Utility generation, transmission and distribution systems
   75,751    74,660
Interstate natural gas pipeline assets
   7,295    7,176
Independent power plants and other assets
   8,156    7,499
Construction in progress
   3,724    2,556




   94,926    91,891
Accumulated depreciation
   (27,339)    (26,020)




   67,587    65,871




   $ 130,387    $ 128,184

~~Notes~~supplied for customers. We may use forward purchases and sales, futures, swaps and options to ~~Consolidated Financial Statements~~~~(Continued)~~

~~Note 11. Property, plant and equipment and~~manage a portion of these price risks. Most of the net derivative contract assets ~~held for lease~~~~(Continued)~~

~~Assets held for lease and property, plant and equipment~~or liabilities of our ~~finance~~regulated utilities are probable of recovery through rates and ~~financial products businesses~~ are ~~summarized below (in millions). Assets held for lease include railcars, intermodal tank containers, cranes,over-the-road~~ ~~trailers, storage units and furniture.~~

   September 30,
2018    December 31,
2017
Assets held for lease
   $ 12,736    $ 12,318
Land
   240    231
Buildings, machinery and other
   1,527    1,444




   14,503    13,993
Accumulated depreciation
   (4,230)    (4,062)




   $ 10,273    $ 9,931

~~A summary of depreciation expense for the first nine months of 2018 and 2017 follows (in millions).~~

           First Nine Months
   2018    2017
Insurance and other
   $ 1,954    $ 1,636
Railroad, utilities and energy
   3,678    3,604
Finance and financial products
   485    487




   $ 6,117    $ 5,727

~~Note 12. Goodwill and other intangible assets~~

~~A reconciliation of the change in the carrying value of goodwill is as follows (in millions).~~

   September 30,
2018    December 31,
2017
Balance at beginning of year
   $ 81,258    $ 79,486
Acquisitions of businesses
   250    1,545
Other, including foreign currency translation
   (181)    227




Balance at end of period
   $ 81,327    $ 81,258

~~Other intangible~~offset by regulatory liabilities or assets. Derivative contract assets are ~~summarized as follows (in millions).~~

   September 30, 2018    December 31, 2017
     Gross carrying
amount    Accumulated
amortization      Gross carrying
amount    Accumulated
amortization
Insurance and other
   $ 40,288    $ 8,662    $ 40,225    $ 7,707
Railroad, utilities and energy
   1,026    362    988    324








   $ 41,314    $ 9,024    $ 41,213    $ 8,031








Trademarks and trade names
   $ 5,396    $ 744    $ 5,381    $ 692
Patents and technology
   4,408    2,716    4,341    2,493
Customer relationships
   28,343    4,351    28,322    3,722
Other
   3,167    1,213    3,169    1,124








   $ 41,314    $ 9,024    $ 41,213    $ 8,031

~~Amortization expense~~included in ~~the first nine months was $1,052~~other assets and were $144 million ~~in 2018 and $1,108 million in 2017. Intangible assets with indefinite lives were approximately $18.9 billion~~ as of September 30, ~~2018~~2019 and $172 million as of December 31, ~~2017.~~2018. Derivative contract liabilities are included in accounts payable, accruals and other liabilities and were $96 million as of September 30, 2019 and $111 million as of December 31, 2018.

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

Note ~~13. Derivative contracts~~15. Supplemental cash flow information

~~We are party to derivative contracts primarily through our finance and financial products and our utilities and energy businesses. Currently,~~A summary of supplemental cash flow information is presented in 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 followsfollowing table (in millions).

   September 30, 2018    December 31, 2017
       Liabilities            Notional
Value        Liabilities            Notional
Value
Equity index put options
   $ 1,869    $ 27,434⁽¹⁾    $ 2,172    $ 28,753⁽¹⁾

	First Nine Months
	2019		2018
Cash paid during the period for:
Income taxes	$	4,395	$	3,977
Interest:
Insurance and other		879		934
Railroad, utilities and energy		2,149		2,129
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions		147		93
Right-of-use assets obtained in exchange for new operating lease liabilities		526		—

Notes to Consolidated Financial Statements(Continued)

⁽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.

~~We record equity index put option contract~~Note 16. Unpaid losses and loss adjustment expenses

Our liabilities ~~at fair value~~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 on or before the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. Reconciliations of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 17), for each of the ~~fair values of such contracts in earnings as derivative contract gains/losses. A summary of derivative contract gains/losses included in our Consolidated Statements of Earnings follows~~nine months ending September 30, 2019 and 2018 follow (in millions).

   Third Quarter    First Nine Months
       2018            2017            2018            2017
Equity index put options
   $ 137    $ 308    $ 303    $ 703

	2019			2018
Balances – beginning of year:
Gross liabilities	$	68,458		$	61,122
Reinsurance recoverable on unpaid losses		(3,060	)		(3,201	)
Net liabilities		65,398			57,921
Incurred losses and loss adjustment expenses:
Current accident year events		31,179			29,071
Prior accident years’ events		(396	)		(1,566	)
Total incurred losses and loss adjustment expenses		30,783			27,505
Paid losses and loss adjustment expenses:
Current accident year events		(13,144	)		(12,474	)
Prior accident years’ events		(13,967	)		(11,516	)
Total payments		(27,111	)		(23,990	)
Foreign currency translation adjustment		(178	)		(117	)
Balances – September 30:
Net liabilities		68,892			61,319
Reinsurance recoverable on unpaid losses		3,105			2,944
Gross liabilities	$	71,997		$	64,263

~~The equity index put option contracts are European style options written prior to March 2008 on four major equity indexes. The remaining contracts expire between April~~

Incurred losses and loss adjustment expenses in the first nine months of 2019 and ~~January 2026. At September 30,~~ 2018 included net decreases of estimated ultimate liabilities for prior accident years of $396 million and $1,566 million, respectively. Increases and decreases in estimated ultimate liabilities produce corresponding decreases and increases to pre-tax earnings. The reductions in incurred losses for prior accident years’ events for the ~~remaining weighted average life~~first nine months as percentages of ~~all contracts was approximately 2.25 years.~~ net liabilities at the beginning of the respective year were 0.6% in 2019 and 2.7% in 2018.

In the ~~second quarter~~first nine months of ~~2018, one equity index put option contract expired with no payment~~2019, we lowered estimated ultimate liabilities of primary insurance for prior years’ events by $321 million, compared to $985 million in 2018. Reductions of estimated liabilities in the ~~counterparty.~~

~~Future payments, if any, under any given contract will be required if~~first nine months of 2019 were lower than the ~~prevailing index value is below the contract strike price at the expiration date. We received aggregate premiums~~first nine months of approximately $4.1 billion on the remaining 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 $919 million at September 30, 2018 and $789 million at December 31, 2017. 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 determined until the contract expiration dates.

~~A limited number of our equity index put option contracts contain collateral posting requirements~~ with respect to ~~changes~~private passenger automobile and medical malpractice insurance. In addition, we increased estimated liabilities in the ~~fair value or intrinsic value~~first nine months of 2019 for legacy casualty exposures and other commercial insurance business.

In the ~~contracts and/or a downgrade~~first nine months of ~~Berkshire’s credit ratings. As of September 30, 2018,~~2019, we ~~did not have any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard & Poor’s~~decreased estimated ultimate property and ~~Aa2 from Moody’s) are downgraded below either~~A-casualty reinsurance liabilities for prior years’ events by ~~Standard & Poor’s or A3 by Moody’s, collateral of up~~$75 million, compared to ~~$1.1 billion could be required to be posted.~~

~~Our regulated utility subsidiaries are exposed to variations~~$581 million in the ~~prices~~first nine months of fuel required to generate electricity, wholesale electricity purchased and sold and natural gas supplied for customers. We may use forward purchases and sales, futures, swaps and options to manage a portion of these price risks. 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 or assets. Derivative contract assets are included2018. The decreases in ~~other assets and were $154 million as of September 30, 2018 and $142 million as of December 31, 2017. Derivative contract liabilities are included~~prior years’ incurred losses in ~~other liabilities and were $80 million as of September 30, 2018 and $82 million as of December 31, 2017.~~each year derived primarily from property claims.

Notes to Consolidated Financial Statements(Continued)

~~Note 14. Supplemental cash flow information~~

~~Supplemental cash flow information follows (in millions).~~

       First Nine Months
   2018    2017
Cash paid during the period for:

Income taxes
   $   3,977    $   1,774
Interest:

Insurance and other businesses
   677    747
Railroad, utilities and energy businesses
   2,129    2,111
Finance and financial products businesses
   257    296
Non-cash investing and financing activities:

Liabilities assumed in connection with business acquisitions
   93    685
Equity securities surrendered in connection with warrant exercise
   —    4,965

Note ~~15. 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. Reconciliations of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 16), for the nine months ending September 30, 2018 and 2017 follow (in millions).

   2018    2017
Balances – beginning of year:

Gross liabilities
   $ 61,122    $ 53,379
Reinsurance recoverable on unpaid losses
   (3,201)    (3,338)




Net liabilities
   57,921    50,041




Incurred losses and loss adjustment expenses:

Current accident year events
   29,071    28,632
Prior accident years’ events
   (1,566)    (461)




Total incurred losses and loss adjustment expenses
   27,505    28,171




Paid losses and loss adjustment expenses:

Current accident year events
   (12,474)    (11,539)
Prior accident years’ events
   (11,516)    (9,952)




Total payments
   (23,990)    (21,491)




Foreign currency translation adjustment
   (117)    603




Balances – September 30:

Net liabilities
   61,319    57,324
Reinsurance recoverable on unpaid losses
   2,944    3,254




Gross liabilities
   $     64,263    $     60,578

Incurred losses and loss adjustment expenses in the first nine months of 2018 and 2017 included net reductions of estimated ultimate claim liabilities for prior accident years of $1,566 million and $461 million, respectively. We reduced estimated ultimate claim liabilities for prior accident years related to primary insurance by $985 million in the first nine months of 2018 and $569 million in the first nine months of 2017, which included reductions of $478 million in 2018 and increases of $37 million in 2017 related to private passenger automobile insurance coverages. We also reduced estimated ultimate claim liabilities with respect to prior accident years for property and casualty reinsurance by $581 million in the first nine months of 2018, compared to an increase of $108 million in the first nine months of 2017.

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 16.~~17. 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~~Depending on the contract terms, claims payments may commence immediately after the contract date or ~~if applicable,~~ once a contractual retention amount has been reached. Reconciliations of the changes 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 nine months ending September 30, ~~2018~~2019 and ~~2017~~2018 follows (in millions).


	2018				2017				2019						2018
	Unpaid losses and loss adjustment expenses		Deferred charges reinsurance assumed		Unpaid losses and loss adjustment expenses		Deferred charges reinsurance assumed		Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed			Unpaid losses and loss adjustment expenses			Deferred charges reinsurance assumed
Balances – beginning of year:	$	42,937	$	(15,278)	$	24,972	$	(8,047)	$	41,834		$	(14,104	)	$	42,937		$	(15,278	)

Incurred losses and loss adjustment expenses
Current year contracts		—		—		17,213		(6,170)		175			(82	)		—			—
Prior years’ contracts		(36)		827		(409)		645		(2	)		827			(36	)		827

Total		(36)		827		16,804		(5,525)		173			745			(36	)		827


Paid losses and loss adjustment expenses		(966)		—		(783)		—		(643	)		—			(966	)		—


Balances – September 30:	$	41,935	$	(14,451)	$	40,993	$	(13,572)	$	41,364		$	(13,359	)	$	41,935		$	(14,451	)

Incurred losses and loss adjustment expenses, net of deferred charges	$	791			$	11,279			$	918					$	791

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts. ~~We do not believe that analysis of~~Incurred 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 case development liabilities has little or no practical analytical value.

Inloss adjustment expenses in the first ~~quarter~~nine months related to contracts written in prior years were $825 million in 2019 and $791 million in 2018. Such losses reflected the periodic amortization of deferred charge assets and the effects of changes in the timing and amount of ultimate claim liabilities.

In 2017, National Indemnity Company (“NICO”)~~, a wholly-owned subsidiary,~~ entered into ~~an agreement~~a contract with various subsidiaries of American International Group, Inc. (collectively, “AIG”), which became effective on February 2, 2017. Under this agreement, 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 losses incurred of $10.2 billion, which consisted of liabilities for unpaid losses and loss adjustment expenses of $16.4 billion and deferred charge reinsurance assumed assets of $6.2 billion. Berkshire agreed to guarantee the timely payment of all amounts due to AIG under the agreement.. Our estimated ultimate claim liabilities with respect to the AIG contract at both September 30, ~~2018~~2019 and at December 31, ~~2017~~2018 were $18.2 ~~billion, which reflected an increase of $1.8 billion in estimated ultimate claim liabilities recorded in the fourth quarter of 2017.~~billion. Deferred charge assets related to the AIG contract were approximately ~~$7.1~~$6.4 billion at September 30, ~~2018~~2019 and ~~$7.5~~$6.9 billion at December 31, ~~2017, which included an additional $1.7 billion arising from the aforementioned increase to ultimate claim liabilities~~2018.

Note 18. 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 ~~fourth quarter.~~following tables are based on borrowings as of September 30, 2019.

~~Incurred losses~~

	Weighted Average Interest Rate			September 30, 2019		December 31, 2018
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2019-2047		3.2	%	$	8,321	$	9,065
Euro denominated due 2020-2035		1.1	%		7,422		7,806
Japanese Yen denominated due 2024-2049		0.5	%		3,962		—
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2020-2049		4.1	%		8,679		10,650
Great Britain Pound denominated due 2039-2059		2.5	%		2,108		—
Other subsidiary borrowings due 2019-2045		4.0	%		5,304		5,597
Subsidiary short-term borrowings		4.1	%		1,380		1,857
				$	37,176	$	34,975

Notes to Consolidated Financial Statements(Continued)

Note 18. Notes payable and ~~loss adjustment expenses related~~other borrowings (Continued)

In September 2019, Berkshire issued ¥430.0 billion of senior notes consisting of ¥108.5 billion of 0.17% senior notes due in 2024, ¥61.0 billion of 0.27% senior notes due in 2026, ¥146.5 billion of 0.44% senior notes due in 2029, ¥19.0 billion of 0.787% senior notes due in 2034, ¥59.0 billion of 0.965% senior notes due in 2039 and ¥36.0 billion of 1.108% senior notes due in 2049.

Borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, consist of senior unsecured notes used to ~~contracts written~~fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. BHFC repaid $3.95 billion of maturing senior notes in ~~prior years were $791~~the first nine months of 2019. In January 2019, BHFC issued $2.0 billion of 4.25% senior notes due in 2049. In June 2019, BHFC also issued £1.75 billion of senior notes consisting of £1.0 billion of 2.375% senior notes due in 2039 and £750 million of 2.625% senior notes due in 2059.

The carrying values of our non-U.S. Dollar denominated senior notes (€6.85 billion, £1.75 billion and ¥430 billion par) reflect the applicable exchange rates as of the balance sheet dates. The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling, general and administrative expenses. Changes in the exchange rates resulted in pre-tax gains of $447 million in the first nine months of ~~2018~~2019 and ~~$236~~$273 million in the first nine months of ~~2017.~~2018.

In addition to BHFC borrowings, Berkshire guaranteed approximately $1.3 billion of other subsidiary borrowings at September 30, 2019. 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.

	Weighted Average Interest Rate			September 30, 2019		December 31, 2018
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2020-2049		4.6	%	$	8,580	$	8,577
Subsidiary and other debt due 2019-2064		4.5	%		29,329		28,196
Short-term borrowings		2.8	%		3,119		2,516
Burlington Northern Santa Fe and subsidiaries due 2019-2097		4.6	%		23,990		23,226
				$	65,018	$	62,515

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements generally contain various covenants, including covenants which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios. During the first nine months of 2019, BHE and its subsidiaries issued approximately $3.4 billion of long-term debt. The debt issued in 2019 has maturity dates ranging from 2029 to 2050 and a weighted average interest rate of 3.9%. Proceeds from these debt issuances were used to repay debt, to fund capital expenditures and for general corporate purposes.

BNSF’s borrowings are primarily senior unsecured debentures. In July 2019, BNSF issued $825 million of 3.55% senior unsecured debentures due in 2050. As of September 30, 2019, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

As of September 30, 2019, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $7.2 billion to support short-term borrowing programs and provide additional liquidity. Such ~~losses~~unused lines of credit included ~~recurring amortization of deferred charge assets~~approximately $5.7 billion related to BHE and ~~net gains from reductions of estimated ultimate claim liabilities.~~its subsidiaries.

Notes to Consolidated Financial Statements(Continued)

Note ~~17. Notes payable and other borrowings~~

Notes payable and other borrowings are summarized below (dollars in millions). The weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of September 30, 2018.

   Weighted
Average
Interest Rate September 30,
2018    December 31,
2017
Insurance and other:
Issued by Berkshire:

U.S. Dollar denominated borrowings due 2018-2047
   3.1 % $ 9,058    $ 10,603
Euro denominated borrowings due 2020-2035
   1.1 % 7,897    8,164
Short-term subsidiary borrowings
   4.1 % 1,733    1,832
Other subsidiary borrowings due 2018-2045
   4.0 % 5,583    6,725




   $ 24,271    $ 27,324

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 17. Notes payable and other borrowings~~~~(Continued)~~

The carrying value of Berkshire’s Euro denominated senior notes reflects the Euro/U.S. Dollar exchange rate as of the balance sheet date. The gains or losses arising from the changes in the Euro/U.S. Dollar exchange rate during the period are recorded in earnings as a component of interest expense. The change in the Euro/U.S. Dollar exchange rate in the first nine months of 2018 resulted in reductions of $273 million in interest expense and to the carrying value of the Euro denominated senior notes compared to increases of $860 million in interest expense and to the carrying value of the notes in the first nine months of 2017.

   Weighted
Average
Interest Rate    September 30,
2018    December 31,
2017
Railroad, utilities and energy:

Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:

BHE senior unsecured debt due 2018-2049
   4.5%      $ 8,970    $ 6,452
Subsidiary and other debt due 2019-2064
   4.7%    28,588    28,739
Short-term debt
   3.0%    1,784    4,488
Issued by BNSF due 2018-2097
   4.7%    23,257    22,499




        $ 62,599    $ 62,178

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements generally contain various covenants, which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios, among other covenants. During the first nine months of 2018, BHE and its subsidiaries issued approximately $5.5 billion of long-term debt, including $2.05 billion in the third quarter. The debt issued in 2018 has maturity dates ranging from 2020 to 2049 and a weighted average interest rate of 3.6%. Proceeds from these debt issuances were used to repay debt, to fund capital expenditures and for general corporate purposes.

BNSF’s borrowings are primarily senior unsecured debentures. In the first nine months of 2018, BNSF issued $1.5 billion of senior unsecured debentures due in 2048, including $750 million in the third quarter. These debentures have a weighted average interest rate of 4.1%. In 2018, BNSF repaid $650 million of maturing debentures. As of September 30, 2018, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

   Weighted
Average
Interest Rate    September 30,
2018    December 31,
2017
Finance and financial products:

Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2019-2048
   3.3%    $ 10,649    $ 12,926
Issued by other subsidiaries due 2018-2028
   3.6%    121    159




      $ 10,770    $ 13,085

Borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and assets held for lease of certain finance subsidiaries. In August 2018, BHFC issued $2.35 billion of 4.2% senior notes due in 2048. Such borrowings are fully and unconditionally guaranteed by Berkshire. During the first nine months of 2018, BHFC repaid $4.6 billion of maturing senior notes.

As of September 30, 2018, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $8.4 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included approximately $6.8 billion related to BHE and its subsidiaries. In addition to BHFC’s borrowings, Berkshire guaranteed approximately $1.7 billion of other subsidiary borrowings at September 30, 2018. 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.

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

~~Note 18.~~19. Fair value measurements

Our financial assets and liabilities are summarized below as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018, 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.

											Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2018
September 30, 2019
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	3,599	$	3,599	$	2,378	$	1,221	$	—	$	3,805	$	3,805	$	2,833	$	972	$	—
U.S. states, municipalities and political subdivisions		290		290		—		290		—
States, municipalities and political subdivisions												157		157		—		157		—
Foreign governments		7,370		7,370		5,162		2,208		—		8,023		8,023		5,752		2,271		—
Corporate bonds		6,458		6,458		—		6,453		5		6,704		6,704		—		6,701		3
Mortgage-backed securities		554		554		—		554		—		483		483		—		483		—
Investments in equity securities		207,332		207,332		206,985		47		300		220,051		220,051		209,195		51		10,805
Investment in Kraft Heinz common stock		17,453		17,935		17,935		—		—		13,770		9,091		9,091		—		—
Loans and finance receivables		14,477		14,735		—		59		14,676		17,135		17,367		—		1,758		15,609
Derivative contract assets⁽¹⁾		154		154		3		41		110		144		144		—		18		126
Derivative contract liabilities:
Railroad, utilities and energy⁽¹⁾		80		80		1		63		16		96		96		6		62		28
Equity index put options		1,869		1,869		—		—		1,869		1,236		1,236		—		—		1,236
Notes payable and other borrowings:
Insurance and other		24,271		24,422		—		24,422		—		37,176		40,409		—		40,381		28
Railroad, utilities and energy		62,599		66,823		—		66,823		—		65,018		76,008		—		76,008		—
Finance and financial products		10,770		10,979		—		10,953		26

December 31, 2017
December 31, 2018
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	3,953	$	3,953	$	2,360	$	1,593	$	—	$	4,223	$	4,223	$	2,933	$	1,290	$	—
U.S. states, municipalities and political subdivisions		854		854		—		854		—
States, municipalities and political subdivisions												189		189		—		189		—
Foreign governments		8,822		8,822		6,946		1,876		—		7,502		7,502		5,417		2,085		—
Corporate bonds		6,862		6,862		—		6,856		6		7,440		7,440		—		7,434		6
Mortgage-backed securities		862		862		—		862		—		544		544		—		544		—
Investments in equity securities		170,540		170,540		170,494		46		—		172,757		172,757		172,253		203		301
Investment in Kraft Heinz common stock		17,635		25,306		25,306		—		—		13,813		14,007		14,007		—		—
Loans and finance receivables		13,748		14,136		—		17		14,119		16,280		16,377		—		1,531		14,846
Derivative contract assets⁽¹⁾		142		142		1		28		113		172		172		2		52		118
Derivative contract liabilities:
Railroad, utilities and energy⁽¹⁾		82		82		3		69		10		111		111		1		101		9
Equity index put options		2,172		2,172		—		—		2,172		2,452		2,452		—		—		2,452
Notes payable and other borrowings:
Insurance and other		27,324		28,180		—		28,180		—		34,975		35,361		—		35,335		26
Railroad, utilities and energy		62,178		70,538		—		70,538		—		62,515		66,422		—		66,422		—
Finance and financial products		13,085		13,582		—		13,577		5

⁽¹⁾

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

Notes to Consolidated Financial Statements(Continued)

Note ~~18.~~ 19. 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 or~~markets; quoted prices for identical assets or liabilities exchanged in inactive ~~markets. In addition,~~markets; other inputs that may be considered in fair value determinations ~~may include~~of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default ~~rates,~~rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

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

Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the nine months ~~ending~~ended September 30, ~~2018~~2019 and ~~2017~~2018 follow (in millions).

     Investments
in equity
and fixed
maturity
securities    Net
    derivative
contract
liabilities
Nine months ending September 30, 2018

Balance at December 31, 2017
   $ 6    $ (2,069)
Gains (losses) included in:

Earnings
   —    446
Regulatory assets and liabilities
   —    (11)
Acquisitions, dispositions and settlements
   (1)    (141)




Balance at September 30, 2018
   $ 5    $ (1,775)




Nine months ending September 30, 2017

Balance at December 31, 2016
   $ 17,321    $ (2,824)
Gains (losses) included in:

Earnings
   —    822
Other comprehensive income
   1,157    (3)
Regulatory assets and liabilities
   —    (5)
Acquisitions, dispositions and settlements
   (58)    (78)
Transfers into/out of Level 3
   (18,413)    —




Balance at September 30, 2017
   $ 7    $ (2,088)

Gains and losses included in earnings are reported as components of investment gains/losses, derivative gains/losses and other revenues, as appropriate. In 2017, gains and losses included in other comprehensive income were primarily the net change in unrealized appreciation of investments and the reclassification of investment appreciation in net earnings in our Consolidated Statements of Comprehensive Income.

On June 30, 2017, we announced our intention to exercise our investment in Bank of America Corporation Warrants (“BAC Warrants”) for common stock in the third quarter of 2017 and that we expected to use our investment in Bank of America Corporation Preferred Stock as consideration. In the second quarter of 2017, Restaurant Brands International, Inc. (“RBI”) announced its intention to redeem our investment in RBI Preferred Shares in the fourth quarter of 2017. As of June 30, 2017, we based our valuations of these investments on such expectations and we significantly reduced expected durations and effectively eliminated the discounts for transferability and other restrictions. As a result, we concluded the Level 3 inputs used in the previous fair value determinations of our investments in BAC Warrants and RBI Preferred Shares were not significant and that the valuations of such investments were deemed Level 2 measurements.

				Gains (losses) included in:
	Balance – beginning of year			Earnings		Other comprehensive income			Regulatory assets and liabilities			Acquisitions, dispositions and settlements			Balance – September 30
Investments in fixed maturity and equity securities:
2019	$	307		$	499	$	—		$	—		$	10,002		$	10,808
2018		6			—		—			—			(1	)		5

Net derivative contract assets (liabilities):
2019		(2,343	)		1,528		(1	)		(40	)		(282	)		(1,138	)
2018		(2,069	)		446		—			(11	)		(141	)		(1,775	)

~~Notes to Consolidated Financial Statements~~~~(Continued)~~

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

Quantitative information as of September 30, ~~2018,~~2019, with respect to assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (in millions).

   Fair
Value    Principal Valuation
Techniques      Unobservable Inputs      Weighted
  Average
Derivative contract liabilities – Equity index put options    $   1,869      Option pricing model      Volatility    16%

Fair

Value

Principal Valuation

Techniques

Unobservable

Inputs

Weighted

Average

Investments in equity securities:

Preferred stocks

10,363

Discounted cash flow

Expected duration

10 years

Discount for transferability restrictions and subordination

375 basis points

Common stock warrants

136

Warrant pricing model

Expected duration

10 years

Derivative contract liabilities

1,236

Option pricing model

Volatility

16%

Investments in equity securities at September 30, 2019 included our investments in Occidental preferred stock and common stock warrants (see Note 4). These investments are subject to contractual restrictions on transferability and may contain provisions that prevent us from economically hedging our investments. In applying discounted cash flow techniques in valuing the perpetual preferred stock, we made assumptions regarding the expected duration of the investment, as the issuer may have the right to redeem or convert the stock. We also made estimates regarding the impact of subordination, as the preferred stock has a lower priority in liquidation than debt instruments of the issuer. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration of the investment. Increases or decreases to these inputs would result in decreases or increases to the fair value of the investments.

Notes to Consolidated Financial Statements(Continued)

Note 19. Fair value measurements (Continued)

Our equity index put option derivative 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 measurements. The methods we use to ~~measure fair values~~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 Berkshirenon-performance input) which are observable. However, we believe that the valuation of ~~our longer duration contracts~~long-duration options using any model is inherently subjective and, given the lack 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.

Note ~~19.~~20. Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the first nine months ~~ending September 30, 2018~~of 2019 are shown in the table below. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but ~~none~~NaN are issued.

   Class A, $5 Par Value
        (1,650,000 shares authorized)             Class B, $0.0033 Par Value
(3,225,000,000 shares authorized)
         Issued              Treasury            Outstanding                  Issued                  Treasury            Outstanding
Balance at December 31, 2017
   762,755    (11,680)    751,075    1,342,066,749    (1,409,762)    1,340,656,987
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition
   (16,850)    —    (16,850)    25,886,063    —    25,886,063
Treasury stock acquired
   —    (225)    (225)    —    (4,139,192)    (4,139,192)












Balance at September 30, 2018
   745,905    (11,905)    734,000    1,367,952,812    (5,548,954)    1,362,403,858

	Class A, $5 Par Value (1,650,000 shares authorized)									Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
	Issued			Treasury			Outstanding			Issued		Treasury			Outstanding
Balance December 31, 2018		742,213			(12,897	)		729,316			1,373,558,983		(6,138,909	)		1,367,420,074
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options		(18,581	)		—			(18,581	)		28,137,369		—			28,137,369
Treasury stock acquired		—			(1,752	)		(1,752	)		—		(11,454,833	)		(11,454,833	)
Balance at September 30, 2019		723,632			(14,649	)		708,983			1,401,696,352		(17,593,742	)		1,384,102,610

Each Class A common share is entitled to ~~one~~1 vote per share. Class B common stock possesses dividend and distribution rights equal toone-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent toone-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were ~~1,642,269~~1,631,718 shares outstanding as of September 30, ~~2018~~2019 and ~~1,644,846~~1,640,929 shares outstanding as of December 31, ~~2017.~~2018.

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

For several years, Berkshire had a common stock repurchase program ~~which~~that permitted 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. On July 17, 2018, Berkshire’s Board of Directors authorized an amendment to the program, permitting Berkshire to repurchase shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, ~~a Vice-Chairman~~Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The program continues to allow share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills 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.

Notes to Consolidated Financial Statements(Continued)

Note 21. Income taxes

Our consolidated effective income tax rates for the third quarter and first nine months of 2019 were 18.7% and 20.2%, respectively. Our effective income tax rates were 19.2% and 19.1% in the third quarter and first nine months of 2018, respectively. Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S. Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings and underlying income tax rates applicable in the various taxing jurisdictions. In the first quarter of 2019, we recorded income tax expense of $377 million for uncertain tax positions related to investments in certain tax equity investment funds that generated income tax benefits from 2015 through 2018. We now believe that it is more likely than not those income tax benefits are not valid.

Note 22. Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders and amounts reclassified out of accumulated other comprehensive income for the nine months ending September 30, 2019 and 2018 follows (in millions).

	Unrealized appreciation of investments, net			Foreign currency translation			Defined benefit pension plans			Other			Accumulated other comprehensive income
First nine months of 2019:
Balance at December 31, 2018	$	370		$	(4,603	)	$	(816	)	$	34		$	(5,015	)
Other comprehensive income, net before reclassifications		95			(534	)		(18	)		(32	)		(489	)
Reclassifications into net earnings:
Reclassifications before income taxes		53			—			68			6			127
Applicable income taxes		(11	)		—			(17	)		(3	)		(31	)
Balance at September 30, 2019	$	507		$	(5,137	)	$	(783	)	$	5		$	(5,408	)

First nine months of 2018:
Balance at December 31, 2017	$	62,093		$	(3,114	)	$	(420	)	$	12		$	58,571
Reclassifications to retained earnings upon adoption of new accounting standards		(61,340	)		(65	)		36			(6	)		(61,375	)
Other comprehensive income, net before reclassifications		(142	)		(776	)		(33	)		(19	)		(970	)
Reclassifications into net earnings:
Reclassifications before income taxes		(299	)		—			101			10			(188	)
Applicable income taxes		63			—			(25	)		(3	)		35
Balance at September 30, 2018	$	375		$	(3,955	)	$	(341	)	$	(6	)	$	(3,927	)

Note 23. Contingencies and Commitments

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

Notes to Consolidated Financial Statements(Continued)

Note 24. Revenues from contracts with customers

On January 1, 2018, we adopted ASC 606 “Revenues from Contracts with Customers.” Under ASC 606, revenues are recognized when a good or service is transferred to a customer. A good or service is transferred when or as the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers.

The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for the third quarter and first nine months of 2019 and 2018 (in millions). Other revenues included in consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues which are not within the scope of ASC 606.

	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending September 30, 2019
Manufactured products:
Industrial and commercial products	$	6,346	$	—	$	44	$	—	$	—	$	—	$	6,390
Building products		4,101		—		—		—		—		—		4,101
Consumer products		3,528		—		—		—		—		—		3,528
Grocery and convenience store distribution		—		8,298		—		—		—		—		8,298
Food and beverage distribution		—		4,202		—		—		—		—		4,202
Auto sales		—		—		2,250		—		—		—		2,250
Other retail and wholesale distribution		524		—		2,946		—		—		—		3,470
Service		445		80		1,034		5,967		1,191		—		8,717
Electricity and natural gas		—		—		—		—		4,213		—		4,213
Total		14,944		12,580		6,274		5,967		5,404		—		45,169
Other revenue		937		24		1,080		15		316		17,431		19,803
	$	15,881	$	12,604	$	7,354	$	5,982	$	5,720	$	17,431	$	64,972

Nine months ending September 30, 2019
Manufactured products:
Industrial and commercial products	$	19,308	$	—	$	136	$	—	$	—	$	—	$	19,444
Building products		11,796		—		—		—		—		—		11,796
Consumer products		10,487		—		—		—		—		—		10,487
Grocery and convenience store distribution		—		24,375		—		—		—		—		24,375
Food and beverage distribution		—		12,648		—		—		—		—		12,648
Auto sales		—		—		6,312		—		—		—		6,312
Other retail and wholesale distribution		1,602		—		8,959		—		—		—		10,561
Service		1,222		123		3,068		17,517		3,139		—		25,069
Electricity and natural gas		—		—		—		—		11,329		—		11,329
Total		44,415		37,146		18,475		17,517		14,468		—		132,021
Other revenue		2,715		68		3,323		41		894		50,186		57,227
	$	47,130	$	37,214	$	21,798	$	17,558	$	15,362	$	50,186	$	189,248

Notes to Consolidated Financial Statements(Continued)

Note 24. Revenues from contracts with customers (Continued)

	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	6,466	$	—	$	47	$	—	$	—	$	—	$	6,513
Building products		3,477		—		—		—		—		—		3,477
Consumer products		4,008		—		—		—		—		—		4,008
Grocery and convenience store distribution		—		8,709		—		—		—		—		8,709
Food and beverage distribution		—		4,079		—		—		—		—		4,079
Auto sales		—		—		2,083		—		—		—		2,083
Other retail and wholesale distribution		524		—		3,137		—		—		—		3,661
Service		395		16		980		6,099		1,140		—		8,630
Electricity and natural gas		—		—		—		—		4,267		—		4,267
Total		14,870		12,804		6,247		6,099		5,407		—		45,427
Other revenue		795		18		964		13		299		15,934		18,023
	$	15,665	$	12,822	$	7,211	$	6,112	$	5,706	$	15,934	$	63,450

Nine months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	19,809	$	—	$	155	$	—	$	—	$	—	$	19,964
Building products		9,828		—		—		—		—		—		9,828
Consumer products		11,858		—		—		—		—		—		11,858
Grocery and convenience store distribution		—		25,128		—		—		—		—		25,128
Food and beverage distribution		—		12,203		—		—		—		—		12,203
Auto sales		—		—		6,087		—		—		—		6,087
Other retail and wholesale distribution		1,541		—		8,791		—		—		—		10,332
Service		892		53		2,953		17,510		3,026		—		24,434
Electricity and natural gas		—		—		—		—		11,357		—		11,357
Total		43,928		37,384		17,986		17,510		14,383		—		131,191
Other revenue		2,346		54		3,298		37		885		46,312		52,932
	$	46,274	$	37,438	$	21,284	$	17,547	$	15,268	$	46,312	$	184,123

~~Note 20. Accumulated other comprehensive income~~

A summary of the ~~net changes~~transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in~~after-tax~~ ~~accumulated other comprehensive income attributable to Berkshire Hathaway shareholders and amounts reclassified out~~ excess of ~~accumulated other comprehensive income for the nine months ending~~one year as of September 30, ~~2018 and 2017~~2019 follows (in millions).

   Unrealized
appreciation of
investments, net    Foreign
currency
      translation          Prior service
and actuarial
gains/losses of
defined benefit
  pension plans            Other            Accumulated
other
comprehensive
income
2018

Balance at December 31, 2017
   $ 62,093    $ (3,114)    $ (420)    $ 12    $ 58,571
Reclassifications to retained earnings upon adoption of new accounting standards
   (61,340)    (65)    36    (6)    (61,375)
Other comprehensive income, net before reclassifications
   (142)    (776)    (33)    (19)    (970)
Reclassifications into net earnings
   (236)    —    76    7    (153)










Balance at September 30, 2018
   $ 375    $ (3,955)    $ (341)    $ (6)    $ (3,927)










Reclassifications into net earnings:

Reclassifications before income taxes
   $ (299)    $ —    $ 101    $ 10    $ (188)
Applicable income taxes
   (63)    —    25    3    (35)










   $ (236)    $ —    $ 76    $ 7    $ (153)










2017

Balance at December 31, 2016
   $ 43,176    $ (5,268)    $ (593)    $ (17)    $ 37,298
Other comprehensive income, net before reclassifications
   11,734    1,946    (90)    19    13,609
Reclassifications into net earnings
   (803)    —    61    18    (724)










Balance at September 30, 2017
   $ 54,107    $ (3,322)    $ (622)    $ 20    $ 50,183










Reclassifications into net earnings:

Reclassifications before income taxes
   $ (1,235)    $ —    $ 82    $ 32    $ (1,121)
Applicable income taxes
   (432)    —    21    14    (397)










   $ (803)    $ —    $ 61    $ 18    $ (724)

	Performance obligations expected to be satisfied:
	Less than 12 months		Greater than 12 months		Total
Electricity and natural gas	$	922	$	5,309	$	6,231
Other sales and service contracts		1,196		2,540		3,736

~~Note 21. Contingencies and Subsequent Event~~

We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. 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 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.

In 2016, NICO entered into a definitive agreement to acquire Medical Liability Mutual Insurance Company, (“Medical Liability Mutual”), a writer of medical professional liability insurance domiciled in New York. The acquisition price was approximately $2.5 billion. The acquisition involved the conversion of Medical Liability Mutual from a mutual company to a stock company. The closing of the transaction was subject to various regulatory approvals, customary closing conditions and the approval of the Medical Liability Mutual policyholders eligible to vote on the proposed demutualization and sale. The acquisition closed on October 1, 2018, at which time, Medical Liability Mutual’s name was changed to the MLMIC Insurance Company (“MLMIC”). The results of MLMIC will be included in Berkshire’s consolidated results beginning as of that date. As of the acquisition date, the preliminary fair values of MLMIC’s assets were approximately $6.3 billion, consisting primarily of cash and investments, and liabilities were approximately $3.8 billion, consisting primarily of unpaid losses and loss adjustment expenses and unearned insurance premiums. We believe goodwill arising from this acquisition will be insignificant. MLMIC’s premiums earned for the first nine months of 2018 were approximately $300 million.

Notes to Consolidated Financial Statements(Continued)

Note ~~22.~~25. Business segment data

Our operating businesses include a large and diverse group of insurance, ~~railroad, utilities and energy, finance,~~ manufacturing, service and retailing businesses. ~~Our~~We organize our reportable business segments ~~are organized~~ in a manner that reflects how management views those business activities. Certain businesses ~~have been~~are grouped together for segment reporting based upon similar products or product lines, marketing, selling and distribution characteristics, even though those business units are operated under separate local management. ~~Revenues by~~The accompanying business segment information for the ~~third quarter~~2018 periods reflects certain reclassifications to conform to presentations as of December 31, 2018. Specifically, business units that previously were reported as the finance and ~~first nine months of~~financial products segment in the 2018 periods were reclassified to manufacturing (Clayton Homes and ~~2017 were as follows (in millions)~~UTLX), services and retailing (CORT and XTRA leasing) and corporate and other (principally investment income).

   Third Quarter    First Nine Months
   2018    2017    2018    2017
Operating Businesses:

Insurance:

Underwriting:

GEICO
     $       8,506      $       7,543    $       24,705    $       21,632
Berkshire Hathaway Reinsurance Group
   3,777    3,954    11,229    20,550
Berkshire Hathaway Primary Group
   2,050    1,852    5,921    5,287
Investment income
   1,446    1,248    4,058    3,664








Total insurance
   15,779    14,597    45,913    51,133
BNSF
   6,147    5,314    17,649    15,749
Berkshire Hathaway Energy
   5,706    5,351    15,268    14,184
Manufacturing
   13,552    12,819    40,339    37,654
McLane Company
   12,822    12,798    37,438    37,480
Service and retailing
   6,974    6,527    20,623    19,170
Finance and financial products
   2,432    2,153    6,861    6,019








   63,412    59,559    184,091    181,389
Reconciliation of segments to consolidated amount:

Corporate, eliminations and other
   38    (52)    32    (256)








     $ 63,450      $ 59,507    $ 184,123    $ 181,133

~~Earnings~~ Revenues and earnings before income taxes by segment for the third quarter and first nine months of ~~2018~~2019 and ~~2017~~2018 were as follows (in millions).

									Third Quarter				First Nine Months
	Third Quarter				First Nine Months				2019		2018		2019		2018
	2018		2017		2018		2017
Operating Businesses:
Revenues of Operating Businesses:
Insurance:
Underwriting:
GEICO	$	627	$	(416)	$	1,977	$	(122)	$	8,996	$	8,506	$	26,487	$	24,705
Berkshire Hathaway Reinsurance Group		(163)		(1,845)		(124)		(2,963)		3,940		3,777		11,193		11,229
Berkshire Hathaway Primary Group		135		52		468		473		2,387		2,050		6,825		5,921
Investment income		1,455		1,246		4,052		3,658		1,789		1,446		4,930		4,058

Total insurance		2,054		(963)		6,373		1,046		17,112		15,779		49,435		45,913
BNSF		1,879		1,710		5,047		4,592		6,021		6,147		17,676		17,649
Berkshire Hathaway Energy		1,165		1,243		2,238		2,481		5,720		5,706		15,362		15,268
Manufacturing		2,012		2,002		6,002		5,428		15,897		15,686		47,173		46,335
McLane Company		44		45		171		202		12,604		12,822		37,214		37,438
Service and retailing		628		491		1,840		1,439		7,378		7,230		21,865		21,352
Finance and financial products		530		496		1,589		1,438

		8,312		5,024		23,260		16,626		64,732		63,370		188,725		183,955
Reconciliation of segments to consolidated amount:
Investment and derivative contract gains/losses		14,706		965		13,053		1,965
Interest expense, not allocated to segments		(60)		(386)		(77)		(1,243)
Equity method investments		316		305		1,044		932
Corporate, eliminations and other		(127)		(278)		(558)		(833)		240		80		523		168
									$	64,972	$	63,450	$	189,248	$	184,123
	$	23,147	$	5,630	$	36,722	$	17,447

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Earnings Before Income Taxes of Operating Businesses:
Insurance:
Underwriting:
GEICO	$	376		$	627		$	1,539		$	1,977
Berkshire Hathaway Reinsurance Group		52			(163	)		(305	)		(124	)
Berkshire Hathaway Primary Group		153			135			290			468
Investment income		1,782			1,455			4,916			4,052
Total insurance		2,363			2,054			6,440			6,373
BNSF		1,941			1,879			5,379			5,047
Berkshire Hathaway Energy		1,061			1,165			2,194			2,238
Manufacturing		2,484			2,369			7,205			7,105
McLane Company		50			44			220			171
Service and retailing		639			701			2,005			2,037
		8,538			8,212			23,443			22,971
Reconciliation of segments to consolidated amount:
Investment and derivative gains (losses)		10,926			14,706			41,296			13,053
Interest expense, not allocated to segments		(96	)		(115	)		(312	)		(350	)
Equity method investments		644			316			936			1,044
Corporate, eliminations and other		477			28			532			4
	$	20,489		$	23,147		$	65,895		$	36,722

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

Results of Operations

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


	Third Quarter				First Nine Months				Third Quarter				First Nine Months
	2018		2017		2018		2017		2019		2018		2019		2018
Insurance – underwriting	$	441	$	(1,439)	$	1,791	$	(1,728)	$	440	$	441	$	1,182	$	1,791
Insurance – investment income		1,239		1,044		3,393		2,917		1,484		1,239		4,087		3,393
Railroad		1,393		1,042		3,847		2,838		1,466		1,393		4,057		3,847
Utilities and energy		1,091		952		2,257		1,941		1,178		1,091		2,390		2,257
Manufacturing, service and retailing		2,097		1,694		6,060		4,673		2,455		2,411		7,142		7,024
Finance and financial products		390		319		1,193		933
Investment and derivative gains/losses		11,660		623	��	10,352		1,270
Investment and derivative gains (losses)										8,666		11,660		32,706		10,352
Other		229		(168)		520		(455)		835		305		694		749

Net earnings attributable to Berkshire Hathaway shareholders	$	18,540	$	4,067	$	29,413	$	12,389	$	16,524	$	18,540	$	52,258	$	29,413

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 theday-to-day business activities of the operating businesses. Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses. Beginning in 2018, our periodic net earnings include changes in unrealized gains and losses on our investments in equity securities. These gains and losses are likely to be very significant given the size of our current holdings and the inherent volatility in securities prices. Prior to 2018, changes in unrealized gains and losses were recorded in other comprehensive income. Thus, the new accounting treatment has no effect on consolidated shareholders’ equity. The business segment data (Note 2225 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

Our insurance businesses generated after-tax earnings from underwriting of $440 million in the third quarter and $1,182 million in the first nine months of 2019. Insurance underwriting results in the first nine months of 2019 include earnings from primary insurance and losses from reinsurance, reflecting lower gains from reductions of claim liability estimates for prior years’ property/casualty loss events and lower gains from foreign currency remeasurement applicable to certain reinsurance liabilities than in 2018. After-tax earnings from insurance investment income increased 19.8% in the third quarter and 20.5% in the first nine months of 2019 over the same periods in 2018. These increases reflect higher short-term interest income and dividend income.

After-tax earnings of our railroad business increased 5.2% in the third quarter and 5.5% in the first nine months of 2019 compared to 2018. Earnings in 2019 were negatively affected by persistent flooding conditions and severe winter weather, which negatively affected operating costs and freight volumes. During the third quarter, the company placed back into service all key routes impacted by flooding. Earnings in 2019 benefited from higher rates per car/unit, a curtailment gain related to an amendment to defined benefit retirement plans and ongoing operating cost control initiatives.

After-tax earnings of our utilities and energy business increased 8.0% in the third quarter and 5.9% in the first nine months of 2019 compared to the corresponding 2018 periods. Earnings from our manufacturing, service and retailing businesses increased approximately 2% in both the third quarter and first nine months ~~of 2018 were favorably affected by lower U.S. income tax expense, primarily attributable to a reduction~~over the same periods in ~~the U.S. statutory income tax rate from 35% to 21% effective January 1, 2018 in connection with the Tax Cuts and Jobs Act~~2018. Operating results of ~~2017 (“TCJA”) enacted on December 22, 2017. The effect of the lower U.S. statutory income tax rate in 2018 generally resulted in increased comparativeafter-tax~~ earnings of our various business operations, although the effects varied, reflecting the differences in the mix of earnings subject to income tax, income tax credits and the varying effects of state and local income taxes.

~~Our insurance businesses generatedafter-tax~~ earnings from underwriting of $441 million and $1.8 billion in the third quarter and first nine months of 2018, respectively, compared to losses of $1.4 billion and $1.7 billion, respectively, in the corresponding 2017 periods. Results in 2018 included reductions of estimated ultimate liabilities for prior years’ property/casualty loss events, gains from foreign currency exchange rate changes on certain~~non-U.S.~~ ~~Dollar denominated liabilities of U.S subsidiaries and a lower effective income tax rate. Underwriting results in the third quarter of 2017 included estimatedpre-tax~~ ~~losses of approximately $3.0 billion ($1.95 billionafter-tax)~~ attributable to three major hurricanes in the U.S. and Puerto Rico and an earthquake in Mexico. Underwriting results in 2017 also included foreign currency exchange rate losses from the revaluation of certain~~non-U.S.~~ ~~Dollar denominated liabilities.~~

Our railroad business generated increased after-tax earnings in the third quarter and first nine months of 2018 compared to 2017, reflecting an increase in unit volume, higher average revenue per car/unit and a lower effective income tax rate, partly offset by increased fuel and other operating costs. Our utilities and energy businesses produced higher~~after-tax~~ ~~earnings in the third quarter and first nine months of 2018 compared to 2017, primarily due to a lower overall effective income tax rate and increasedpre-tax~~ ~~earnings from renewables and natural gas pipelines. After-tax earnings from~~ our manufacturing, service and retailing businesses in 2019 were mixed, with several of these businesses experiencing lower earnings in 2019. Revenues and pre-tax earnings in 2019 of certain of these businesses were negatively affected by the ~~third quarter~~unfavorable effects of foreign currency translation attributable to a stronger U.S. Dollar, international trade tensions and ~~first nine months of 2018 increased 24% and 30%, respectively, over 2017, due to lower effective income tax rates and a 13% increase inyear-to-datepre-tax~~ ~~earnings.~~U.S. trade tariffs.

~~After-tax~~ ~~gains in the third quarter and first nine months of 2018 from investments~~Investment and derivative ~~contracts~~gains/losses in 2019 and 2018 included significant unrealized gains from market price changes on our holdings of equity securities. After-tax unrealized gains on equity securities were ~~$11.7 billion and $10.4 billion, respectively. Investment gains/losses includedafter-tax~~ ~~gains of~~ approximately ~~$11.4~~$8.0 billion in the third quarter and ~~$9.6~~$30.1 billion in the first nine months ~~from changes~~of 2019 and were approximately $10.2 billion in ~~market values of our investments~~the third quarter and $7.5 billion in ~~equity securities held at September 30, 2018. In 2017,after-tax~~ ~~investment gains on equity securities arose from the disposition or exchange of securities during the period based on the cost of the disposed security. In~~ the first nine months of ~~2017, we recorded~~2018. After-tax investment gains in 2019 also included after-tax ~~unrealized~~ realized gains on ~~our investments in~~sales of equity and fixed maturity securities of ~~approximately $10.9~~$513 million in the third quarter and $1.6 billion in ~~other comprehensive income.~~ the first nine months. After-tax realized gains on sales of equity and fixed maturity securities in 2018 were $995 million in the third quarter and $2.3 billion in the first nine months.

We believe that investment and derivative gains/losses, whether realized from dispositions or settlements or unrealized from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating ~~the~~our economic ~~performance of our businesses.~~performance. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.

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

Insurance—Underwriting

~~Insurance—~~Our management views our insurance businesses as possessing two distinct activities – underwriting and investing. Underwriting decisions are the responsibility of the unit managers, while investing decisions are the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett and Berkshire’s corporate investment managers. Accordingly, we evaluate 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 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 losses in excess of $100 million from a current year event as significant. Changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years, can also significantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts, were $113.4 billion as of September 30, 2019. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S. Dollar denominated reinsurance liabilities of our U.S. based insurance subsidiaries due to foreign currency exchange rate fluctuations.

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 and CEO, 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 businesses.

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 catastrophe losses in excess of $100 million~~(pre-tax)~~ ~~from a current year event as significant. We incurred estimatedpre-tax~~ ~~losses of $372 million from two significant catastrophe events in the third quarter of 2018. In the third quarter of 2017, we incurredpre-tax~~ losses of approximately $3.0 billion from four significant catastrophe events. In October 2018, Hurricane Michael hit the Southeastern United States. Incurred losses in the fourth quarter from this event are currently estimated to be in the $350 million to $550 million range.

Changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years, can also significantly affect our periodic underwriting results. Unpaid loss estimates, including estimates under retroactive reinsurance contracts, were approximately $106 billion as of September 30, 2018. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation of~~non-U.S. Dollar~~ ~~denominated reinsurance liabilities of our U.S. based insurance subsidiaries due to foreign currency exchange rate fluctuations.~~

Underwriting results of our insurance businesses are summarized below ~~(in~~(dollars in millions).

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Pre-tax underwriting earnings (loss):
GEICO	$	376		$	627		$	1,539		$	1,977
Berkshire Hathaway Reinsurance Group		52			(163	)		(305	)		(124	)
Berkshire Hathaway Primary Group		153			135			290			468
Pre-tax underwriting earnings		581			599			1,524			2,321
Income taxes and noncontrolling interests		141			158			342			530
Net underwriting earnings	$	440		$	441		$	1,182		$	1,791
Effective income tax rate		24.1	%		25.9	%		23.0	%		22.6	%

Third Quarter First Nine Months
2018 2017 2018 2017
Underwriting gain (loss):

GEICO
$ 627   $ (416) $ 1,977   $ (122)
Berkshire Hathaway Reinsurance Group
(163) (1,845) (124) (2,963)
Berkshire Hathaway Primary Group
135   52   468   473

Pre-tax underwriting gain (loss)
599   (2,209) 2,321   (2,612)
Income taxes and noncontrolling interests
158   (770) 530   (884)

Net underwriting gain (loss)
$         441   $ (1,439) $         1,791   $ (1,728)

Effective income tax rate
25.9%         35.1% 22.6%         34.4%

GEICO

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

	Third Quarter								First Nine Months
	2019				2018				2019				2018
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	9,412			$	8,952			$	27,378			$	25,878
Premiums earned	$	8,996		100.0	$	8,506		100.0	$	26,487		100.0	$	24,705		100.0
Losses and loss adjustment expenses		7,344		81.6		6,725		79.1		21,176		80.0		19,305		78.1
Underwriting expenses		1,276		14.2		1,154		13.5		3,772		14.2		3,423		13.9
Total losses and expenses		8,620		95.8		7,879		92.6		24,948		94.2		22,728		92.0
Pre-tax underwriting earnings	$	376			$	627			$	1,539			$	1,977

   Third Quarter    First Nine Months
   2018    2017    2018    2017
   Amount    %    Amount    %    Amount    %    Amount    %
Premiums written
   $ 8,952       $     8,130       $   25,878       $    22,987









Premiums earned
   $ 8,506        100.0      $ 7,543        100.0      $ 24,705        100.0    $ 21,632        100.0
















Losses and loss adjustment expenses
   6,725    79.1      6,933    91.9      19,305    78.1    18,631    86.1
Underwriting expenses
   1,154    13.5      1,026    13.6      3,423    13.9    3,123    14.5
















Total losses and expenses
   7,879    92.6      7,959    105.5      22,728    92.0    21,754    100.6
















Pre-tax underwriting gain (loss)
   $         627       $ (416)       $ 1,977       $ (122)

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

I~~nsurance—~~Insurance—Underwriting(Continued)

GEICO (Continued)

Premiums written in 2019 increased 5.1% in the third quarter and 5.8% in the first nine months ~~of 2018 were approximately $9.0 billion and $25.9 billion, respectively, representing increases of 10.1% and 12.6%, respectively,~~ compared to ~~2017. These~~the corresponding periods in 2018. Premiums earned in 2019 increased 5.8% in the third quarter and 7.2% in the first nine months compared to the corresponding 2018 periods. The premium increases ~~reflected increases in~~were primarily attributable to voluntary autopolicies-in-force growth of ~~3.7% and~~5.6% over the past twelve months, as average premiums per auto policy ~~of approximately 7.8% over the past twelve months.~~were relatively unchanged. The increase in ~~premiums per policy was attributable to rate increases, coverage changes~~voluntary auto policies-in-force primarily resulted from an increase in new business sales of 10.6% and ~~changes~~a decrease in ~~state and risk mix. The rate increases were in response to accelerating claim costs in recent years. Although~~the number of policies not renewed. Voluntary auto policies-in-force increased ~~461,000~~approximately 846,000 during the first nine months of ~~2018, the rate of increase slowed, as voluntary auto new business sales decreased 6.6% compared to 2017.~~2019.

Losses and loss adjustment expenses ~~decreased $208 million (3.0%)~~in 2019 increased 9.2% in the third quarter to $7.3 billion and ~~increased $674 million (3.6%)~~9.7% in the first nine months ~~of 2018 compared~~ to ~~2017. Our~~$21.2 billion. GEICO’s ratios of losses and loss adjustment expenses to premiums earned (the “loss ratio”) ~~for~~in the third quarter and first nine months of ~~2018~~2019 were ~~79.1%~~81.6% and ~~78.1%~~80.0%, respectively, ~~declines~~increases of ~~12.8 and 8.0~~2.5 percentage points ~~compared to~~over the third quarter and first nine months of 2017, respectively. In the third quarter of 2018, we recorded estimated losses of $30 million related to Hurricane Florence. In the third quarter of 2017, we incurred estimated losses related to Hurricanes Harvey and Irma of approximately $500 million (6.6% of premiums earned in the third quarter and 2.3% in the first nine months).

~~Our losses and loss adjustment expenses incurred in~~1.9 percentage points over the first nine months of ~~2018 also included reductions of $478 million with respect to ultimate claim~~2018. The loss ~~estimates for prior years’~~ratio increases in 2019 reflected continuing increases in loss ~~events, which produced a corresponding increase inpre-tax~~ ~~underwriting gains. By comparison, we increased loss estimates for prior years’ events~~severities, slightly offset by ~~$37 million in the first nine months of 2017.~~ lower storm-related losses.

Claims frequencies in the first nine months of ~~2018~~2019 declined for property damage and collision ~~and bodily and personal injury protection~~ coverages ~~declined~~ (two to three percent range) and personal injury protection coverage (two to four percent range) compared to ~~2017.~~2018 and were relatively unchanged for bodily injury coverage. Average claims severities in the first nine months of ~~2018 increased~~2019 were higher for property damage and collision coverages (four to six percent range) and bodily injury coverage ~~(five~~(six to ~~seven~~eight percent range).

~~Our~~GEICO reduced ultimate claim loss estimates for prior years’ loss events by $47 million in the first nine months of 2019 compared to $478 million in the first nine months of 2018. These reductions produced corresponding pre-tax underwriting gains. The reduction in claim loss estimates in 2019 was primarily due to lower than expected losses from property damage and collision claims, partly offset by higher than expected losses from personal injury protection claims.

Underwriting expenses in the first nine months of ~~2018~~2019 were ~~approximately $3.4~~$3.8 billion, an increase of ~~$300~~$349 million ~~(9.6%~~(10.2%) over ~~2017. Our~~2018. GEICO’s expense ratio (underwriting expenses to premiums earned) ~~for~~in the first nine months of ~~2018 decreased 0.6~~2019 was 14.2%, an increase of 0.3 percentage points compared to ~~2017.~~2018. The ~~increases in~~ underwriting ~~expenses were~~expense increase was primarily attributable to increases in advertising expenses, insurance premium taxes and employee-related costs, which ~~included~~reflected wage and staffing increases.

Berkshire Hathaway Reinsurance Group

We offerexcess-of-loss and quota-share reinsurance coverages on property and casualty risks and life and health reinsurance to insurers and reinsurers worldwide through several ~~legal entities,~~subsidiaries, led by National Indemnity Company (“~~NICO Group”~~NICO”), Berkshire Hathaway Life Insurance Company of Nebraska (“~~BHLN Group”~~BHLN”), and General Reinsurance Corporation, General Reinsurance AG and General Re Life Corporation (collectively, “General ~~Re Group”~~Re”). We also periodically assume property and casualty risks under retroactive reinsurance contracts written through NICO. In addition, ~~the BHLN Group writes~~we write periodic payment annuity ~~contracts.~~contracts predominantly through BHLN.

With the exception of our retroactive reinsurance and periodic payment annuity ~~businesses,~~product lines, we strive to generatepre-tax underwriting profits.Time-value-of-money concepts are important elements in establishing prices for ~~our~~ retroactive reinsurance and periodic payment annuity ~~businesses~~premiums due to the expected long durations of the associated liabilities. We expect to incurpre-tax underwriting losses from ~~such businesses, primarily~~these products through deferred charge amortization and discount accretion charges. We receive premiums at the inception of these contracts, which are then available for investment. A summary of ~~the~~BHRG’s premiums andpre-tax underwriting results ~~of our reinsurance business~~ follows ~~(in~~(dollars in millions).

	Third Quarter										First Nine Months
	Premiums earned				Pre-tax underwriting earnings (loss)						Premiums earned				Pre-tax underwriting earnings (loss)
	2019		2018		2019			2018			2019		2018		2019			2018
Property/casualty	$	2,614	$	2,157	$	314		$	67		$	7,237	$	6,479	$	472		$	535
Retroactive reinsurance		—		1		(190	)		(246	)		94		1		(751	)		(704	)
Life/health		1,097		1,307		19			108			3,210		3,855		310			324
Periodic payment annuity		229		312		(91	)		(92	)		652		894		(336	)		(279	)
	$	3,940	$	3,777	$	52		$	(163	)	$	11,193	$	11,229	$	(305	)	$	(124	)

Premiums earned Pre-tax underwriting gain (loss)
Third Quarter First Nine Months Third Quarter First Nine Months
2018 2017 2018 2017 2018 2017 2018 2017
Property/casualty
$ 2,157 $ 2,061 $ 6,479 $ 5,763 $ 67 $ (1,486) $ 535 $ (1,856)
Retroactive reinsurance
1 550 1 10,736 (246) (287) (704) (881)

2,158 2,611 6,480 16,499 (179) (1,773) (169) (2,737)

Life/health
1,307 1,146 3,855 3,404 108 113 324         302
Periodic payment annuity
312 197 894 647 (92) (185) (279) (528)

1,619 1,343 4,749 4,051             16 (72)             45 (226)

$         3,777 $       3,954 $       11,229 $   20,550 $ (163) $     (1,845) $ (124) $ (2,963)

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

Insurance—Underwriting(Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Property/casualty

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

	Third Quarter								First Nine Months
	2019				2018				2019				2018
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	2,435			$	2,201			$	8,304			$	7,636
Premiums earned	$	2,614		100.0	$	2,157		100.0	$	7,237		100.0	$	6,479		100.0
Losses and loss adjustment expenses		1,659		63.5		1,514		70.2		4,888		67.5		4,315		66.6
Underwriting expenses		641		24.5		576		26.7		1,877		26.0		1,629		25.1
Total losses and expenses		2,300		88.0		2,090		96.9		6,765		93.5		5,944		91.7
Pre-tax underwriting earnings (loss)	$	314			$	67			$	472			$	535

   Premiums earned    Pre-tax underwriting gain (loss)
   Third Quarter    First Nine Months    Third Quarter    First Nine Months
   2018    2017    2018    2017    2018              2017            2018            2017
NICO Group
   $ 1,077    $ 1,217    $ 3,394    $ 3,488    $ (29)    $ (927)    $ 272    $ (1,144)
General Re Group
   1,080    844    3,085    2,275    96    (559)    263    (712)
















   $         2,157    $         2,061    $         6,479    $         5,763    $           67    $ (1,486)    $           535    $ (1,856)

~~NICO Group’s~~Property/casualty premiums written increased 10.6% in the third quarter and 8.7% in the first nine months of 2019, as compared to the same periods in 2018. Premiums earned in the third quarter and first nine months of ~~2018 decreased 11.5%~~2019 increased $457 million (21.2%) and ~~2.7%~~$758 million (11.7%), respectively, ~~compared~~versus 2018. The increases in premiums written reflected overall growth in U.S. and international markets. The growth was primarily attributable to ~~2017.~~new business, net of non-renewals, and increased participations for renewal business, partly offset by the unfavorable foreign currency translation effects of a stronger U.S. Dollar. Premiums earned in the third quarter of 2017 included additional amounts related to certain contracts where policy limits were fully exhausted due to catastrophe losses during the quarter. Such amounts would have been earned in future periods. The effect of significant catastrophe losses in 2018 on the timing of premiums earned was relatively insignificant. For the first nine months ofincluded $1,286 million in 2019 and $1,347 million in 2018 ~~approximately 40% of NICO Group’s premiums earned derived~~ from a10-year, 20% quota-share contract between NICO with Insurance Australia Group ~~Ltd. that~~Limited, which expires in 2025. ~~General Re Group’s premiums earned~~

Losses and loss adjustment expenses in the third quarter and first nine months of ~~2018~~2019 increased ~~$236~~$145 million ~~(28.0%~~(9.6%) and ~~$810~~$573 million ~~(35.6%~~(13.3%), respectively, compared to ~~2017. The increases reflected higher direct~~the same periods in 2018. Losses and ~~broker markets business, derived primarily from new business and increased participations for renewal business in both property and casualty lines.~~

~~On a combined basis, our property/casualty reinsurance business generatedpre-tax~~ ~~underwriting gains of $67 million and $535 million in the third quarter and first nine months of 2018, respectively, andpre-tax~~ ~~losses of approximately $1.5 billion in the third quarter and $1.9 billion~~loss adjustment expenses in the first nine months of ~~2017. We incurred~~2019 included a net decrease in estimated ~~losses~~ultimate claim liabilities attributable to prior years’ loss events of approximately ~~$267~~$75 million compared to $581 million in 2018. Such decreases as percentages of the related net unpaid claim liabilities as of the beginning of the applicable year were 0.25% in 2019 and 2% in 2018. Losses and loss adjustment expenses in the first nine months of 2019 also reflected an overall 7.0 percentage point decline in the loss ratio attributable to the current accident year as compared to 2018. Incurred losses in the third quarter ofincluded $281 million in 2019 related to Typhoon Faxia in Japan and $267 million in 2018 related to Hurricane Florence and Typhoon ~~Jebi~~Jebi. In the fourth quarter of 2019, Typhoon Hagibis struck Japan and ~~approximately $2.29 billion~~caused widespread damage, which certain industry models presently estimate insured losses will likely exceed $8 billion. While we cannot reasonably estimate our losses from this event at this time, we expect our underwriting results in the ~~third~~fourth quarter ~~of 2017 related to Hurricanes Harvey, Irma and Maria and an earthquake in Mexico. Our losses from~~will be negatively affected.

Retroactive reinsurance

There were no significant ~~catastrophe events were approximately $2.45 billion for the first nine months of 2017.~~

~~In addition, we reduced estimated ultimate claims liabilities~~retroactive reinsurance contracts written in the first nine months of 2019 or 2018. Pre-tax underwriting losses in 2019 and 2018 ~~for prior years’ loss events~~derived from deferred charge amortization and changes in the estimated timing and amount of future claim payments, as well as from foreign currency gains arising from the periodic re-measurement of liabilities related to contracts written by ~~$581 million. We increased estimated ultimate liabilities for prior years’ loss events by $108~~our U.S. subsidiaries that are denominated in foreign currencies.

Pre-tax foreign currency re-measurement gains were $84 million in the third quarter and $73 million in the first nine months of ~~2017, which reflected the U.K. Ministry of Justice’s decision~~2019 and were $35 million in the ~~first~~third quarter ~~to reduce the fixed discount rate required in lump sum settlement calculations of U.K. personal injury claims~~ and ~~unanticipated property claims from events in 2016.~~

~~Retroactive reinsurance~~

~~Premiums earned~~$99 million in the first nine months of ~~2017~~2018. Retroactive reinsurance contracts produced pre-tax underwriting losses before foreign currency gains of $824 million in the first nine months of 2019 and $803 million in 2018, and included ~~$10.2 billion from an aggregateexcess-of-loss~~ ~~retroactive~~deferred charge amortization of $480 million in 2019 and $454 million in 2018 related to the reinsurance agreement with various subsidiaries of American International Group, Inc. (the “AIG Agreement”), which became effective on February 2, 2017. We also recorded losses and loss adjustment expenses incurred of $10.2 billion at the inception of the AIG Agreement, 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.~~

~~Pre-tax~~ ~~underwriting losses from retroactive reinsurance contracts~~entered into in the third quarter and first nine months of 2018 were $246 million and $704 million, respectively, compared to $287 million and $881 million, respectively, in the same periods in 2017. Certain liabilities relating to retroactive reinsurance contracts written by our U.S. subsidiaries are denominated in foreign currencies. Underwriting results include gains and losses from the~~re-measurement~~ ~~of such liabilities due to changes in foreign currency exchange rates. Changes in exchange rates generatedpre-tax~~ ~~gains of $35 million and $99 million in the third quarter and first nine months of 2018, respectively, compared topre-tax~~ ~~losses in the third quarter and first nine months of $60 million and $251 million, respectively, in 2017.~~

~~Pre-tax~~ ~~underwriting losses before foreign currency gains/losses in the first nine months of 2018 and 2017 were $803 million and $630 million, respectively. The increase inpre-tax~~ losses was primarily due to amortization charges related to the AIG Agreement, which included the effects of increases to our ultimate claim liability estimates (approximately $1.8 billion) and related deferred charge asset (approximately $1.7 billion) in the fourth quarter of 2017.

Gross unpaid losses assumed under retroactive reinsurance contracts were ~~approximately $41.9~~$41.4 billion at September 30, ~~2018~~2019 and ~~$42.9~~$41.8 billion at December 31, ~~2017.~~2018. Unamortized deferred charge assets related to such reinsurance contracts were ~~approximately $14.5~~$13.4 billion at September 30, ~~2018~~2019 and ~~$15.3~~$14.1 billion at December 31, ~~2017.~~2018. Deferred charge ~~asset balances~~assets will be ~~amortized as charges~~charged to~~pre-tax~~ earnings over the expected remaining claims settlement ~~periods.~~periods through periodic amortization.

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

Insurance—Underwriting(Continued)

Berkshire Hathaway Reinsurance Group (Continued)

Life/health

~~Premiums earned andpre-tax~~ ~~underwriting results~~A summary of our life/health reinsurance ~~businesses are further summarized as~~underwriting results follows ~~(in~~(dollars in millions).

	Third Quarter								First Nine Months
	2019				2018				2019				2018
	Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	1,099			$	1,327			$	3,218			$	3,894
Premiums earned	$	1,097		100.0	$	1,307		100.0	$	3,210		100.0	$	3,855		100.0
Life and health insurance benefits		829		75.6		1,051		80.4		2,290		71.3		3,011		78.1
Underwriting expenses		249		22.7		148		11.3		610		19.0		520		13.5
Total benefits and expenses		1,078		98.3		1,199		91.7		2,900		90.3		3,531		91.6
Pre-tax underwriting earnings (loss)	$	19			$	108			$	310			$	324

   Premiums earned    Pre-tax underwriting gain (loss)
   Third Quarter    First Nine Months    Third Quarter    First Nine Months
   2018    2017    2018    2017    2018    2017    2018    2017
General Re Group
   $ 964    $ 786    $ 2,819    $ 2,324    $ 38    $ 57    $ 152    $ 96
BHLN Group
   343    360    1,036    1,080    70    56    172    206
















   $       1,307    $       1,146    $       3,855    $       3,404    $           108    $         113    $         324    $          302

~~General Re Group’s~~Life/health premiums earned were $1.1 billion in the third quarter and $3.2 billion in first nine months of ~~2018 increased $178~~2019, decreases of $210 million ~~(22.6%~~(16.1%) and ~~$495~~$645 million ~~(21.3%~~(16.7%), respectively, compared to ~~2017.~~corresponding 2018 periods. In the first quarter of 2019, BHLN amended a yearly-renewable-term life reinsurance contract with a major U.S. reinsurer. The ~~increases were primarily attributable to growth~~amendment effectively eliminated BHLN’s future exposures under the contract. BHLN recorded a reduction in ~~Asia and Australia markets and foreign currency translation effects~~earned premiums on this contract of ~~a comparatively weaker U.S. Dollar. The General Re Group producedpre-tax~~ ~~underwriting gains~~$49 million in the first nine months of ~~$152~~2019 attributable to the contract amendment, while premiums earned related to this contract were $666 million ~~in 2018 and $96 million in 2017. The comparative increase in~~for the first nine months of 2018. Life/health premiums earned in 2019 also reflected ~~increased earnings from~~volume growth in several international ~~business, primarily due to increased volumes and~~life markets, partially offset by the unfavorable effects of foreign currency translation ~~improved earnings from life business in North America~~attributable to a stronger U.S. Dollar and lower ~~losses from the run-off~~U.S. life and medical supplement volumes.

The life/health business produced pre-tax underwriting income of ~~long-term care and disability business.~~

~~BHLN Group’s life reinsurance premiums earned~~$19 million in the third quarter and ~~first nine months of 2018 were $340~~$310 million and $1,025 million, respectively, compared to $355 million and $1,067 million, respectively, in the corresponding 2017 periods. BHLN Group’s business during the last two years covered predominantly life risks in North America, with approximately~~two-thirds~~ ~~of the premiums earned deriving from one reinsurance contract. BHLN Group’s life reinsurance business produced near break-even results in each of the first nine months of 2018 and 2017.~~

~~BHLN Group’spre-tax~~ ~~underwriting results~~ in the first nine months of ~~2018 and 2017~~2019. Underwriting results in the third quarter of 2019 included~~pre-tax~~ ~~gains of $166 million and $197 million, respectively,~~ lower earnings from therun-off of variable annuity ~~reinsurance~~guarantee contracts. Results for the first nine months of 2019 also included a one-time pre-tax gain of $163 million attributable to the BHLN contract amendment in the first quarter, primarily from reductions of benefits incurred.

Variable annuity guarantee contracts ~~that provide guarantees on closed blocks~~produced pre-tax losses of ~~variable annuity business. Periodic underwriting~~$18 million in the third quarter and earnings of $83 million in the first nine months of 2019 compared to earnings of $66 million in the third quarter and $166 million in the first nine months of 2018. Underwriting results from this business reflect changes in estimated liabilities for guaranteed benefits, which ~~result~~derive from changes in securities markets and interest rates and from the periodic amortization of expected profit margins. ~~Underwriting results~~

Pre-tax underwriting earnings in 2019 also included losses from ~~variable annuity contracts can be volatile, reflecting~~increased disability benefit liabilities in Australia in the ~~volatility of securities markets, interest rates~~second quarter, attributable to higher claims experience and ~~foreign currency exchange rates. Estimated variable annuity guarantee liabilities were approximately $1.6 billion at September 30, 2018~~changes to various underlying assumptions, and ~~$1.8 billion at December 31, 2017.~~an increase in life claims in North America, partially offset by increased earnings from other international life business.

Periodic payment annuity

Periodic payment annuity premiums earned in the ~~third quarter and~~ first nine months of ~~2018 increased $115~~2019 were $652 million, ~~(58.4%) and $247~~a decrease of $242 million ~~(38.2%~~(27.1%)~~, respectively,~~ compared to ~~2017.~~ 2018. Periodic payment business is price sensitive. The volumes written can change rapidly due to changes in prices, which are affected by prevailing interest rates, the perceived risks and durations associated with the expected annuity payments, and the level of competition.

Periodic payment annuity contracts ~~produced~~normally produce pre-tax underwriting losses deriving from the recurring discount accretion of ~~$92 million~~annuity liabilities. Underwriting results also include the effects of mortality and ~~$279~~interest rate changes and re-measurement gains and losses related to foreign currency denominated liabilities of certain contracts written by our U.S. subsidiaries. Pre-tax re-measurement gains were $61 million in the third quarter and $70 million in the first nine months ~~of 2018, respectively,~~in 2019 compared to~~pre-tax~~ losses of $185 million and $528 million, respectively, for the same periods in 2017. Certain contracts written by our U.S. subsidiaries are denominated in foreign currencies, primarily the Great Britain Pound Sterling.~~Pre-tax~~ ~~underwriting results in 2018 includedpre-tax~~ ~~gains of~~ $21 million in the third quarter and $57 million in the first nine months of 2018.

Excluding foreign currency re-measurement gains, pre-tax underwriting losses from ~~there-measurement~~ ~~of such liabilities due to changes in exchange rates compared topre-tax~~ ~~losses of $63~~periodic payment annuity contracts were $152 million in the third quarter and ~~$173~~$406 million in the first nine months of ~~2017. Before~~2019 compared to $113 million in the ~~effect of foreign currency gains~~third quarter and ~~losses, this business generatedpre-tax~~ ~~underwriting losses of~~ $336 million in the first nine months of ~~2018 and $355 million in the first nine months of 2017. These losses were primarily attributable to the recurring discount accretion of annuity liabilities.~~2018. Discounted annuity liabilities ~~approximated $12.2~~were $13.2 billion at September 30, ~~2018~~2019 and ~~$11.2~~$12.5 billion at December 31, ~~2017,~~2018, reflecting a weighted average discount rate of approximately 4.1%.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~(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~~provides 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 largest of these insurers ~~include~~are 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~~(which was sold in October 2019), Central States Indemnity ~~Company.~~Company and MLMIC Insurance Company, acquired October 1, 2018.

A summary of BH Primary underwriting results follows (dollars in millions).


	Third Quarter								First Nine Months								Third Quarter								First Nine Months
	2018				2017				2018				2017				2019				2018				2019				2018
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	2,227			$	1,995			$	6,498			$	5,645			$	2,824			$	2,227			$	7,535			$	6,498

Premiums earned	$	2,050		100.0	$	1,852		100.0	$	5,921		100.0	$	5,287		100.0	$	2,387		100.0	$	2,050		100.0	$	6,825		100.0	$	5,921		100.0

Losses and loss adjustment expenses		1,419		69.2		1,342		72.5		3,884		65.6		3,426		64.8		1,583		66.3		1,419		69.2		4,721		69.2		3,884		65.6
Underwriting expenses		496		24.2		458		24.7		1,569		26.5		1,388		26.3		651		27.3		496		24.2		1,814		26.6		1,569		26.5

Total losses and expenses		1,915		93.4		1,800		97.2		5,453		92.1		4,814		91.1		2,234		93.6		1,915	93.4			6,535	95.8			5,453	92.1

Pre-tax underwriting gain	$	135			$	52			$	468			$	473

Pre-tax underwriting earnings (loss)																	$	153			$	135			$	290			$	468

Premiums written in the third quarter and first nine months of ~~2018~~2019 increased ~~11.6%~~26.8% and ~~15.1%~~16.0%, respectively, compared to the ~~corresponding 2017 periods. These increases were~~same periods in 2018. The comparative year-to-date increase was primarily attributable to GUARD (25.8%), BH Specialty ~~MedPro Group, GUARD~~(24.1%) and ~~BHHC. Premiums~~the impact of the MLMIC acquisition, while aggregate premiums written in 2019 by other BH Primary operations were relatively unchanged from 2018. The increases in premiums earned in 2019 reflected volume increases over the past year.

BH Primary produced pre-tax underwriting earnings of $290 million in the first nine months of ~~2018 increased $634~~2019 and $468 million ~~(12.0%) compared to~~in the first nine months of ~~2017, reflecting~~2018. BH Primary’s aggregate loss ratios for the ~~written premium increases of these businesses.~~

~~BH Primary producedpre-tax~~ ~~underwriting gains of $135 million and $468 million in the third quarter and~~ first nine months ~~of 2018, respectively, compared to $52 million~~were 69.2% in 2019 and ~~$473 million~~65.6% in 2018. Losses and loss adjustment expenses incurred in the ~~third quarter and~~ first nine months included reductions for prior years’ loss events of ~~2017, respectively.~~$274 million in 2019 and $507 million in 2018. The net gains from the reductions of prior accident years’ liabilities in 2019 were generally lower compared to 2018 across the various BH Primary operations, due in part to additional estimated claim liabilities recorded in the first quarter of 2019 for legacy casualty exposures. Underwriting results in the third quarter of 2018 included estimated losses from Hurricane Florence of approximately $75 ~~million in 2018 from Hurricane Florence and $225 million in 2017 from Hurricanes Harvey, Irma and Maria.~~million.

Losses and loss adjustment expenses in the first nine months also included net reductions of estimated ultimate liabilities for prior years’ loss events of $507 million in 2018 and $606 million in 2017, which produced corresponding increases in~~pre-tax~~ ~~underwriting gains. The liability reductions in each year primarily related to healthcare malpractice and workers’ compensation business.~~ BH Primary ~~writes~~insurers write significant levels of commercial and professional liability and workers’ compensation insurance and the related claim costs may be subject to higher severity and longer ~~claim-tails, which~~claim-tails. Accordingly, we could ~~give rise to~~experience significant increases in claims liabilities in the future attributable to higher than expected claim settlements, adverse litigation outcomes or judicial rulings and other factors not currently anticipated.

Insurance—Investment Income

A summary of net investment income ~~generated from investments held by~~attributable to our insurance operations follows ~~(in~~(dollars in millions).

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Interest and other investment income	$	556		$	495		$	1,646		$	1,346
Dividend income		1,226			960			3,270			2,706
Investment income before income taxes and noncontrolling interests		1,782			1,455			4,916			4,052
Income taxes and noncontrolling interests		298			216			829			659
Net investment income	$	1,484		$	1,239		$	4,087		$	3,393
Effective income tax rate		16.6	%		14.7	%		16.7	%		16.2	%

   Third Quarter    First Nine Months
   2018    2017    2018    2017
Interest and other investment income
   $ 495    $ 344    $ 1,346    $ 870
Dividend income
   960    902    2,706    2,788








Investment income before income taxes and noncontrolling interests
   1,455    1,246    4,052    3,658
Income taxes and noncontrolling interests
   216    202    659    741








Net investment income
   $     1,239    $     1,044    $     3,393    $     2,917








Effective income tax rate
   14.7%    16.2%    16.2%    20.2%

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

Insurance—Investment Income(Continued)

~~Pre-tax~~ ~~interest~~Interest and other investment income in the third quarter and first nine months of ~~2018~~2019 increased ~~$151~~$61 million ~~(43.9%~~(12.3%) and ~~$476~~$300 million ~~(54.7%~~(22.3%), respectively, as compared to the same periods in ~~2017.~~2018. The comparative increases ~~reflected the effect of~~were primarily due to higher ~~short-term~~ interest rates ~~in 2018~~on short-term investments and ~~income~~interest from a term loan with Seritage Growth Properties. For the first nine months, the increase in interest income was partially offset by lower income earned from limited partnership ~~investment~~investments. Dividend income in 2019 increased $266 million (27.7%) in the third quarter and $564 million (20.8%) in the first ~~quarter, partly offset by lower interest from reduced investments~~nine months compared to the corresponding 2018 periods. The increases in ~~fixed maturity securities. Our invested assets~~dividend income were attributable to an overall increase in investment levels over the past year, including the investment in $10 billion liquidation value of 8% cumulative preferred stock of Occidental on August 8, 2019 (see Note 4 to the accompanying unaudited Interim Consolidated Financial Statements), and higher dividend rates on common stock investments. We continue to ~~include significant levels~~hold large balances of cash, cash equivalents and U.S. Treasury Bills. While short-term ~~investments.~~interest yields in the U.S. were higher in the first half of 2019 compared to 2018, interest rates began to decline in the third quarter. Accordingly, earnings from such balances may be lower in the fourth quarter than in prior quarters of 2019. We believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to ~~such~~short-term investments.

Dividend income increased $58 million (6.4%) in the third quarter and decreased $82 million (2.9%) in the first nine months of 2018 as compared to the same periods in 2017. The comparative changes in dividend income reflected the impact of Restaurant Brands International’s redemption of our $3 billion investment in 9% preferred stock in December 2017 and increases in our portfolio of marketable equity securities.

Invested assets of our insurance businesses derive from shareholder capital, including reinvested earnings, and from net liabilities under insurance ~~and reinsurance~~ contracts or “float.” The major components of float are unpaid losses and loss adjustment expenses, including liabilities under retroactive reinsurance contracts, life, annuity and health ~~insurance~~ benefit liabilities, unearned premiums and other liabilities due to policyholders, less premium and reinsurance receivables, deferred charges assumed under retroactive reinsurance contracts and deferred policy acquisition costs. Float ~~approximated $118~~was approximately $127 billion at September 30, ~~2018~~2019 and ~~$114~~$123 billion at December 31, ~~2017.~~2018. Our ~~combined insurance operations generatedpre-tax~~ ~~underwriting earnings~~average cost of ~~$2.3 billion~~float was negative in the first nine months of ~~2018, and consequently, the average cost~~2019 as our underwriting operations generated pre-tax earnings of ~~float for that period was negative. Our average cost of float for the year ending December 31, 2017 was approximately 3%, reflectingpre-tax~~ ~~underwriting losses of approximately $3.2 billion, most of which was incurred in the second half of the year.~~$1.5 billion.

A summary of cash and investments held in our insurance businesses as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 follows (in millions).


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
Cash, cash equivalents and U.S. Treasury Bills	$	59,292	$	73,285	$	62,979	$	64,548
Equity securities		199,860		163,134		213,144		166,385
Fixed maturity securities		18,057		21,092		19,008		19,690
Other						2,522		2,288
					$	297,653	$	252,911
	$	277,209	$	257,511

Fixed maturity ~~investments~~securities as of September 30, ~~2018~~2019 were as follows (in millions).


	Amortized cost		Unrealized gains/losses		Carrying value		Amortized cost		Unrealized gains		Carrying value
U.S. Treasury, U.S. government corporations and agencies	$	3,618	$	(26)	$	3,592	$	3,754	$	44	$	3,798
States, municipalities and political subdivisions		259		14		273		148		6		154
Foreign governments		7,360		8		7,368		7,960		61		8,021
Corporate bonds, investment grade		5,321		388		5,709		5,674		452		6,126
Corporate bonds,non-investment grade		563		42		605		442		20		462
Mortgage-backed securities		457		53		510		382		65		447
							$	18,360	$	648	$	19,008
	$	17,578	$	479	$	18,057

U.S. government ~~obligations~~securities are rated AA+ or Aaa by the major rating agencies. Approximately ~~88%~~87% of all state, municipal and political subdivisions, foreign government ~~obligations~~securities and mortgage-backed securities were rated AA or higher.Non-investment grade securities represent securities rated belowBBB- or Baa3. Foreign government securities include obligations issued or unconditionally guaranteed by national or provincial government entities.

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

Railroad (“Burlington Northern Santa Fe”)

Burlington Northern Santa Fe, LLC (“BNSF”) operates one of the largest railroad systems in North ~~America. BNSF operates~~America, with approximately 32,500 route miles of track in 28 ~~states, as well as~~states. BNSF also operates in three Canadian provinces. BNSF classifies its major business groups by type of product shipped which ~~include~~includes consumer products, coal, industrial products and agricultural products. A summary of BNSF’s earnings follows ~~(in~~(dollars in millions).

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Revenues	$	6,021		$	6,147		$	17,676		$	17,649
Operating expenses:
Compensation and benefits		1,337			1,378			4,071			4,021
Fuel		725			859			2,211			2,456
Purchased services		687			718			2,087			2,124
Depreciation and amortization		602			580			1,788			1,726
Equipment rents, materials and other		458			471			1,334			1,501
Total operating expenses		3,809			4,006			11,491			11,828
Interest expense		271			262			806			774
		4,080			4,268			12,297			12,602
Pre-tax earnings		1,941			1,879			5,379			5,047
Income taxes		475			486			1,322			1,200
Net earnings	$	1,466		$	1,393		$	4,057		$	3,847
Effective income tax rate		24.5	%		25.9	%		24.6	%		23.8	%

   Third Quarter    First Nine Months
   2018    2017    2018    2017
Revenues
   $     6,147    $     5,314    $     17,649    $     15,749








Operating expenses:

Compensation and benefits
   1,378    1,173    4,021    3,725
Fuel
   859    595    2,456    1,777
Purchased services
   718    608    2,124    1,843
Depreciation and amortization
   580    591    1,726    1,756
Equipment rents, materials and other
   471    384    1,501    1,295








Total operating expenses
   4,006    3,351    11,828    10,396
Interest expense
   262    253    774    761








   4,268    3,604    12,602    11,157








Pre-tax earnings
   1,879    1,710    5,047    4,592
Income taxes
   486    668    1,200    1,754








Net earnings
   $ 1,393    $ 1,042    $ 3,847    $ 2,838








Effective income tax rate
   25.9%    39.1%    23.8%    38.2%

BNSF’s revenues in the third quarter and first nine months of ~~2018~~2019 were ~~$6.1~~$6.0 billion and ~~$17.6~~$17.7 billion, respectively, representing ~~increases~~a decrease of ~~$833~~$126 million ~~(15.7%~~(2.0%) and ~~$1.9 billion (12.1%~~an increase of $27 million (0.2%)~~, respectively,~~ versus the corresponding periods in ~~2017.~~2018. During the first nine months of ~~2018, our overall average revenue per car/unit increased 6.1% and our aggregate volume increased 4.6%. Ouryear-to-date~~ ~~volume was approximately 8.0 million cars/units compared to 7.6 million in 2017. The~~2019, revenues reflected a 4.5% comparative increase in average revenue per car/unit, ~~was attributable to business mix changes, higher fuel surcharge revenue~~ driven ~~primarily~~ by ~~higher fuel prices, and~~ increased rates per car/unit. Aggregate volumes were 2.65 million cars/units in the third quarter and 7.68 million cars/units in the first nine months of 2019 compared to 2.72 million cars/units in the third quarter and 7.99 million cars/units in the first nine months of 2018.

Pre-tax earnings were ~~approximately~~ $1.9 billion and ~~$5.0~~$5.4 billion in the third quarter and first nine months of ~~2018,~~2019, respectively, increases of ~~9.9%~~3.3% and 6.6%, respectively, compared to the corresponding ~~periods~~2018 periods. BNSF experienced severe winter weather and flooding on parts of the network, which has negatively affected revenues, expenses and service levels. BNSF’s earnings in ~~2017.~~the first nine months of 2019 also benefitted from a revenue increase related to the favorable outcome of an arbitration hearing and a reduction to expense for a curtailment gain arising from an amendment to the defined benefit retirement plans in the first quarter, as well as lower operating expenses attributable to lower volume and cost control initiatives.

Revenues from consumer products were $2.0 billion in the third quarter and ~~$5.8~~$5.9 billion in the first nine months of ~~2018,~~2019, representing ~~increases~~a decrease of ~~11.7%~~1.4% and ~~12.0%~~an increase of 0.6%, respectively, from ~~2017. The increases reflected higher average~~the corresponding periods in 2018. Average revenue per car/unit in 2019 was essentially unchanged for the third quarter and ~~volume increases of 0.9%~~higher for the first nine months. Volumes in 2019 decreased 1.2% in the third quarter and ~~3.9%~~4.4% in the first nine months. The volume ~~increases~~decreases were ~~attributable to~~driven by overall lower demand and the ~~intermodal business, due to general economic growth and tight~~availability of truck capacity, ~~leading to conversion from highway to rail,~~ as well as ~~growth in imports and containerized agricultural product exports, partially offset by a sizable contract loss.~~from lower international intermodal market share.

Revenues from industrial products ~~in 2018~~ were $1.6 billion in the third quarter and ~~$4.4~~$4.6 billion for the first nine months orof 2019, increases of ~~24.3%~~0.8% and ~~17.3%~~5.0%, respectively, from ~~the~~ comparable ~~2017~~2018 periods. ~~These~~The revenue increases ~~were attributable to~~reflected higher average revenue per car/unit and volume ~~increases~~decreases of ~~13.1%~~2.9% in the third quarter and ~~10.9%~~0.6% in the first nine months ~~as well as higher average revenue per car.~~of 2019. Volumes ~~in 2018 were higher~~decreased primarily due to ~~strength~~overall softness in the industrial sector, lower sand volumes, and reduced car loadings due to the challenging weather conditions in 2019. Strength in the energy ~~sectors,~~sector, which drove higher demand for petroleum products ~~rocks, steel,~~ and ~~plastics. Volumes in the first nine months of 2018 were also higher for sand and taconite.~~

Revenues from agricultural products in 2018 increased 17.4% in the third quarter to $1.2 billion and increased 10.2% to $3.5 billion for the first nine months when compared to the same periods in 2017. The third quarter revenue increase reflected a 16.3% increase in volumes and higher average revenue per car. In the first nine months, the increase in revenues was attributable to volume increases of 10.5%,liquefied petroleum gas, partially offset ~~by slightly lower average revenue per car. Volumes in 2018 increased due to strong export and domestic grain shipments, as well as higher fertilizer and other grain products volumes.~~

~~Revenues from coal in 2018 increased 5.9% in~~ the third quarter to $1.1 billion and 1.6% in the first nine months to $2.9 billion compared to 2017. These increases reflected higher average revenue per car partially offset by lower volumes of 4.6% in the third quarter and 2.6%~~year-to-date.~~ ~~The volume~~ decreases in ~~2018 were due mainly to plant retirements combined with competition from natural gas and renewables, partially offset by market share gains and improved export~~other volumes.

Operating expenses in the third quarter and first nine months of 2018 were $4.0 billion and $11.8 billion, respectively, increases of $655 million (19.5%) and $1.4 billion (13.8%), respectively, compared to the same periods in 2017. Our ratios of operating expenses to revenues were 65.2% in the third quarter and 67.0% for the first nine months of 2018, or increases of 2.1 and 1.0 percentage points, respectively, versus the corresponding prior year periods.

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

Railroad (“Burlington Northern Santa Fe”)(Continued)

~~Compensation and benefits expenses~~Revenues from agricultural products in 2019 increased ~~$205 million (17.5%) for~~0.1% in the third quarter ~~of 2018~~to $1.2 billion and ~~$296 million (7.9%) for~~were unchanged in the first nine months at $3.5 billion, when compared to the same periods in 2018. The comparative results reflected higher average revenue per car/unit, offset by volume decreases of ~~2018, primarily due~~5.7% in both periods. The volume decreases were attributable to ~~wage inflation, including a change~~export competition from non-U.S. sources, the impacts of changes in ~~estimate of~~international trade policies, and the ~~effect of a pending labor agreement recorded~~challenging weather conditions in ~~2017, increased headcount and higher training costs. Fuel expenses increased $264 million (44.4%) for~~2019.

Revenues from coal in 2019 decreased 6.8% in the third quarter to $1.0 billion and ~~$679 million (38.2%) for~~6.1% in the first nine months to $2.7 billion compared to 2018. The decreases reflected lower average revenue per car/unit and volume decreases of ~~2018, primarily due to higher average fuel prices and increased volumes.~~

~~Purchased services expenses increased $110 million (18.1%)~~4.0% in the third quarter and ~~$281 million (15.2%)~~4.5% in the first nine months of ~~2018 as compared to 2017. The increases~~2019. Volumes were ~~due to higher purchased transportation costs of our logistics services business,~~impacted by adverse weather conditions as well as ~~increased intermodal ramping, drayage and other volume-related costs.~~from the effects of lower natural gas prices.

InTotal operating expenses in the third quarter and first nine months of ~~2018, equipment~~2019 were $3.8 billion and $11.5 billion, respectively, decreases of $197 million (4.9%) and $337 million (2.8%), respectively, compared to the same periods in 2018. Our ratio of operating expenses to revenues decreased 1.9 percentage points to 63.3% in the third quarter and 2.0 percentage points to 65.0% in the first nine months of 2019 versus the corresponding prior year periods. BNSF’s expenses in 2019 reflected lower volume-related costs, the effects of several cost control initiatives, and a retirement plan curtailment gain, partially offset by the unfavorable impact of adverse weather conditions.

Compensation and benefits expense decreased $41 million (3.0%) for the third quarter and increased $50 million (1.2%) for the first nine months of 2019. The decrease for the third quarter was primarily due to lower volume-related costs and cost control initiatives. The increase for the first nine months was driven by wage inflation and higher average employee counts offset by the effects of lower volume and cost control initiatives. Fuel expenses decreased $134 million (15.6%) for the third quarter and $245 million (10.0%) for the first nine months of 2019 primarily due to lower average fuel prices, lower volumes in both periods, and favorable fuel efficiency in the third quarter. Equipment rents, materials and other expense ~~increased $87~~decreased $13 million ~~(22.7%~~(2.8%) for the third quarter and ~~$206~~$167 million ~~(15.9%~~(11.1%)~~, respectively, compared to 2017. These increases resulted from higher locomotive materials, personal injury expenses and property taxes. The~~ for the first nine months ~~also included higher derailment-related costs.~~of 2019 as compared to the same periods in 2018. The decrease in the first nine months was driven by a $120 million curtailment gain from the amendment to company-sponsored defined benefit retirement plans.

BNSF’s effective income tax rate was ~~25.9%~~24.5% and ~~23.8%~~24.6% for the third quarter and first nine months of ~~2018,~~2019, respectively, as compared to ~~39.1%~~25.9% and ~~38.2%~~23.8%, respectively, infor the corresponding periods in ~~2017.~~2018. The ~~reduction~~effective income tax rates in 2018 included the ~~U.S. statutory~~impact of various state income tax rate ~~under~~reductions enacted during the ~~TCJA, effective January 1, 2018, drove most of the~~second quarter. The effective income tax rate ~~reduction. In addition, certain states enacted income tax rate reductions in 2018.~~for the third quarter of 2019 includes the favorable impact of a completed state audit.

Utilities and Energy (“Berkshire Hathaway Energy Company”)

We currently own ~~90.4%~~90.9% of the outstanding common stock of 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 a regulated electricity transmission-only business in Alberta, Canada (“AltaLink, L.P.”) and a diversified portfolio of mostly renewable independent power projects. In addition, BHE also operates the ~~second-largest~~largest residential real estate brokerage firm and one of the largest residential real estate brokerage franchise networks in the United States.

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

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 income taxes and a return on capital, and are subject to regulatory approval. To the extent ~~these regulated operations~~such costs are not allowed ~~to include such costs~~ in the approved rates, operating results will be adversely affected. ~~Among its provisions,~~The legislation known as the ~~TCJA~~Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted in December 2017, which reduced the U.S. federal statutory corporate income tax rate ~~of our domestic regulated utilities~~ from 35% to 21%. In 2018, BHE’s regulated subsidiaries ~~anticipate~~began passing the benefits of lower income tax expense attributable to the TCJA to customers through various regulatory mechanisms, including lower rates, higher depreciation and reductions to rate base, which would produce lower revenue and pre-tax earnings in 2018 and future years when compared to 2017. We do not expect the TCJA and related regulatory treatment to have a material adverse impact on BHE’s long-term operating cash flows, subject to actual rulings by regulatory commissions that are expected in 2018 and 2019.base. Revenues and earnings of BHE are summarized below ~~(in~~(dollars in millions).

	Third Quarter										First Nine Months
	Revenues				Earnings						Revenues				Earnings
	2019		2018		2019			2018			2019		2018		2019			2018
PacifiCorp	$	1,396	$	1,386	$	275		$	319		$	3,868	$	3,786	$	703		$	704
MidAmerican Energy Company		823		857		199			251			2,379		2,354		336			347
NV Energy		1,057		1,071		261			268			2,416		2,456		401			403
Northern Powergrid		230		233		47			58			737		756		226			217
Natural gas pipelines		238		268		86			104			833		889		387			376
Other energy businesses		663		669		189			184			1,697		1,764		260			318
Real estate brokerage		1,313		1,222		112			83			3,432		3,263		203			180
Corporate interest		—		—		(108	)		(102	)		—		—		(322	)		(307	)
	$	5,720	$	5,706							$	15,362	$	15,268
Pre-tax earnings						1,061			1,165							2,194			2,238
Income tax benefit						(241	)		(49	)						(451	)		(279	)
Net earnings						1,302			1,214							2,645			2,517
Noncontrolling interests						124			123							255			260
Net earnings attributable to Berkshire Hathaway shareholders					$	1,178		$	1,091						$	2,390		$	2,257
Effective income tax rate						(22.7	)%		(4.2	)%						(20.6	)%		(12.5	)%

   Third Quarter    First Nine Months
   Revenues    Earnings    Revenues    Earnings
   2018    2017    2018    2017    2018    2017    2018    2017
PacifiCorp
   $ 1,386    $ 1,443    $ 319    $ 389    $ 3,786    $ 3,991    $ 704    $ 912
MidAmerican Energy Company
   857    832    251    250    2,354    2,209    347    402
NV Energy
   1,071    1,057    268    347    2,456    2,412    403    539
Northern Powergrid
   233    220    58    48    756    685    217    215
Natural gas pipelines
   268    198    104    60    889    706    376    303
Other energy businesses
   669    636    184    179    1,764    1,670    318    245
Real estate brokerage
   1,222    965    83    81    3,263    2,511    180    197
Corporate interest
   —    —    (102)    (111)    —    —    (307)    (332)
















   $     5,706    $     5,351          $     15,268    $     14,184









Pre-tax earnings

   1,165    1,243          2,238    2,481
Income taxes

   (49)    177          (279)    296








Net earnings

   1,214    1,066          2,517    2,185
Noncontrolling interests

   123    114          260    244








Net earnings attributable to Berkshire Hathaway shareholders

   $ 1,091    $ 952          $     2,257    $     1,941








Effective income tax rate

   (4.2)%    14.2%          (12.5)%    11.9%

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

~~Utilities and Energy (“Berkshire Hathaway Energy Company”)~~~~(Continued)~~

PacifiCorp

PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming. Revenues ~~in the third quarter~~ and ~~first nine months of 2018 decreased 4% and 5%, respectively, compared to the same periods in 2017. Retail revenues~~other income in the third quarter of 2019 were $1.4 billion, relatively unchanged from 2018, and were $3.9 billion in the first nine months, an increase of 2% over the first nine months of 2018. Retail revenues in the first nine months of 2019 increased $81 million compared to 2018, reflecting higher average rates ($65 million) and business mix changes. Wholesale and other revenues in the first nine months of 2019 decreased ~~$40~~$34 million due to lower volumes and ~~$218~~other income increased in the first nine months of 2019 primarily due to higher allowances for equity funds used during construction.

Pre-tax earnings were $275 million in the third quarter of 2019, a decline of $44 million (14%) from 2018, and were $703 million in the first nine months, relatively unchanged from 2018. Utility margin (operating revenues less cost of fuel and energy) was $2.5 billion in the first nine months of 2019, an increase of 1% compared to ~~2017.~~2018. Pre-tax earnings in the third quarter of 2019 included additional depreciation expense of $65 million due to a state regulatory order that accelerated depreciation on certain retired wind equipment due to repowering activities. Under the order, this pre-tax charge was offset by reduced income tax expense. The ~~declines~~changes in earnings reflected the ~~effects of~~improved utility margin, lower ~~average rates ($185 millionyear-to-date),~~ ~~including the impact of the TCJA ($53~~operations and maintenance expense, higher depreciation and lower net interest and finance expenses. PacifiCorp’s after-tax earnings were $278 million in the third quarter and ~~$159~~$626 million ~~in the first nine months), and ayear-to-date~~ ~~reduction in volumes (0.9%), largely attributable to the impacts of weather.~~

~~Pre-tax~~ ~~earnings decreased $70 million (18%) in the third quarter and $208 million (23%)~~ in the first nine months of ~~2018 as compared to the same periods in 2017. Utility margin (operating revenues less fuel~~2019, increases of 3% and ~~purchased energy costs) in the third quarter and first nine months of 2018 were $904 million and $2,446 million, respectively, representing decreases of $61 million (6%) and $205 million (8%)~~4%, respectively, ~~versus the comparable periods in 2017. These decreases were primarily due to the declines in revenues, which included the effects~~over 2018.

Item 2. Management’s Discussion and Analysis of ~~the TCJA. PacifiCorp’safter-tax~~ ~~earnings in the third quarter~~Financial Condition and ~~first nine months~~Results of ~~2018 were $270 million~~Operations

Utilities and ~~$603 million, respectively, representing an increase of $7 million (3%~~Energy (“Berkshire Hathaway Energy Company”) ~~in the third quarter and a decrease of $15 million (2%) from the first nine months of 2017.~~ (Continued)

MidAmerican Energy Company

MEC operates a regulated electric and natural gas utility primarily in Iowa and Illinois. Revenues and other income were $823 million in the third quarter of 2019, a decrease of 4% compared to 2018, and $2.4 billion in the first nine months, an increase of 1% versus the same period in 2018. Electric operating revenues were $712 million in the third quarter of 2019 and $1.8 billion in the first nine months, each relatively unchanged from 2018. Natural gas revenues decreased in the third quarter and first nine months of ~~2018 increased $25 million (3%) and $145 million (7%), respectively, as compared to~~2019 versus the same periods in ~~2017. Electric operating revenues in~~ 2018, primarily due to decreased volumes. Revenues and other income also increased ~~$20 million in the third quarter and $108~~$38 million in the first nine months ~~versus 2017. The~~of 2019, primarily from increased allowances for equity funds used during construction and higher nonregulated utility construction services revenues.

Pre-tax earnings were $199 million in the third quarter ~~increase was due to higher wholesale~~of 2019, a decline of $52 million (21%) versus 2018, and ~~other revenues due to increases in volumes and average prices. The increase~~were $336 million in the first nine months, ~~was primarily attributable to higher retail revenues~~a decrease of ~~$96~~$11 million reflecting higher recoveries through bill riders (substantially offset in cost of sales, operating expenses and income tax expense) and volumes, partially offset by lower average rates, predominantly from the impact of the TCJA. In the first nine months of 2018, natural gas revenues increased $20 million, primarily due to increased volumes, partially offset by a lower average~~per-unit~~ ~~price and the effects of the TCJA.~~

~~Pre-tax~~ ~~earnings in the third quarter of 2018 were relatively unchanged and in the first nine months decreased $55 million (14%~~(3%) compared to ~~the same periods in 2017.~~2018. Electric utility margin in the third quarter ~~and first nine months~~ of ~~2018 was $587~~2019 increased 2% to $599 million and ~~$1,419 million, respectively, increases of $10 million and $84 million, respectively, over the corresponding 2017 periods, which were primarily due to the net increase in retail revenues~~ in the first nine ~~months. However, theyear-to-date~~ ~~increase~~months increased 4% to $1.5 billion. The increases in electric utility margin ~~was~~were more than offset by increased depreciation, operations and maintenance expenses and ~~other operating expenses. Theyear-to-date~~ ~~increase in depreciation expense included $83~~interest. MEC’s after-tax earnings are greater than its pre-tax earnings due to the significant production tax credits related to its wind-powered generating facilities. MEC’s after-tax earnings were $279 million ~~from Iowa revenue sharing and $47 million from additional wind generation and other plant placedin-service.~~

~~MEC’safter-tax~~ ~~earnings~~ in the third quarter of 2019 and $622 million in the first nine months, decreases of ~~2018 were $479~~$200 million ~~and $685 million, respectively, increases of $96 million (25%~~(42%) and ~~$69~~$63 million ~~(11%~~(9%), respectively, as compared to the same periods in ~~2017. MEC’safter-tax~~ ~~earnings~~2018, reflecting decreases in ~~2018 and 2017 were significantly greater thanpre-tax~~ ~~earnings due to the significant production income~~ tax credits ~~received relating to wind-powered generating facilities.~~recognized.

NV Energy

NV Energy operates regulated electric and natural gas utilities in Nevada. Revenues were $1.1 billion in the third quarter and $2.4 billion in the first nine months of ~~2018 increased~~2019, decreases of 1% and 2%, respectively, compared to the same periods in ~~2017.~~2018. Electric operating revenues ~~increased $12~~decreased $9 million in the third quarter and ~~$34~~$38 million in the first nine months of 2019 versus 2018, primarily attributable to lower retail revenue, reflecting lower customer volumes and reductions related to the TCJA that were effective April 1, 2018, partially offset by higher rates resulting from increased pass-through cost ~~adjustments~~adjustments.

Pre-tax earnings decreased $7 million (3%) in the third quarter and ~~higher volumes largely attributable~~$2 million (1%) in the first nine months of 2019 as compared to 2018. Electric utility margin was $592 million in the ~~impacts~~third quarter and $1.3 billion in the first nine months of ~~weather~~2019, decreases of $32 million and $58 million, respectively, compared to 2018, primarily due to lower retail ~~customer growth, partly~~operating revenues. The declines in electric utility margin and increases in depreciation in 2019 were mostly offset by ~~reductions from~~lower operations and maintenance expenses. NV Energy’s after-tax earnings were $206 million in the ~~impact of the TCJA~~third quarter and ~~lower retail rates resulting from a 2017 regulatory rate review. Natural gas operating revenue increased $8~~$316 million in the first nine months of 2019, increases of 2% over each of the corresponding 2018 periods.

Northern Powergrid

Revenues decreased $3 million in the third quarter and $19 million in the first nine months of 2019 compared to 2018, primarily due to the unfavorable foreign currency translation effects of a ~~higher averageper-unit~~ ~~price,~~stronger U.S. Dollar in 2019, partially offset by higher distribution and smart meter revenues. Pre-tax earnings decreased $11 million in the third quarter and increased $9 million in the first nine months of 2019 as compared to 2018, reflecting changes in the timing and amount of pension settlement losses and lower ~~customer usage.~~revenues.

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

Utilities and Energy (“Berkshire Hathaway Energy Company”)(Continued)

~~NV Energy (Continued)~~

~~Pre-tax~~ earnings in the third quarter and first nine months of 2018 decreased $79 million (23%) and $136 million (25%), respectively, compared to the same periods in 2017. The decreases were primarily due to lower electric utility margin and increased depreciation, maintenance and other operating costs. Electric utility margin in the third quarter and first nine months of 2018 was $623 million and $1,366 million, respectively, representing decreases of $17 million (3%) and $38 million (3%) versus the comparable periods in 2017. The decreases were primarily due to the effects of the TCJA offset by the higher sales volumes. NV Energy’s~~after-tax~~ ~~earnings in the third quarter and first nine months of 2018 were $201 million and $311 million, respectively, declines of 10% from each of the corresponding 2017 periods.~~

~~Northern Powergrid~~

Revenues increased $13 million and $71 million in the third quarter and first nine months of 2018 compared to same periods in 2017, primarily due to the favorable foreign currency translation effects of a weaker U.S. Dollar in the first nine months of 2018 and increased smart meter and distribution revenues.~~Pre-tax~~ earnings in the third quarter of 2018 increased $10 million (21%) and $2 million (1%) in the first nine months of 2018 compared to 2017, primarily due to favorable foreign currency translation effects and the increases in revenues, partly offset by higher depreciation and other operating expenses, including higher pension settlement losses in 2018.

Natural gas pipelines

Revenues increased $70 million (35%) in the third quarter and $183 million (26%) in the first nine months of 2018 compared to 2017, primarily due to higher transportation revenues of $58 million and $102 million, respectively, from higher volumes and rates due to unique market opportunities and increased gas sales volumes related to system balancing activities, which were largely offset in cost of sales.~~Pre-tax~~ earnings increased $44 million (73%) and $73 million (24%) in the third quarter and first nine months of 2018, respectively, compared to 2017. The increases were primarily due to the increases in transportation revenues and lower depreciation expense, partly offset by comparative increases in operations and maintenance expenses.

~~Other energy businesses~~

~~Revenues increased $33 million (5%) in the third quarter and $94 million (6%) in the first nine months of 2018 compared to the same periods in 2017, reflecting comparativeyear-to-date~~ ~~increases from renewable energy of 10% and from AltaLink, L.P. of 4%.Pre-tax~~ earnings in the third quarter and first nine months of 2018 increased $5 million and $73 million, respectively, compared to the same periods in 2017. The increases were primarily attributable to the increased revenues from renewable energy and AltaLink, L.P., partly offset by increased depreciation expense and higher other operating expenses.

~~Real estate brokerage~~

Revenues in the third quarter and first nine months of ~~2018 increased 27%~~2019 declined $30 million (11%) and ~~30%~~$56 million (6%), respectively, compared to 2018. The third quarter decline was due to lower transportation revenues of $30 million. The decrease in the first nine months was primarily due to lower gas sales ($58 million) related to system balancing activities at Northern Natural Gas (largely offset in cost of sales) and lower transportation revenues of $3 million, which included a reduction of $26 million from lower contract rates (largely offset by lower depreciation and amortization) and refunds related to the TCJA, substantially offset by higher volumes and rates. Pre-tax earnings were $86 million in the third quarter and $387 million in the first nine months of 2019, a decrease of $18 million (17%) and an increase of $11 million (3%), respectively, compared to 2018. The earnings decrease in the third quarter was primarily due to the decrease in transportation revenues, partly offset by a comparative decrease in operating expenses. The earnings increase in the first nine months was primarily due to the increase in transportation revenues from higher volumes and rates and favorable margins from system rebalancing activities, partly offset by comparative increases in deprecation and operating expenses.

Other energy businesses

Other energy revenues and other income declined $6 million (1%) in the third quarter and $67 million (4%) in the first nine months of 2019 as compared to the same periods in ~~2017,~~2018. The declines were primarily due to ~~recent business acquisitions.~~increased losses from tax equity renewable energy investments of $13 million for the third quarter and $48 million for the first nine months (largely due to increased investments) and lower operating revenues from non-regulated services. Pre-tax earnings increased $5 million in the third quarter and decreased ~~$17~~$58 million in the first nine months of ~~2018~~2019 compared to ~~2017,~~the same periods in 2018. The decrease in the comparative earnings for the first nine months is a result of the increase in tax equity investment losses. The pre-tax losses from these investments are included in revenues and are substantially offset by income tax benefits. Results for the first nine months of 2019 also included increased earnings from AltaLink, L.P. and lower operating earnings from renewable energy and the non-regulated service business, attributable to higher operating expenses and depreciation from renewable energy and lower non-regulated service business margin. After-tax earnings from other energy activities were $228 million in the third quarter and $466 million in the first nine months of 2019, increases of $42 million and $26 million, respectively, versus 2018.

Real estate brokerage

Revenues increased 7% in the third quarter and 5% in the first nine months of 2019 compared to the same periods in 2018. The increases were attributable to recent business acquisitions and higher mortgage revenues, partly offset by a 5% year-to-date decrease in closed units at existing brokerage businesses. Pre-tax earnings increased 35% in the third quarter and 13% in the first nine months of 2019 compared to 2018. The year-to-date increase was primarily due to ~~higher operating costs~~the increase in mortgage net revenues and ~~interest expense,~~earnings from acquired businesses, partially offset by ~~higher margin.~~lower earnings at existing brokerage businesses.

Corporate interest

Corporate interest includes interest on unsecured debt issued by the BHE holding company and borrowings from Berkshire insurance subsidiaries in connection with certain of BHE’s business acquisitions. The borrowings from Berkshire insurance subsidiaries were repaid in the third quarter of 2017.company. Corporate interest ~~declined 7.5%~~ in the first nine months of ~~2018 as~~2019 increased 5% compared to ~~2017,~~2018, primarily due to ~~lower~~higher average borrowings.

Income taxes

BHE’s ~~consolidated~~ effective income tax ~~rate~~rates for the first nine months of 2019 and 2018 were approximately (20.6%) and ~~2017 was (12.5)% and 11.9%~~(12.5%), respectively. BHE’s effective income tax rates regularly reflect significant production tax credits from wind-powered electricity generation placed in service by our domestic regulated utilities and other energy businesses. The effective tax rate in the first nine months of ~~2018~~2019 decreased primarily due to ~~the reduction in the U.S. federal corporate income tax rate, as well as from lower state income tax expense,~~ an increase in recognized production tax credits ~~lower U.S. income taxes on~~and favorable impacts of rate making in 2019, partially offset by benefits recognized in 2018 related to foreign earnings and ~~impacts of rate making.~~the accrued repatriation tax on undistributed foreign earnings in connection with the TCJA.

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

Manufacturing, Service and Retailing

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

	Third Quarter										First Nine Months
	Revenues				Earnings *						Revenues				Earnings *
	2019		2018		2019			2018			2019		2018		2019			2018
Manufacturing	$	15,897	$	15,686	$	2,484		$	2,369		$	47,173	$	46,335	$	7,205		$	7,105
Service and retailing		19,982		20,052		689			745			59,079		58,790		2,225			2,208
	$	35,879	$	35,738							$	106,252	$	105,125
Pre-tax earnings						3,173			3,114							9,430			9,313
Income taxes and noncontrolling interests						718			703							2,288			2,289
					$	2,455		$	2,411						$	7,142		$	7,024
Effective income tax rate						22.1	%		22.1	%						23.7	%		24.1	%

   Third Quarter    First Nine Months
   Revenues    Earnings *    Revenues    Earnings *
   2018    2017    2018    2017    2018    2017    2018    2017
Manufacturing
   $ 13,552    $ 12,819    $     2,012    $     2,002    $   40,339    $ 37,654    $ 6,002    $ 5,428
Service and retailing
   19,796    19,325    672    536    58,061    56,650    2,011    1,641
















   $     33,348    $     32,144          $   98,400    $     94,304









Pre-tax earnings

      2,684    2,538          8,013    7,069
Income taxes and noncontrolling interests

      587    844          1,953    2,396








      $ 2,097    $ 1,694          $      6,060    $     4,673








Effective income tax rate

      21.3%    32.7%          23.8%    33.3%

Excludes certain acquisition accounting expenses, which were primarily from the amortization of identified intangible assets recorded in connection with our business acquisitions. Theafter-tax acquisition accounting expenses excluded from earnings in the preceding table were ~~$192 million and $614~~$201 million in the third quarter and $581 million in first nine months of ~~2018, respectively,~~2019, compared to ~~$184 million and $485~~$199 million in the third quarter and $637 million in the first nine months of ~~2017, respectively.~~2018. These expenses are included in “Other” in the summary of earnings on page 2628 and in the “Other” earnings section on page ~~42.~~46.

Manufacturing

Our manufacturing group includes a variety of ~~businesses that produce and distribute~~ industrial, building and consumer ~~products. Industrial~~ products ~~businesses include~~businesses. The industrial products group includes specialty chemicals (The Lubrizol Corporation (“Lubrizol”)), complex metal products for aerospace, power and general industrial markets (Precision Castparts Corp. (“PCC”)), 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”)). Marmon includes UTLX Company (“UTLX”), which provides various products and services (including equipment leasing) for the rail and mobile crane industries.

~~Our~~The building products ~~businesses include~~group includes homebuilding and manufactured housing finance (Clayton Homes), flooring (Shaw), insulation, roofing and engineered products (Johns Manville), bricks and masonry products (Acme Building Brands), paint and coatings (Benjamin Moore), and residential and commercial construction and engineering products and systems (MiTek). ~~Our~~The consumer products ~~businesses include~~group includes leisure vehicles (Forest River), several apparel and footwear operations (including Fruit of the Loom, Garan, H.H. Brown Shoe Group and Brooks Sports) and the Duracell Company (“Duracell”), a manufacturer of high performance alkaline batteries. This group also includes custom picture framing products (Larson Juhl) and jewelry products (Richline). A summary of revenues andpre-tax earnings of our manufacturing operations follows ~~(in~~(dollars in millions).


	Third Quarter								First Nine Months								Third Quarter								First Nine Months
	Revenues				Pre-tax earnings				Revenues				Pre-tax earnings				Revenues				Pre-tax earnings				Revenues				Pre-tax earnings
	2018		2017		2018		2017		2018		2017		2018		2017		2019		2018		2019		2018		2019		2018		2019		2018
Industrial products	$	7,119	$	6,657	$	1,297	$	1,247	$	21,483	$	19,802	$	4,012	$	3,508	$	7,716	$	7,673	$	1,458	$	1,449	$	23,280	$	23,143	$	4,441	$	4,481
Building products		3,389		3,124		375		407		9,563		8,983		1,042		1,057		5,281		4,969		696		580		15,212		13,899		1,904		1,676
Consumer products		3,044		3,038		340		348		9,293		8,869		948		863		2,900		3,044		330		340		8,681		9,293		860		948
																	$	15,897	$	15,686	$	2,484	$	2,369	$	47,173	$	46,335	$	7,205	$	7,105
	$	13,552	$	12,819	$	2,012	$	2,002	$	40,339	$	37,654	$	6,002	$	5,428

Aggregate revenues of our manufacturing businesses in the third quarter of 2019 were $15.9 billion, an increase of 1.3% compared to 2018 and in the first nine months were $47.2 billion, an increase of ~~2018 were approximately $13.6 billion and $40.3 billion, increases of $733 million (5.7%) and approximately $2.7 billion (7.1%), respectively, compared to the same periods in 2017.~~1.8%. Pre-tax earnings in the third quarter of 2019 were $2.5 billion, an increase of 4.9% compared to 2018 ~~were approximately $2.0 billion, relatively unchanged from 2017,~~ and ~~$6.0 billion~~ in the first nine months ~~of 2018,~~were $7.2 billion, an increase of ~~$574 million (10.6%) compared to 2017.Pre-tax~~ ~~earnings in the first nine months of 2017 includedpre-tax~~ ~~losses of approximately $190 million (predominantly in the first quarter) in connection with the disposition of an underperformingbolt-on~~ ~~business acquired by Lubrizol in 2014. Excluding these losses,pre-tax~~ earnings in the first nine months of 2018 increased 6.8% compared to 2017. Results of our manufacturing businesses in 2018 generally reflected higher revenues compared to 2017. However, manufacturing costs and operating expenses were also higher, partly offsetting the revenue increases, particularly in the third quarter.1.4%.

~~Industrial products~~

Revenues from industrial products businesses were approximately $7.1 billion in the third quarter and $21.5 billion in the first nine months of 2018, or increases of $462 million (6.9%) and $1.7 billion (8.5%), respectively, compared to 2017. PCC’s revenues in the third quarter and first nine months of 2018 increased approximately 5.9% and 6.3%, respectively, over the same periods in 2017. The increases reflected increased demand in aerospace markets in connection with new aircraft programs, partly offset by lower demand for industrial gas turbine products.

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

Manufacturing, Service and Retailing (Continued)

Industrial products ~~(Continued)~~

Revenues of the industrial products group were $7.7 billion in the third quarter and $23.3 billion in the first nine months of 2019, slight increases over revenues in each of the comparable 2018 periods. Pre-tax earnings of the group were $1.46 billion in the third quarter and $4.44 billion in the first nine months of 2019, compared to $1.45 billion and $4.48 billion in the corresponding 2018 periods. Pre-tax earnings as a percentage of revenues for the group were 19.1% in the first nine months of 2019 compared to 19.4% in 2018.

PCC’s revenues were $2.58 billion in the third quarter and $7.80 billion in the first nine months of 2019, increases of $37 million (1.4%) and $148 million (1.9%), respectively, compared to 2018. The revenue increases reflected increased sales in aerospace markets, partly offset by lower industrial gas turbine products sales and lower sales of certain pipe products, primarily attributable to U.S tariffs.

PCC’s pre-tax earnings increased 9% in the third quarter and 8% in the first nine months of 2019 compared to 2018. The earnings increases reflected higher earnings from aerospace products and the impacts of costs incurred in 2018 related to the temporary unplanned shutdown of certain metals facilities and metal press outages and earnings from various non-recurring items in 2019, partially offset by lower earnings from industrial gas turbine business. While demand for aerospace products continues to be high, we continue to incur incremental production and other costs to meet required deliveries to customers, which have negatively affected margins and earnings. The production headwinds experienced were primarily attributable to shortages of qualified skilled labor and plant capacity. We continue to work towards addressing these issues.

Lubrizol’s revenues were $1.62 billion in the third quarter and $5.01 billion in the first nine months of 2019, decreases of $92 million (5%) and $231 million (4%), respectively, as compared to 2018. The declines were primarily due to lower volumes and unfavorable foreign currency translation effects, partly offset by higher average selling prices which were necessitated by raw material cost increases in 2018 and the first quarter of 2019. Lubrizol’s consolidated volume in the first nine months of 2019 declined 4% from 2018, reflecting reduced volumes in both the Additives and Advanced Materials product lines.

Lubrizol’s pre-tax earnings decreased 8% in the third quarter and 5% in the first nine months of 2019 compared to 2018. Earnings in the third quarter and first nine months of ~~2018 increased 7.3% and 7.6%, respectively, compared to 2017, primarily due to higher prices, changes in product mix and favorable~~2019 were negatively affected by lower sales volumes, unfavorable foreign currency ~~translation. Lubrizol experienced~~translation effects, higher manufacturing expenses and the impact of a ~~significant increase in average~~fire at Lubrizol’s Rouen, France manufacturing facility on September 26, 2019, partly offset by improved material ~~unit costs during 2018 and 2017, necessitating increases in sales prices. Lubrizol’s consolidated sales volumes increased 6% and 3%, respectively,~~margins.

Marmon’s revenues were $2.13 billion in the third quarter and $6.28 billion in the first nine months of ~~2018,~~2019, increases of $58 million (2.8%) and $140 million (2.3%), respectively, as compared to ~~2017. IMC’s~~2018. The increases reflected higher volumes in the Electrical Products, Retail Solutions and Water sectors, increased railcar repair services, higher railcar lease revenues ~~increased 11.7%~~ in the third quarter, and ~~20.0%~~the effects of business acquisitions. These increases were partly offset by lower distribution volumes in the Metals Services sector, unfavorable foreign currency translation effects and lower metals prices in the Electrical Products and Plumbing & Refrigeration sectors.

Marmon’s pre-tax earnings in the third quarter of 2019 increased $12 million (3.5%), while earnings in first nine months of 2019 decreased $50 million (5%), as compared to 2018. Pre-tax earnings in the first nine months of 2018 ~~compared to 2017, due to~~included a ~~combination~~gain of ~~factors, including increased unit sales (particularly over~~$44 million realized on the ~~first half of the year), business acquisitions and foreign currency translation effects from a weaker U.S. Dollar~~divestiture in the ~~first half~~Food & Beverage sector. Excluding the divestiture gain, pre-tax earnings as a percentage of ~~2018.~~

~~Marmon’s revenues in the third quarter and first nine months of 2018 increased 4.0% and 7.6%, respectively, as compared to 2017. Revenue increases~~sales were primarily attributable to higher average metals prices, business acquisitions and growth in heavy-duty transportation product lines, partially offset by lower sales from the beverage and retail products businesses and lower steel distribution volume. CTB’s revenues increased 6.0%15.6% in the first nine months of ~~2018 versus 2017, due~~2019 as compared to ~~favorable foreign currency effects~~16.0% in 2018. In the first nine months of 2019, we experienced lower earnings attributable to lower rail tank car leasing rates coupled with higher rail tank car maintenance expenses in the Rail Products & Leasing sector and ~~modest sales growth~~declines in ~~protein production~~the Metals Services and ~~grain systems during~~Industrial Products sectors, somewhat offset by earnings increases in the ~~third quarter.~~Retail Solutions, Water Technologies and Crane Services sectors and from business acquisitions.

~~Pre-tax~~ ~~earnings of the industrial products group were $1.3 billion~~IMC’s revenues in the third quarter increased 2% over 2018, and ~~$4.0 billion~~were relatively unchanged in the first nine months of ~~2018, representing increases of $50 million (4.0%) and $504 million (14.4%), respectively,~~2019 as compared to ~~2017. Our results~~the corresponding 2018 period, reflecting increased revenues from recent business acquisitions, offset by unfavorable foreign currency translation effects of a stronger U.S. Dollar and the effects of the U.S./China trade disputes. IMC’s pre-tax earnings declined 11% in the first nine months of ~~2017 includedpre-tax~~ ~~losses of approximately $190 million, substantially all of which were~~2019 versus 2018, attributable to increased raw material costs, unfavorable foreign currency translation effects, changes in ~~the first quarter, related to Lubrizol’s disposition of an underperformingbolt-on~~business mix and ~~related intangible asset impairments and restructuring charges. Excluding~~ the effects of ~~these losses,pre-tax~~ ~~earnings~~the U.S./China trade disputes.

CTB’s revenues decreased 8% in the third quarter of ~~the industrial products group increased 8.5%~~2019 and were relatively unchanged in the first nine months of ~~2018 as compared~~2019 versus the same periods in 2018. The comparative decline in third quarter revenues was primarily due to ~~2017.~~

~~PCC’s~~lower revenues from grain and protein equipment and the unfavorable foreign currency translation effects of a stronger U.S. Dollar, partly offset by higher revenues from processing systems. CTB’s pre-tax earnings ~~decreased 2.0%~~declined 3% in the third quarter and ~~6.2%~~increased 17% in the first nine months of ~~2018~~2019 as compared to ~~2017. Results in~~the 2018 were negatively affected by costs associated with the temporary unplanned shut-downs of certain metals facilities, metal press outages and lower earnings from the industrial gas turbine business. The closed facilities are gradually resuming production, with most expected to becoming fully operational by the end of 2018. In addition, the aforementioned new aircraft programs involve relatively complex manufacturing processes and manufacturing costs (including personnel training costs) have been relatively high~~to-date,~~ ~~but we expect costs will decline as processes and efficiencies develop.~~

~~Lubrizol’spre-tax~~ ~~earnings, excluding the effects of the losses on the disposition of a bolt-on business in 2017, increased approximately 16%~~periods. Earnings in the first nine months of 2018 compared to 2017. The increase was primarily due to increases in sales volumes and selling prices, as well as by lower interest expense and the favorable effects of foreign currency translation, somewhat offset by higher raw material costs and operating expenses. IMC’s~~pre-tax~~ ~~earnings increased significantly in the first nine months of 2018 compared to the same periods in 2017, reflecting~~2019 benefitted from a combination of ~~increased sales, increased manufacturing efficiencies,~~favorable changes in business mix, the ~~effects~~moderation of ~~business acquisitions~~cost increases of certain raw materials, better pricing efficiency and ongoing ~~expense~~efforts to control ~~efforts, partly offset by the effects of rising raw material costs.~~operating expenses.

~~Marmon’spre-tax~~ ~~earnings in 2018 increased 3.2% in the third quarter and 12.3% in the first nine months compared to the same periods in 2017. The increase in the first nine months was primarily due to anon-recurring~~ ~~gain of $43 million from the sale of certain assets of its beverage products business in the second quarter.~~

~~Building products~~

Revenues of the building products group in the third quarter and first nine months of 2018 were approximately $3.4 billion and $9.6 billion, respectively, increases of $265 million (8.5%) and $580 million (6.5%), respectively, compared to the corresponding 2017 periods. For the third quarter and first nine months of 2018, the increases reflected higher average selling prices, product mix changes and unit increases with respect to certain flooring and insulation products. The selling price increases in 2018 were in response to significant material cost increases over the past two years.

~~Pre-tax~~ earnings of the building products group in the third quarter and first nine months of 2018 were $375 million and $1,042 million, respectively, decreases of 7.9% and 1.4%, respectively, versus the corresponding 2017 periods. Raw material and production costs rose over the first nine months of 2018, which together with increased facilities closure costs, more than offset most of the increases in revenues. In particular, costs for steel, titanium dioxide and petrochemicals were substantially higher in 2018 than in 2017. The increases in selling prices have lagged the increases in raw materials costs and, consequently, gross margin rates have deteriorated.

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

Manufacturing, Service and Retailing (Continued)

~~Consumer~~Building products

Revenues of the ~~consumer~~building products group were $5.3 billion in the third quarter and $15.2 billion in the first nine months of 2019, increases of $312 million (6.3%) and $1.3 billion (9.4%), respectively, compared to the same periods in 2018. Pre-tax earnings of the group were $696 million in the third quarter and $1.9 billion in the first nine months of 2019, increases of 20.0% and 13.6%, respectively, over 2018. Pre-tax earnings as percentages of revenues were 12.5% and 12.1% in the first nine months of 2019 and 2018, respectively.

Clayton Homes revenues were approximately $1.9 billion in the third quarter and $5.3 billion in the first nine months of 2019, increases of $304 million (19%) and $993 million (23%), respectively, over the same periods in 2018. The comparative increases were primarily due to increases in home sales of $263 million (22%) in the third quarter and $890 million (28%) year-to-date, reflecting increased units sold and changes in sales mix. Unit sales of site-built homes increased 58% in the third quarter and 105% in the first nine months of 2019 over 2018, primarily due to business acquisitions, while manufactured home unit sales at retail and wholesale were unchanged in the third quarter and 4% lower in the first nine months of 2019. Interest income from lending activities in the first nine months of 2019 increased 6.5% compared to 2018, attributable to increased originations and average outstanding loan balances. Aggregate loan balances outstanding were approximately $15.5 billion at September 30, 2019 compared to $14.4 billion as of September 30, 2018.

Pre-tax earnings of Clayton Homes were $272 million in the third quarter and $769 million in the first nine months of 2019, increases of $67 million (33%) and $135 million (21%), respectively, compared to 2018. The earnings increases in 2019 were attributable to home building activities, which reflected the increases in home sales and manufactured housing lending activities. Pre-tax earnings from lending and finance activities in the first nine months of 2019 increased 8%, reflecting the increases in interest income and other financial services income and decreases in insurance losses, partially offset by higher interest expense, attributable to higher average borrowings and interest rates, and by higher other operating costs.

Aggregate revenues of our other building products businesses were $3.4 billion in the third quarter of ~~2018 were approximately $3.0 billion, essentially~~2019, unchanged from ~~2017. Our apparel~~2018, and ~~footwear businesses generated a comparative~~$9.9 billion in the first nine months of 2019, an increase of 3.4% versus 2018. Comparative third quarter ~~revenue increase of 6%, offset by lower~~ revenues ~~from Forest River~~increased for paint, coatings, and ~~Duracell. These increases and decreases were~~roofing products, due primarily ~~attributable~~ to ~~changes in unit sales,~~increased volumes and to a lesser extent increased selling prices, while sales of flooring and ~~sales mix changes. Most significantly, Forest River experienced a comparative 7% decline~~brick products declined, primarily attributable to lower volumes.

Pre-tax earnings of the other building products businesses were $424 million in the third quarter ~~unit sales.~~and $1.1 billion in the first nine months of 2019, increases of 13% and 9%, respectively, over the corresponding 2018 periods. Earnings in 2019 benefitted from a combination of increases in selling prices in certain product categories, declining raw material costs for certain commodities and operating cost control initiatives, which were partly offset by the effects of increased facilities closure costs and lower earnings from flooring products.

Consumer products

Consumer products revenues were $2.9 billion in the third quarter and $8.7 billion in the first nine months of 2019, decreases of $144 million (4.7%) and $612 million (6.6%), respectively, versus 2018. Revenues in the first nine months of 2019 declined at Forest River, Duracell and the apparel and footwear businesses versus 2018. Revenues of Forest River declined 11% in the third quarter and 13% in the first nine months versus 2018 ~~were approximately $9.3 billion, an increase~~due to lower unit sales. Revenues of ~~$424 million (4.8%) compared to~~Duracell increased 7% in the third quarter and decreased 2% in the first nine months of ~~2017.~~2019 compared to the prior year periods. Duracell’s third quarter revenue increase was primarily attributable to customers delaying orders in the second quarter, partly offset by unfavorable foreign currency translation effects. Apparel and footwear revenues in the third quarter and first nine months of 2019 declined 4% and 2%, respectively, compared to 2018. The~~year-to-date~~ ~~increase included increases from Forest River (5%)~~ declines reflected the product shipping delays associated with a Brooks Sports distribution center that opened in the second quarter of 2019, and ~~our~~lower apparel and other footwear ~~businesses (6%), which~~volumes, reflecting the shift by major retailers towards private label products and smaller order sizes.

Consumer products pre-tax earnings were ~~primarily due to increased volume from Brooks Sports and Garan.~~

~~Pre-tax~~ ~~earnings of the consumer products group were $340~~$330 million in the third quarter and $860 million in the first nine months of ~~2018,~~2019, decreases of $10 million (2.9%) and $88 million (9.3%), respectively, compared to 2018. Pre-tax earnings as a ~~decrease~~percentage of ~~2.3% from 2017.~~revenues for the first nine months were 9.9% in 2019 and 10.2% in 2018. The decline ~~reflected lower earnings from Forest River (24%), partially offset by increased earnings from the apparel and footwear businesses (5%) and Duracell (8%).Pre-tax~~in pre-tax earnings for the first nine months of ~~2018 were $948 million, an increase of $85 million (9.8%) compared to 2017. The comparative increase inyear-to-date~~ ~~earnings reflected increases from Duracell (47%) and the apparel and footwear businesses (9%), partly offset by lower earnings from Forest River and Larson Juhl.~~

During 2018, and in the third quarter in particular, Forest River’s results were affected by higher material costs, which together with the effects of lower sales volume in the third quarter, contributed to reductions in its gross sales margin rates and~~pre-tax~~ ~~earnings. The comparative earnings increases of the apparel and footwear businesses in 2018 were~~2019 was primarily attributable to ~~revenue increases. Duracell’s earnings increases in 2018 reflected~~lower recreational vehicle sales at Forest River, lower gross margin rates at Duracell and the ~~favorable effects~~costs related to a Duracell new product launch.

Item 2. Management’s Discussion and Analysis of ~~ongoing operational restructuring efforts~~Financial Condition and ~~comparatively lower restructuring charges.~~Results of Operations

Manufacturing, Service and Retailing (Continued)

Service and retailing

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

	Third Quarter								First Nine Months
	Revenues				Pre-tax earnings				Revenues				Pre-tax earnings
	2019		2018		2019		2018		2019		2018		2019		2018
Service	$	3,341	$	3,397	$	451	$	517	$	10,195	$	9,948	$	1,425	$	1,465
Retailing		4,037		3,833		188		184		11,670		11,404		580		572
McLane Company		12,604		12,822		50		44		37,214		37,438		220		171
	$	19,982	$	20,052	$	689	$	745	$	59,079	$	58,790	$	2,225	$	2,208

   Third Quarter    First Nine Months
   Revenues        Pre-tax earnings        Revenues        Pre-tax earnings
   2018    2017    2018    2017    2018    2017    2018    2017
Service
   $ 3,141    $ 2,775    $ 444    $ 315    $ 9,219    $ 8,184    $ 1,268    $ 926
Retailing
   3,833    3,752    184    176    11,404    10,986    572    513
McLane Company
   12,822    12,798    44    45    37,438    37,480    171    202
















   $ 19,796    $ 19,325    $     672    $     536    $ 58,061    $ 56,650    $   2,011    $     1,641

Service

Our service ~~businesses offer~~business group offers 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) and offer third party logistics services that primarily serve the petroleum and chemical industries (Charter Brokerage). ~~Service~~Other service businesses ~~also~~ include ~~the~~transportation equipment leasing (XTRA) and furniture leasing (CORT), electronic news distribution, ~~of corporate news,~~ multimedia and regulatory filings (Business Wire), ~~publication of~~publishing newspapers and other publications (Buffalo News and the BH Media Group) and operation of a television station in Miami, Florida (WPLG). ~~We also offer third party logistics services that primarily serve the petroleum and chemical industries (Charter Brokerage).~~

~~Revenues of the service~~Service group revenues were ~~approximately $3.1~~$3.3 billion in the third quarter and ~~$9.2~~$10.2 billion in the first nine months of ~~2018, representing increases~~2019, a decrease of ~~$366~~$56 million ~~(13.2%~~(1.6%) ~~and $1.0 billion (12.6%), respectively, as compared to the same periods in 2017. TTI’s revenues~~ in the third quarter and an increase of $247 million (2.5%) in the first nine months ~~of 2018 increased approximately 35%~~as compared to 2018. Sales of TTI declined 4% in the ~~same periods in 2017. The increases reflected an industry-wide increase in demand throughout 2018 for electronic components in many geographic markets around the world,~~third quarter and from the effects of business acquisitions and foreign currency translation due to a weaker U.S. Dollar. While TTI’s revenue increases were significant, we believe that demand is beginning to moderate. Otherwise, Charter Brokerage, FlightSafety and WPLG generated comparative revenue increasesincreased 4% in the first nine months of 2019 compared to the exceptionally high sales levels in 2018. Excluding the effects of acquisitions and foreign currency, TTI’s sales in the third quarter of 2019 declined 7% compared to 2018 ~~while~~and increased 2% in the first nine months compared to 2018. Sales began slowing in the fourth quarter of 2018 and continued to slow through the third quarter of 2019. The declines were attributable to reduced customer demand, the effects of U.S. trade tariffs, and lower sales prices.

Service group revenues in the first nine months of 2019 also reflected increases in aviation-related services (NetJets and to a lesser extent FlightSafety) and the leasing businesses, and decreases from ~~most~~the media businesses and Charter Brokerage, which divested a high revenue, low margin business in 2019. The increases in NetJets revenues were primarily due to increases in the number of ~~our other service businesses declined from 2017.~~aircraft on lease and increased flight hours.

Pre-tax earnings of the service group were $451 million in the third quarter of 2019, a decrease of $66 million (12.8%) compared to 2018, and $1.4 billion in the first nine months, a decrease of $40 million (2.7%) compared to the first nine months of ~~2018~~2018. Pre-tax earnings of the group as a percentage of revenues were ~~$444 million and $1.3 billion, respectively, increases~~14.0% in the first nine months of ~~$129 million (41.0%) and $342 million (36.9%), respectively,~~2019 compared to ~~the same periods~~14.7% in ~~2017.~~2018. The comparative ~~increases~~declines in earnings in ~~2018~~the third quarter of 2019 were ~~driven~~primarily due to lower earnings from TTI, partly offset by ~~the aforementioned revenue increases at TTI, which accounted for almost 70%~~higher earnings from NetJets and FlightSafety. TTI’s earnings declines in 2019 reflected lower gross margin rates. Earnings from NetJets increased in 2019, primarily attributable to increased revenues and improved operating margins.

Item 2. Management’s Discussion and Analysis of ~~these increases, as well as from earnings increases at Charter Brokerage~~Financial Condition and ~~NetJets.~~Results of Operations

Manufacturing, Service and Retailing (Continued)

Retailing

Our ~~retailers include~~largest retailing business is Berkshire Hathaway Automotive (“BHA”)~~. BHA includes~~, which consists of over 80 auto dealerships that sell new andpre-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~~Other retailing businesses ~~also~~ include four home furnishings retailing businesses (Nebraska Furniture Mart, R.C. Willey, Star Furniture and Jordan’s), which sell furniture, appliances, flooring and electronics.

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

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

~~Retailing (Continued)~~

~~Our other~~ Other retailing businesses also 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 and toys and novelties) and Detlev Louis Motorrad (“Louis”), a Germany-based retailer of motorcycle accessories.

~~Revenues of the retailing business~~Retailing group revenues were $4.0 billion in the third quarter and $11.7 billion in the first nine months of ~~2018 were $3.8 billion and $11.4 billion, respectively,~~2019, increases of ~~$81~~$204 million ~~(2.2%~~(5.3%) and ~~$418~~$266 million ~~(3.8%~~(2.3%), respectively, compared to 2018. BHA’s revenues, which represented approximately 65% of our year-to-date retailing revenues, increased 8% in the third quarter and 4% in the first nine months of 2019, as compared to 2018. BHA experienced revenue increases in the third quarter of 2019 in all significant product categories, including a 6% increase in new auto sales. For the first nine months of 2019, BHA’s revenue increase reflected an increase in pre-owned vehicle sales, while new auto sales were relatively unchanged compared to 2018. BHA’s revenues also reflected increases in vehicle repair work and finance and service contract activities.

Home furnishings group revenues, which represented about 20% of the aggregate retailing group revenues, were relatively unchanged in the third quarter and declined 2% in the first nine months of 2019 compared to the same periods in ~~2017. BHA’s revenues, which represented approximately 64%~~2018. Sales in 2019 were relatively unchanged or lower in each of ~~theyear-to-date~~ ~~retailing revenues in 2018, increased 2.1%~~our home furnishings operations.

Retail group pre-tax earnings were $188 million in the third quarter and ~~4.0%~~$580 million in the first nine months of 2019, increases of 2.2% and 1.4%, respectively, over the comparable 2018 ~~as compared to 2017. The increases derived primarily from~~periods. Comparative pre-tax earnings of BHA increased~~pre-owned~~ ~~vehicle sales. Revenues from new vehicle sales were down 2.3%~~ 24% in the third quarter and ~~relatively unchanged for the first nine months. In addition, Louis revenues increased 9.1%~~25% in the first nine months of ~~2018,~~2019, primarily due ~~primarily~~ to ~~foreign currency translation effects~~the increases in vehicle sales and ~~comparatively~~from earnings from finance and service contract activities, partly offset by higher ~~sales. Revenues of our home~~floorplan interest expense. Home furnishings ~~businesses increased 5.4%~~group pre-tax earnings in the first nine months of 2019 declined 19% versus 2018, ~~compared to 2017, due to~~reflecting the decline in revenues and generally higher ~~volumes in certain geographic markets and the effect of a new store, which opened in 2018.~~operating expenses.

~~Pre-tax~~ earnings in the third quarter and first nine months of 2018 from retailing were $184 million and $572 million, respectively, increases of $8 million (4.5%) and $59 million (11.5%), respectively, over 2017. The increases were primarily attributable to BHA and Louis. The earnings increases of BHA were primarily from finance and insurance activities, while the increases at Louis were primarily attributable to the revenue increases.

McLane Company

McLane operates a wholesale distribution business that provides grocery andnon-food consumer products to retailers and convenience stores (“grocery”) and to restaurants (“foodservice”). McLane also operates businesses that are wholesale distributors of distilled spirits, wine and beer (“beverage”). The grocery and foodservice ~~units~~businesses generate high sales ~~volumes~~ and very low ~~operating margins and~~profit margins. These businesses have several significant customers, including~~Wal-Mart,7-Eleven~~ Walmart, 7-Eleven, Yum! Brands and ~~Yum! Brands.~~others. Grocery sales comprise approximately two-thirds of McLane’s consolidated sales with food service comprising most of the remainder. A curtailment of purchasing by any of its significant customers could have an adverse impact on ~~McLane’s~~ periodic revenues and earnings.

Revenues ~~for~~were $12.6 billion in the third quarter and ~~first nine months of 2018 were $12.8~~$37.2 billion ~~and $37.4 billion, respectively, relatively unchanged compared to the same periods in 2017. On ayear-to-date~~ ~~basis, grocery sales increased 0.8% and foodservice sales declined 2.4%, compared to 2017. The decline in foodservice revenues was primarily due to a net loss of customers.~~

~~Pre-tax~~ ~~earnings in the third quarter of 2018 were $44 million, essentially unchanged from 2017, whilepre-tax~~ ~~earnings~~ in the first nine months of ~~2018~~2019, declines of ~~$171 million declined $31 million (15.3%),~~1.7% and 0.6% compared to ~~2017. McLane’s~~the corresponding 2018 periods. Revenues in the first nine months of 2019 decreased 3% in the grocery business and increased 4% in the foodservice ~~businesses continue~~business compared to 2018. Pre-tax earnings increased $6 million (14%) in the third quarter and $49 million (29%) in the first nine months of 2019 as compared to 2018. Results in 2019 reflected a slight increase in average gross margins and changes in business mix, partly offset by increased operating expenses, which were primarily employee-related. McLane continues to operate in ~~a highly~~an intensely competitive business environment, which is negatively affecting its current operating results. Gross margin rates increased slightly over the first nine months of 2018, but were more than offset by increases in fuel, depreciation and certain other operating expenses, producing a decline in its operating margin rate compared to 2017. We expect ~~the current unfavorable~~these operating conditions will continue ~~into~~over the remainder of 2019.

~~Finance and Financial Products~~

Our finance and financial products businesses include manufactured and site built housing and finance (Clayton Homes), transportation equipment manufacturing and leasing businesses (UTLX and XTRA, and together, “transportation equipment leasing”), as well as other leasing and financing activities. A summary of earnings from our finance and financial products businesses follows (in millions).

   Third Quarter    First Nine Months
   Revenues    Earnings    Revenues    Earnings
   2018    2017    2018    2017    2018    2017    2018    2017
Manufactured housing and finance
   $ 1,580    $ 1,318    $ 205    $ 173    $ 4,336    $ 3,591    $ 634    $ 546
Transportation equipment leasing
   674    652    209    219    2,000    1,928    624    649
Other
   178    183    116    104    525    500    331    243
















   $     2,432    $     2,153          $     6,861    $     6,019









Pre-tax earnings
         530    496          1,589    1,438
Income taxes and noncontrolling interests
         140    177          396    505








         $         390    $       319          $     1,193    $     933








Effective income tax rate
         26.6%    35.6%          25.0%    35.1%

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

~~Finance and Financial Products~~~~(Continued)~~

~~Manufactured housing and finance~~

Clayton Homes’ revenues in the third quarter and first nine months of 2018 were approximately $1.6 billion and $4.3 billion, respectively, increases of $262 million (19.9%) and $745 million (20.7%), respectively, over the corresponding 2017 periods. The increases reflected~~year-to-date~~ ~~increases in home sales of 29% and in financial services revenue of approximately 4%. The increase in home sales was primarily due to a 104%year-to-date~~ increase in unit sales of site built homes attributable to business acquisitions during the last two years, and to increased unit sales of manufactured homes. Average unit prices of site built homes are considerably higher than our traditional manufactured homes. The increase in financial services revenue was primarily attributable to increased interest income from a comparative increase in average loan balances of approximately 5% over the first nine months of 2018 as compared to 2017. As of September 30, 2018, Clayton Homes’ loan balances were approximately $14.4 billion.

~~Pre-tax~~ earnings in the third quarter and first nine months of 2018 were $205 million and $634 million, respectively, increases of $32 million (18.5%) and $88 million (16.1%), respectively, compared to the same periods in 2017. The increases in earnings reflected increased manufactured and site built home sales and financial services interest income, lower corporate overhead costs and credit losses, partly offset by increased interest expense and the effects of an $11 million gain from a legal settlement in 2017.

~~Transportation equipment leasing~~

Transportation equipment leasing revenues in 2018 were $674 million in the third quarter and $2.0 billion in the first nine months, increases of 3.4% and 3.7%, respectively, over the comparable 2017 periods. Revenues in 2018 of our~~over-the-road~~ trailer leasing business increased 14% in the third quarter and 13% in the first nine months over the same periods in 2017, primarily due to increased units on lease. Revenues in the third quarter of 2018 of our railcar and crane services businesses were relatively unchanged compared to 2017, while revenues in the first nine months increased $32 million (2%) compared to 2017. The increase in~~year-to-date~~ revenues was attributable to increased railcar equipment sales, railcar repair services and crane services, partly offset by lower railcar lease revenues. Throughout 2018, we have experienced negative impacts from lower railcar lease renewal rates versus the higher rates on expiring leases.

~~Pre-tax~~ earnings in 2018 were $209 million in the third quarter and $624 million in the first nine months, decreases of $10 million (4.6%) and $25 million (3.9%), respectively, compared to the same periods in 2017. The decreases were due to lower earnings from the railcar leasing business, attributable to the decline in lease revenues and higher repair costs, partly offset by increased earnings of our~~over-the-road~~ trailer and crane services businesses. Significant components of the operating costs of these businesses, such as depreciation, interest and certain other operating costs, do not vary proportionately to revenue changes. Thus, changes in revenues can disproportionately affect earnings.

~~Other~~

Other earnings from our finance activities include CORT furniture leasing and other investment income. Other earnings also include interest income on loans to finance Clayton Homes’ loan portfolio and transportation equipment held for lease (charged as interest expense in the results of those businesses) and interest expense on related borrowings of Berkshire Hathaway Finance Corporation (“BHFC”). The net interest (income, net of expense) related to such loans increased $81 million in the first nine months of 2018 compared to 2017, which reflected increased interest income and lower interest expense of BHFC.

Investment and Derivative Gains/Losses

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

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Investment gains (losses)	$	10,692		$	14,569		$	40,079		$	12,750
Derivative gains (losses)		234			137			1,217			303
Gains (losses) before income taxes and noncontrolling interests		10,926			14,706			41,296			13,053
Income taxes and noncontrolling interests		2,260			3,046			8,590			2,701
Net gains (losses)	$	8,666		$	11,660		$	32,706		$	10,352
Effective income tax rate		20.8	%		20.5	%		20.8	%		20.8	%

   Third Quarter    First Nine Months
   2018    2017    2018    2017
Investment gains/losses
   $ 14,569    $ 657    $ 12,750    $ 1,262
Derivative gains/losses
   137    308    303    703








Gains/losses before income taxes and noncontrolling interests
   14,706    965    13,053    1,965
Income taxes and noncontrolling interests
   3,046    342    2,701    695








Net gains/losses
   $       11,660    $ 623    $       10,352    $ 1,270








Effective income tax rate
   20.5%          35.3%    20.8%          35.3%

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

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

Investment gains/losses

~~As discussed in Note 2~~Due to ~~the accompanying Consolidated Financial Statements, on January 1, 2018, we adopted~~ a new accounting pronouncement ~~(“ASU2016-01”),~~ ~~which requires the recognition~~adopted as of January 1, 2018, pre-tax investment gains/losses reported in earnings include unrealized gains and losses arising from changes in market ~~values~~prices of investments in equity ~~securities~~securities. Pre-tax investment gains included net unrealized gains of approximately $10.5 billion in the ~~Consolidated Statements~~third quarter and $39.5 billion in the first nine months of ~~Earnings.~~ 2019 attributable to equity securities we held at September 30, 2019. By comparison, we recorded pre-tax investment gains of approximately $14.3 billion in the third quarter and $12.1 billion in the first nine months of 2018 with respect to equity securities we held at September 30, 2018.

Prior to 2018, investment gains/losses ~~related to~~on equity securities were ~~generally~~ recorded ~~as the~~when securities were sold ~~redeemed or exchanged and were~~ based on the cost of the disposed securities. Taxable investment gains on equity securities sold in the first nine months, which is the difference between sales proceeds and the original cost basis of the securities sold, were $2.0 billion in 2019 and $2.7 billion in 2018.

While ~~ASU2016-01~~the new accounting standard does not ~~affect~~change the effect on our consolidated shareholders’ equity or total comprehensive income, it ~~is expected to~~has significantly ~~increase~~increased the volatility of our periodic net earnings ~~given~~due to the magnitude of our ~~existing~~ equity securities portfolio and the inherent volatility of equity securities prices. Investment ~~gains and~~ gains/losses ~~have caused and~~from periodic changes in securities prices will continue to cause significant volatility in ~~earnings reported in~~ our ~~Consolidated Statements of Earnings.~~

~~Pre-tax~~ investment gains/losses reflected in earnings in 2018 included net unrealized gains of approximately $14.3 billion in the third quarter and $12.1 billion for the first nine months from investments in equity securities still held at September 30, 2018. Prior to the adoption of ASU~~2016-01,~~ ~~such unrealized gains and losses were included in other comprehensive income. ASU2016-01~~ ~~did not permit the restatement of prior years’ statements of~~consolidated earnings.

We believe that investment gains/losses, whether realized from sales or unrealized from changes in market prices, are often meaningless in terms of understanding our reported ~~results~~consolidated earnings or evaluating our periodic economic performance. We continue to believe that the amount of investment gains/losses included in earnings in any given period ~~typically~~ has little analytical or predictive value. ~~The effects of changes in market prices for equity securities now reported in earnings are unpredictable over any quarterly or annual period.~~

Derivative gains/losses

Derivative contract gains/losses ~~represent~~include the changes in fair value of our equity index put option contract ~~liabilities. These~~ liabilities, which relate to contracts ~~entered into before~~that were originated prior to March ~~2008 and that~~2008. Substantially all remaining contracts will expire ~~between April 2019 and January 2026.~~by February 2023. The periodic changes in the fair values of these liabilities are recorded in earnings and can be significant, ~~reflecting~~primarily due to the volatility of underlying equity ~~markets and the changes in the inputs used to measure such liabilities.~~markets.

As of September 30, ~~2018,~~2019, the intrinsic value of our equity index put option contracts was ~~approximately $919~~$626 million and our recorded ~~liabilities~~liability at fair value ~~were approximately $1.9~~was $1.2 billion. Our ultimate payment obligations, if any, under our contracts will be determined as of the contract expiration dates ~~and will be~~ based on the intrinsic value as defined under the contracts. ~~Derivative contracts producedpre-tax~~ ~~gains~~Contracts with an aggregate notional value of $3 billion expired in the first nine months of ~~2018~~2019 and contracts with an aggregate notional value of ~~$303~~$9 billion will expire in the fourth quarter of 2019.

Pre-tax gains from equity index put option contracts were $234 million ~~which were primarily due~~in the third quarter and $1.2 billion in the first nine months of 2019 compared to ~~foreign currency exchange rate changes and the effects of shorter average contract durations, partially offset by lower values on certain indexes. Derivative contracts produced~~pre-tax gains of ~~$703~~$137 million in the third quarter and $303 million in the first nine months of ~~2017, which~~2018. The gains in 2019 were primarily ~~attributable~~due to higher equity index values and shorter remaining contract ~~durations, partly offset by unfavorable foreign currency exchange rate changes.~~durations.

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

Other

A summary ofafter-tax other ~~earnings (losses)~~earnings/losses follows (in millions).

	Third Quarter						First Nine Months
	2019			2018			2019			2018
Equity method earnings	$	515		$	269		$	812		$	894
Acquisition accounting expenses		(201	)		(199	)		(581	)		(637	)
Corporate interest expense, before foreign currency effects		(63	)		(77	)		(209	)		(236	)
Foreign currency exchange rate gains (losses) on Berkshire and BHFC non-U.S. Dollar senior notes		308			56			355			216
Income tax expense adjustment		—			—			(377	)		—
Other, principally corporate investment income		276			256			694			512
Net earnings (losses) attributable to Berkshire Hathaway shareholders	$	835		$	305		$	694		$	749

   Third Quarter    First Nine Months
   2018    2017    2018    2017
Equity method earnings
   $ 269    $ 248    $ 894    $ 807
Acquisition accounting expenses
   (199)    (196)            (637)    (518)
Corporate interest expense, before foreign currency exchange rate effects
   (77)    (66)    (236)    (198)
Corporate interest expense, Euro note foreign currency exchange rate effects
   56    (172)    216    (571)
Other
   180    18    283    25








Net earnings (losses) attributable to Berkshire Hathaway shareholders
   $         229    $         (168)    $ 520    $         (455)

After-tax equity method earnings ~~includes~~include Berkshire’s share of earnings attributable to Kraft Heinz, Pilot Flying J, Berkadia and Electric Transmission of Texas.~~After-tax~~ ~~other~~ As discussed in Note 5 to the accompanying unaudited interim Consolidated Financial Statements, financial results of Kraft Heinz for the first three quarters of 2019 were made available to us during the third quarter of 2019. Accordingly, our consolidated statement of earnings ~~(losses) also~~for the third quarter of 2019 include our share of Kraft Heinz’s earnings for those periods. After-tax equity method earnings related to our Kraft Heinz investment were $377 million for the third quarter and first nine months of 2019 and $163 million in the third quarter and $584 million for the first nine months of 2018.

After-tax acquisition accounting expenses include charges arising from the application of the acquisition method in connection with certain of Berkshire’s past business acquisitions. Such charges ~~were~~arise primarily from the amortization or impairment of intangible assets recorded in connection with those business acquisitions. ~~Berkshire issued~~

Foreign currency exchange rate gains and losses pertain to Berkshire’s outstanding Euro denominated debt (€6.85 billion par) and Japanese Yen denominated debt (¥430 billion par), which was issued in ~~2015, 2016~~September 2019, and ~~2017 and at September 30, 2018, the aggregate par amount outstanding~~BHFC’s Great Britain Pound denominated debt (£1.75 billion par), which was ~~€6.85 billion.~~issued in June 2019. Changes in foreign currency exchange rates ~~in 2018 and 2017~~ produced ~~sizable~~non-cash unrealized gains and losses from the periodic revaluation of these liabilities into U.S. Dollars.

The gains and losses recorded in any given period can be significant due the magnitude of the borrowings and the inherent volatility in foreign currency exchange rates.

~~Item 2. Management’s Discussion~~The income tax expense adjustment in the first nine months of 2019 relates to investments that we made between 2015 and ~~Analysis~~2018 in certain tax equity investment funds. Our investments in these funds aggregated approximately $340 million. In December 2018 and during the first quarter of ~~Financial Condition and Results~~2019, we learned of ~~Operations~~~~(Continued)~~

allegations by federal authorities of fraudulent income conduct by the sponsor of these funds. As a result of our investigation into these allegations, we now believe that it is more likely than not that the income tax benefits that we recognized are not valid.

Financial Condition

Our consolidated balance sheet continues to reflect significant liquidity and a strong capital base. ~~Our consolidated~~Consolidated shareholders’ equity at September 30, ~~2018~~2019 was ~~$375.6~~$397.6 billion, ~~increases~~an increase of ~~$17.5 billion since June 30, 2018 and $27.3~~$48.9 billion since December 31, ~~2017.~~2018. Net earnings attributable to Berkshire shareholders in the first nine months of ~~2018~~2019 were ~~$29.4~~$52.3 billion, which includedafter-tax gains on our investments of approximately ~~$10.1 billion. Most of these gains derived from changes~~$31.7 billion, which was primarily due to increases in market prices ~~for~~of the equity securities we owned at September 30, ~~2018.~~2019.

At September 30, ~~2018,~~2019, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills (net of ~~approximately $96.5~~amounts payable for acquired but not yet settled purchases) of $116.3 billion, which included ~~$74.5~~$85.9 billion in U.S. Treasury Bills. Investments in equity and fixed maturity securities (excluding our investment in Kraft Heinz) were ~~$219.5~~$239.2 billion. In August 2019, Berkshire paid $10 billion to acquire preferred stock and warrants of Occidental Petroleum Corporation, as discussed in Note 4 to the accompanying unaudited interim Consolidated Financial Statements.

Berkshire parent company debt outstanding at September 30, ~~2018~~2019 was ~~approximately $17.0~~$19.7 billion, ~~a decrease~~an increase of ~~$1.8~~$2.8 billion ~~from~~since December 31, ~~2017, reflecting maturities~~2018. In August 2019, Berkshire repaid maturing senior notes of ~~$1.55~~$750 million and issued ¥430 billion of senior notes (approximately $4.0 billion) in ~~term debt~~September 2019, which has a weighted average interest rate of 0.49% and maturity dates ranging from 2024 to 2049.

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

Financial Condition (Continued)

Berkshire’s insurance and other subsidiary outstanding borrowings were $17.5 billion at September 30, 2019, which included senior note borrowings of BHFC, a wholly-owned financing subsidiary, of $10.8 billion. BHFC’s borrowings are used to fund loans originated and acquired by Clayton Homes and a ~~$273 millionyear-to-date~~ ~~decrease attributable to foreign currency exchange rate changes applicable to~~portion of assets held for lease by our UTLX railcar leasing business. In the ~~€6.85~~first nine months of 2019, BHFC repaid $3.95 billion ~~par amount~~ of ~~Euro denominated~~maturing senior notes. ~~The next maturity~~BHFC issued $2.0 billion of 4.25% senior notes due in 2049 in the first quarter of 2019 and in the second quarter of 2019 issued £1.0 billion of 2.375% senior notes due in 2039 and £750 million of 2.625% senior notes due in 2059. Berkshire ~~parent company debt is August 2019.~~guarantees the full and timely payment of principal and interest with respect to BHFC’s senior notes.

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. ~~We forecast capital~~Capital expenditures of these two operations ~~will approximate $9.8 billion for the year ending December 31, 2018, of which approximately $6.4 billion was expended during~~in the first nine ~~months.~~months of 2019 were $7.4 billion and we forecast additional capital expenditures of approximately $3.8 billion in the fourth quarter of 2019.

BNSF’s outstanding debt ~~approximated $23.3~~was $24.0 billion as of September 30, ~~2018,~~2019, an increase of ~~$758~~approximately $764 million since December 31, ~~2017.~~2018. In ~~August 2018,~~July 2019, BNSF issued ~~$750~~$825 million of ~~4.15%~~3.55% senior unsecured debentures due in ~~2048.~~2050. BNSF debentures of $750 million matured in October 2019. Outstanding borrowings of BHE and its subsidiaries were ~~approximately $39.3~~$41.0 billion at September 30, ~~2018, a decrease~~2019, an increase of ~~$337 million~~$1.7 billion since December 31, ~~2017.~~2018. In ~~July 2018,~~the first nine months of 2019, BHE and its subsidiaries issued ~~$1.0~~debt aggregating $3.4 billion with maturity dates ranging from 2029 to 2050 and repaid approximately $1.7 billion of ~~4.45% senior unsecured debt that matures in 2049. BHE subsidiaries also issued debt in July 2018, aggregating $1.05 billion and due in 2049.~~maturing term debt. The proceeds from these financings were used to repay borrowings, to fund capital expenditures and for other general corporate purposes. ~~Approximately $500 million of~~ BHE subsidiary term debt of $368 million will mature in the fourth ~~quarter of 2018, and another $1.4 billion will mature in the first~~ quarter of 2019. 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 $38.3 billion as of September 30, 2018, a decrease of $3.6 billion since December 31, 2017. 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 $2.3 billion in the first nine months of 2018 to approximately $14.4 billion at September 30, 2018, primarily attributable to a net decrease in borrowings of a wholly-owned financing subsidiary, Berkshire Hathaway Finance Corporation (“BHFC”). During the first nine months of 2018, BHFC repaid $4.6 billion of maturing senior notes and in August 2018 issued $2.35 billion of 4.2% senior notes due in 2048. In the first quarter of 2019, an additional $2.7 billion of BHFC senior notes will mature. 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 has a~~Berkshire’s common stock repurchase program ~~which, as~~was amended on July 17, 2018, ~~permits~~permitting Berkshire to repurchase its Class A and Class B shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, ~~a Vice-Chairman~~Vice Chairman of the Board. 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. The program is expected to continue indefinitely. We will not repurchase our stock if it reduces the total amount of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire. In the ~~third quarter~~first nine months of ~~2018,~~2019, Berkshire ~~paid $928 million to repurchase~~repurchased shares of Class A and B common stock ~~under the program.~~for an aggregate cost of $2.8 billion.

Contractual Obligations

We are party to contracts associated with ongoing business and financing activities, which will result in cash payments to counterparties in future periods. Certain obligations are included in our Consolidated Balance Sheets, such as notes payable, which require future payments on contractually specified dates and in fixed and determinable amounts. Other obligations pertaining to the acquisition of goods or services in the future ~~such as minimum rentals under operating leases and certain purchase obligations~~are not currently reflected in the financial statements, which will be recognized in future periods as the goods are delivered or services are provided. Beginning in 2019, operating lease obligations are included in the consolidated balance sheet due to the adoption of a new accounting pronouncement. The timing and amount of the payments under certain contracts, such as insurance and reinsurance contracts, are contingent upon the outcome of future ~~events and claim settlements.~~events. Actual payments will likely vary, perhaps materially, from the estimated liabilities currently recorded in our Consolidated Balance Sheet.

In the first nine months of 2019, Berkshire and its subsidiaries issued new term debt. Principal and interest payments associated with these new borrowings are expected as follows: 2019 – $124 million; 2020 and 2021 – $637 million; 2022 and 2023 – $637 million; and thereafter – $19.1 billion.

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

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

~~Our~~Except as otherwise disclosed in this Quarterly Report, our contractual obligations as of ~~December 31, 2017~~September 30, 2019 were, in the aggregate, not materially different from those disclosed in the “Contractual Obligations” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Berkshire’s Annual Report on Form10-K for the year ended December 31, 2017. During the first nine months of 2018, our subsidiaries issued term debt of approximately $9.4 billion, which included approximately $5.2 billion in the third quarter. The borrowings in 2018 were used to repay existing debt, as well as for other corporate purposes. Interest and principal payments in connection with these new borrowings in the aggregate are due as follows: 2019 and 2020 — $1.3 billion; 2021 and 2022 — $1.1 billion; and thereafter $16.4 billion.2018.

Critical Accounting Policies

Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the Consolidated Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts 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. Reference is made to “Critical Accounting Policies” discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Berkshire’s Annual Report on Form10-K for the year ended December 31, ~~2017.~~2018.

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

Critical Accounting Policies (Continued)

Our Consolidated Balance Sheet as of September 30, ~~2018~~2019 includes estimated liabilities for unpaid losses and loss adjustment expenses from property and casualty insurance and reinsurance contracts of ~~approximately $106~~$113.4 billion. Due to the inherent uncertainties in the process of establishing loss reserve amounts, the actual ultimate claim amounts will likely differ from the currently recorded amounts. A very small percentage change in estimates of this magnitude will result in a material effect on periodic earnings. The effects from changes in these estimates are recorded as a component of insurance losses and loss adjustment expenses in the period of the change.

Our Consolidated Balance Sheet as of September 30, ~~2018~~2019 includes goodwill of acquired businesses of ~~approximately $81~~$81.2 billion. We evaluate goodwill for impairment at least annually and we conducted our most recent annual review during the fourth quarter of ~~2017.~~2018. Although we believe that the goodwill reflected in the ~~accompanying~~ Consolidated Balance Sheet is not impaired, goodwill may subsequently become impaired ~~as a result of~~due to changes in facts and circumstances affecting the valuation of the reporting unit. A goodwill impairment charge could have a material effect on ~~periodic earnings.~~

Our Consolidated Balance Sheets include derivative contract liabilities with respect to our equity index put option contracts. The fair values recorded for these liabilities are based on valuation models that utilize various inputs and assumptions that we believe are used by market participants. We further believe that fair values based on such models are inherently subjective and the values in an actual transaction may differ significantly from the model values. Changes in the assumptions utilized within the valuation models may have a significant effect on recorded fair values and periodic earnings.

Information concerning new accounting pronouncements is included in Note 2 to the accompanying Consolidated Financial Statements.

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 ~~that~~which are predictive in nature, which depend upon or refer to future events or conditions, ~~and may~~which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible future Berkshire actions, which may be provided by management, are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and assumptions about Berkshire and its subsidiaries, ~~as well as~~ economic and market factors and the industries in which we do business, among other things. These statements are not guarantees of future performance and we have no specific intention to update these statements.

Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The ~~important~~principal risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changes in market prices of our investments in fixed maturity and equity securities, losses realized from derivative contracts, the occurrence of one or more catastrophic events, such as an earthquake, hurricane, act of terrorism or cyber attack that causes losses insured by our insurance subsidiaries and/or losses to our business operations, changes in laws or regulations affecting our insurance, railroad, utilities and energy and finance subsidiaries, changes in federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which we do business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Reference is made to Berkshire’s most recently issued Annual Report and in particular the “Market Risk Disclosures” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of September 30, ~~2018,~~2019, there were no material changes in the market risks described in Berkshire’s Annual Report on Form10-K for the year ended December 31, ~~2017.~~2018.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule13a-15. Based upon that evaluation, the Chairman (Chief Executive Officer) and the Senior Vice President (Chief Financial Officer) concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. During the quarter, there have been no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Our significant business risks are described in Item 1A to Form10-K for the year ended December 31, ~~2017~~2018 to which reference is made herein.

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

For several years, Berkshire had a common stock repurchase program ~~which~~that permitted 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. On July 17, 2018, Berkshire’s Board of Directors authorized an amendment to the program, permitting Berkshire to repurchase shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charles Munger, ~~a Vice-Chairman~~Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. Repurchases may be in the open market or through privately negotiated transactions. Information with respect to Berkshire’s Class A and Class B common stock repurchased during the third quarter of ~~2018~~2019 follows.

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program		Maximum number or value of shares that yet may be repurchased under the program
August 5 through August 28:
Class A common stock		64	$	300,166.13		64	*
Class B common stock		2,793,092	$	197.68		2,793,092	*

September 3 through September 30:
Class A common stock		149	$	310,231.27		149	*
Class B common stock		375,771	$	206.50		375,771	*

Period

Total number of
shares purchased

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced program

Maximum number or
value of shares that yet
may be repurchased
under the program
August 7 through August 24:

Class A common stock
   225        $312,806.74    225        *
Class B common stock
   4,139,192        $207.09    4,139,192        *

The program does not specify a maximum number of shares to be repurchased or obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the repurchase program. Berkshire will not repurchase its common stock if the repurchases reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings to less than $20 billion.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Information regarding the Company’s mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form10-Q.

Item 5. Other Information

None

Item 6. Exhibits


		~~a. Exhibits~~

~~3(i)~~	a. Exhibits

3(i)	Restated Certificate of Incorporation Incorporated by reference to Exhibit 3(i) to Form10-K filed on March 2, 2015.

3(ii)		By-Laws Incorporated by reference to Exhibit 3(ii) to Form8-K filed on ~~May~~August 4, 2016.

12 31.1		~~Calculation of Ratio of Consolidated Earnings to Consolidated Fixed Charges~~Rule 13a-14(a)/15d-14(a) Certifications

~~31.1~~ 31.2		Rule13a-14(a)/15d-14(a) Certifications

~~31.2~~ 32.1		~~Rule13a-14(a)/15d-14(a)~~Section 1350 Certifications

~~32.1~~ 32.2		Section 1350 Certifications

~~32.2~~ 95		~~Section~~ ~~1350 Certifications~~

95		Mine Safety Disclosures

101		The following financial information from Berkshire Hathaway Inc.’s Quarterly Report on Form10-Q for the quarter ended September 30, ~~2018,~~2019, formatted in ~~XBRL (Extensible~~iXBRL (Inline Extensible Business Reporting Language) includes: (i) the Cover Page (ii) the Consolidated Balance Sheets, ~~as of September 30, 2018 and December 31, 2017, (ii)~~(iii) the Consolidated Statements of Earnings, ~~for each of the three-month and nine-month periods ended September 30, 2018 and 2017, (iii)~~(iv) the Consolidated Statements of Comprehensive Income, ~~for each of the three-month and nine-month periods ended September 30, 2018 and 2017, (iv)~~(v) the Consolidated Statements of Changes in Shareholders’ Equity, ~~for each of the nine-month periods ended September 30, 2018 and 2017, (v)~~(vi) the Consolidated Statements of Cash Flows, ~~for each of the nine-month periods ended September 30, 2018~~ and ~~2017, and (vi)~~(vii) the Notes to Consolidated Financial Statements, tagged in summary and detail.
104	Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

SIGNATURE

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


		BERKSHIRE HATHAWAY INC.
		(Registrant)

Date: November ~~3, 2018~~2, 2019		/S/ M~~ARC~~MARC D. H~~AMBURG~~HAMBURG
		(Signature)
		~~(Signature)~~
		Marc D. Hamburg,
		Senior Vice President and
		Principal Financial Officer

4650


	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Finance and Financial Products		Insurance, Corporate and other		Total
Three months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	6,384	$	—	$	47	$	—	$	—	$	82	$	—	$	6,513
Building products		3,473		—		—		—		—		4		—		3,477
Consumer products		2,838		—		—		—		—		1,170		—		4,008
Grocery and convenience store distribution		—		8,709		—		—		—		—		—		8,709
Food and beverage distribution		—		4,079		—		—		—		—		—		4,079
Auto sales		—		—		2,083		—		—		—		—		2,083
Other retail and wholesale distribution		521		—		3,117		—		—		23		—		3,661
Service		262		16		965		6,099		1,140		148		—		8,630
Electricity and natural gas		—		—		—		—		4,267		—		—		4,267

Total		13,478		12,804		6,212		6,099		5,407		1,427		—		45,427
Other revenue		51		18		743		13		299		1,004		15,895		18,023

	$	13,529	$	12,822	$	6,955	$	6,112	$	5,706	$	2,431	$	15,895	$	63,450


	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Finance and Financial Products		Insurance, Corporate and other		Total
Nine months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	19,306	$	—	$	155	$	—	$	—	$	503	$	—	$	19,964
Building products		9,817		—		—		—		—		11		—		9,828
Consumer products		8,734		—		—		—		—		3,124		—		11,858
Grocery and convenience store distribution		—		25,128		—		—		—		—		—		25,128
Food and beverage distribution		—		12,203		—		—		—		—		—		12,203
Auto sales		—		—		6,087		—		—		—		—		6,087
Other retail and wholesale distribution		1,533		—		8,734		—		—		65		—		10,332
Service		759		53		2,912		17,510		3,026		174		—		24,434
Electricity and natural gas		—		—		—		—		11,357		—		—		11,357

Total		40,149		37,384		17,888		17,510		14,383		3,877		—		131,191
Other revenue		132		54		2,664		37		885		2,980		46,180		52,932

	$	40,281	$	37,438	$	20,552	$	17,547	$	15,268	$	6,857	$	46,180	$	184,123


	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Mortgage- backed securities		Total
Amortized cost	$	7,275	$	9,057	$	387	$	574	$	502	$	17,795
Fair value		7,274		9,108		435		900		554		18,271


					September 29, 2018		December 30, 2017
Assets					$	119,730	$	120,232
Liabilities						54,152		53,985

	Third Quarter				First Nine Months
	2018		2017		2018		2017
Sales	$	6,378	$	6,280	$	19,368	$	19,241

Net earnings attributable to Kraft Heinz common shareholders	$	630	$	944	$	2,379	$	2,996


	September 30, 2018		December 31, 2017
Assets held for lease	$	12,736	$	12,318
Land		240		231
Buildings, machinery and other		1,527		1,444

		14,503		13,993
Accumulated depreciation		(4,230)		(4,062)

	$	10,273	$	9,931


	September 30, 2018				December 31, 2017
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	40,288	$	8,662	$	40,225	$	7,707
Railroad, utilities and energy		1,026		362		988		324

	$	41,314	$	9,024	$	41,213	$	8,031

Trademarks and trade names	$	5,396	$	744	$	5,381	$	692
Patents and technology		4,408		2,716		4,341		2,493
Customer relationships		28,343		4,351		28,322		3,722
Other		3,167		1,213		3,169		1,124

	$	41,314	$	9,024	$	41,213	$	8,031


	Investments in equity and fixed maturity securities		Net derivative contract liabilities
Nine months ending September 30, 2018
Balance at December 31, 2017	$	6	$	(2,069)
Gains (losses) included in:
Earnings		—		446
Regulatory assets and liabilities		—		(11)
Acquisitions, dispositions and settlements		(1)		(141)

Balance at September 30, 2018	$	5	$	(1,775)

Nine months ending September 30, 2017
Balance at December 31, 2016	$	17,321	$	(2,824)
Gains (losses) included in:
Earnings		—		822
Other comprehensive income		1,157		(3)
Regulatory assets and liabilities		—		(5)
Acquisitions, dispositions and settlements		(58)		(78)
Transfers into/out of Level 3		(18,413)		—

Balance at September 30, 2017	$	7	$	(2,088)


	Class A, $5 Par Value (1,650,000 shares authorized)						Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
	Issued		Treasury		Outstanding		Issued		Treasury		Outstanding
Balance at December 31, 2017		762,755		(11,680)		751,075		1,342,066,749		(1,409,762)		1,340,656,987
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition		(16,850)		—		(16,850)		25,886,063		—		25,886,063
Treasury stock acquired		—		(225)		(225)		—		(4,139,192)		(4,139,192)

Balance at September 30, 2018		745,905		(11,905)		734,000		1,367,952,812		(5,548,954)		1,362,403,858


	Unrealized appreciation of investments, net		Foreign currency translation		Prior service and actuarial gains/losses of defined benefit pension plans		Other		Accumulated other comprehensive income
2018
Balance at December 31, 2017	$	62,093	$	(3,114)	$	(420)	$	12	$	58,571
Reclassifications to retained earnings upon adoption of new accounting standards		(61,340)		(65)		36		(6)		(61,375)
Other comprehensive income, net before reclassifications		(142)		(776)		(33)		(19)		(970)
Reclassifications into net earnings		(236)		—		76		7		(153)

Balance at September 30, 2018	$	375	$	(3,955)	$	(341)	$	(6)	$	(3,927)

Reclassifications into net earnings:
Reclassifications before income taxes	$	(299)	$	—	$	101	$	10	$	(188)
Applicable income taxes		(63)		—		25		3		(35)

	$	(236)	$	—	$	76	$	7	$	(153)

2017
Balance at December 31, 2016	$	43,176	$	(5,268)	$	(593)	$	(17)	$	37,298
Other comprehensive income, net before reclassifications		11,734		1,946		(90)		19		13,609
Reclassifications into net earnings		(803)		—		61		18		(724)

Balance at September 30, 2017	$	54,107	$	(3,322)	$	(622)	$	20	$	50,183

Reclassifications into net earnings:
Reclassifications before income taxes	$	(1,235)	$	—	$	82	$	32	$	(1,121)
Applicable income taxes		(432)		—		21		14		(397)

	$	(803)	$	—	$	61	$	18	$	(724)


	Premiums earned								Pre-tax underwriting gain (loss)
	Third Quarter				First Nine Months				Third Quarter				First Nine Months
	2018		2017		2018		2017		2018		2017		2018		2017
Property/casualty	$	2,157	$	2,061	$	6,479	$	5,763	$	67	$	(1,486)	$	535	$	(1,856)
Retroactive reinsurance		1		550		1		10,736		(246)		(287)		(704)		(881)

		2,158		2,611		6,480		16,499		(179)		(1,773)		(169)		(2,737)


Life/health		1,307		1,146		3,855		3,404		108		113		324		302
Periodic payment annuity		312		197		894		647		(92)		(185)		(279)		(528)

		1,619		1,343		4,749		4,051		16		(72)		45		(226)

	$	3,777	$	3,954	$	11,229	$	20,550	$	(163)	$	(1,845)	$	(124)	$	(2,963)