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~~March 31, 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)

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 RegulationS-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~~April 25, ~~2018:~~2019:


		Class A —			723,114
		Class B —			1,368,243,498

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

~~Class A —~~Title of each class

~~733,152~~

Trading Symbols

Name of each exchange on which registered

Class A Common Stock

Class B —Common Stock

~~1,362,792,906~~

BRK.A

BRK.B

New York Stock Exchange

BERKSHIRE HATHAWAY INC.


		Page No.
Part I – Financial Information

Item 1. Financial Statements
	Consolidated Balance Sheets—~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018		2-3
	Consolidated Statements of Earnings—~~Third~~First Quarter 2019 and ~~First Nine Months~~ 2018 ~~and 2017~~		4
	Consolidated Statements of Comprehensive Income— ~~Third~~First Quarter 2019 and ~~First Nine Months~~ 2018 ~~and 2017~~		5
	Consolidated Statements of Changes in Shareholders’ Equity—First ~~Nine Months~~Quarter 2019 and 2018 ~~and 2017~~		5
	Consolidated Statements of Cash Flows—First ~~Nine Months~~Quarter 2019 and 2018 ~~and 2017~~		6
	Notes to Consolidated Financial Statements		~~7-25~~7-24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~26-44~~25-42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4542
Item 4.	Controls and Procedures		4542

Part II – Other Information			4543

Item 1.	Legal Proceedings		4543
Item 1A.	Risk Factors		4543
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities		4543
Item 3.	Defaults Upon Senior Securities		4643
Item 4.	Mine Safety Disclosures		4643
Item 5.	Other Information		4643
Item 6.	Exhibits		4644

Signature			4644

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		March 31, 2019		December 31, 2018
	(Unaudited)				(Unaudited)
ASSETS
*Insurance and Other:*
Cash and cash equivalents*	$	36,506	$	25,460	$	22,487	$	27,749
Short-term investments in U.S. Treasury Bills		59,947		78,515		88,029		81,506
Investments in fixed maturity securities		18,271		21,353		19,415		19,898
Investments in equity securities		201,226		164,026		191,771		172,757
Investment in The Kraft Heinz Company		17,453		17,635
Receivables		31,884		28,578
Equity method investments						17,308		17,325
Loans and finance receivables						16,432		16,280
Other receivables						33,710		31,564
Inventories		16,793		16,187		19,454		19,069
Property, plant and equipment		24,357		20,104		20,825		20,628
Equipment held for lease						14,429		14,298
Goodwill		54,985		54,985		56,449		56,323
Other intangible assets		31,626		32,518		31,266		31,499
Deferred charges under retroactive reinsurance contracts		14,451		15,278		13,831		14,104
Other		13,250		11,158		12,726		9,307

		520,749		485,797		558,132		532,307

*Railroad, Utilities and Energy:*
Cash and cash equivalents*		3,297		2,910		3,652		2,612
Receivables						3,460		3,666
Property, plant and equipment		130,387		128,184		132,170		131,780
Goodwill		24,790		24,780		24,771		24,702
Regulatory assets		2,928		2,950		3,154		3,067
Other		16,020		15,589		13,385		9,660

		177,422		174,413		180,592		175,487

*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
					$	738,724	$	707,794
		38,288		41,885

	$	736,459	$	702,095

*	Cash and cash equivalents includes U.S. Treasury Bills with maturities of three months or less when purchased of ~~$14.7~~$2.1 billion at ~~September 30, 2018~~March 31, 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		March 31, 2019			December 31, 2018
	(Unaudited)				(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
*Insurance and Other:*
Unpaid losses and loss adjustment expenses	$	64,263	$	61,122	$	69,535		$	68,458
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts		41,935		42,937		41,633			41,834
Unearned premiums		19,011		16,040		20,172			18,093
Life, annuity and health insurance benefits		18,368		17,608		18,918			18,632
Other policyholder liabilities		6,692		7,654		7,742			7,675
Accounts payable, accruals and other liabilities		27,178		23,099		25,164			25,776
Derivative contract liabilities						1,682			2,452
Aircraft repurchase liabilities and unearned lease revenues						5,071			4,593
Notes payable and other borrowings		24,271		27,324		33,847			34,975

		201,718		195,784		223,764			222,488

*Railroad, Utilities and Energy:*
Accounts payable, accruals and other liabilities		11,269		11,334		14,643			11,410
Regulatory liabilities		7,723		7,511		7,528			7,506
Notes payable and other borrowings		62,599		62,178

		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		63,346			62,515

		14,391		16,727		85,517			81,431

Income taxes, principally deferred		59,340		56,607		56,852			51,375

Total liabilities		357,040		350,141		366,133			355,294

Shareholders’ equity:
Common stock		8		8		8			8
Capital in excess of par value		35,713		35,694		35,622			35,707
Accumulated other comprehensive income		(3,927)		58,571		(4,727	)		(5,015	)
Retained earnings		346,503		255,786		342,773			321,112
Treasury stock, at cost		(2,691)		(1,763)		(4,799	)		(3,109	)

Berkshire Hathaway shareholders’ equity		375,606		348,296		368,877			348,703
Noncontrolling interests		3,813		3,658		3,714			3,797

Total shareholders’ equity		379,419		351,954		372,591			352,500

	$	736,459	$	702,095	$	738,724		$	707,794

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				First Quarter
	2018		2017		2018		2017		2019		2018
	(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
*Insurance and Other:*
Insurance premiums earned	$	14,333	$	13,349	$	41,855	$	47,469	$	14,319	$	13,373
Sales and service revenues		33,249		32,055		98,128		94,017		32,409		31,882
Leasing revenues										1,436		1,434
Interest, dividend and other investment income		1,619		1,320		4,468		3,804		2,117		1,682

		49,201		46,724		144,451		145,290		50,281		48,371

*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
*Railroad, Utilities and Energy:*
Freight rail transportation revenues										5,725		5,590
Energy operating revenues										3,825		3,679
Service revenues and other income										847		833

		2,431		2,150		6,857		6,010		10,397		10,102

Total revenues		63,450		59,507		184,123		181,133		60,678		58,473

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)										19,552		(7,809	)
Derivative contract gains (losses)		137		308		303		703		770		(206	)

		14,706		965		13,053		1,965		20,322		(8,015	)

Costs and expenses:
*Insurance and Other:*
Insurance losses and loss adjustment expenses		9,932		12,137		28,296		39,450		10,174		8,963
Life, annuity and health insurance benefits		1,448		1,213		4,153		3,703		904		1,287
Insurance underwriting expenses		2,352		2,207		7,079		6,924		2,756		2,604
Cost of sales and services		26,789		25,815		78,684		75,594		25,767		25,461
Cost of leasing										1,020		983
Selling, general and administrative expenses		3,984		3,965		12,158		12,101		4,432		4,708
Interest expense		116		435		246		1,405		262		265

		44,621		45,772		130,616		139,177		45,315		44,271

*Railroad, Utilities and Energy:*
Cost of sales and operating expenses		8,087		6,984		23,451		20,678
Interest expense		698		700		2,110		2,090

		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
Freight rail transportation expenses										3,982		3,852
Utilities and energy cost of sales and other expenses										2,842		2,800
Other expenses										653		749
Interest expense		82		98		253		305		729		710

		1,919		1,691		5,321		4,638		8,206		8,111

Total costs and expenses		55,325		55,147		161,498		166,583		53,521		52,382

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 (losses)										27,479		(1,924	)
Equity method earnings		316		305		1,044		932		168		401

Earnings before income taxes		23,147		5,630		36,722		17,447
Income tax expense		4,440		1,427		7,009		4,750
Earnings (loss) before income taxes										27,647		(1,523	)
Income tax expense (benefit)										5,915		(452	)

Net earnings		18,707		4,203		29,713		12,697
Net earnings (loss)										21,732		(1,071	)
Earnings attributable to noncontrolling interests		167		136		300		308		71		67

Net earnings attributable to Berkshire Hathaway shareholders	$	18,540	$	4,067	$	29,413	$	12,389
Net earnings (loss) attributable to Berkshire Hathaway shareholders									$	21,661	$	(1,138	)

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) per average equivalent Class A share									$	13,209	$	(692	)
Net earnings (loss) per average equivalent Class B share*									$	8.81	$	(0.46	)
Average equivalent Class A shares outstanding										1,639,821		1,644,958
Average equivalent Class B shares outstanding										2,459,731,886		2,467,436,888

Class B shares are economically equivalent toone-fifteen-hundredth of a Class A share. Accordingly, net ~~earnings~~earnings/loss 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				First Quarter
	2018		2017		2018		2017		2019			2018
	(Unaudited)				(Unaudited)				(Unaudited)
Net earnings	$	18,707	$	4,203	$	29,713	$	12,697
Net earnings (loss)									$	21,732		$	(1,071	)

Other comprehensive income:
Net change in unrealized appreciation of investments		5		4,952		(132)		18,040		117			(45	)
Applicable income taxes		(1)		(1,716)		19		(6,247)		(27	)		(2	)
Reclassification of investment appreciation in net earnings		(34)		(646)		(299)		(1,235)		5			(221	)
Applicable income taxes		7		226		63		432		(1	)		46
Foreign currency translation		(79)		771		(842)		2,127		183			601
Applicable income taxes		9		(24)		46		(116)		(3	)		(6	)
Prior service cost and actuarial gains/losses of defined benefit pension plans		(13)		(3)		50		(57)
Defined benefit pension plans										66			(24	)
Applicable income taxes		3		6		—		31		(17	)		17
Other, net		(21)		32		(57)		38		(13	)		(31	)

Other comprehensive income, net		(124)		3,598		(1,152)		13,013		310			335

Comprehensive income		18,583		7,801		28,561		25,710		22,042			(736	)
Comprehensive income attributable to noncontrolling interests		162		203		271		436		93			75

Comprehensive income attributable to Berkshire Hathaway shareholders	$	18,421	$	7,598	$	28,290	$	25,274	$	21,949		$	(811	)

~~BERKSHIRE HATHAWAY INC.~~

~~and Subsidiaries~~

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(dollars in millions)

   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
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
Adoption of new accounting pronouncements
   —    (61,375)    61,304    —    —    (71)
Net earnings
   —    —    29,413    —    300    29,713
Other comprehensive income, net
   —    (1,123)    —    —    (29)    (1,152)
Issuance (acquisition) of common stock
   54    —    —    (928)    —    (874)
Transactions with noncontrolling interests
   (35)    —    —    —    (116)    (151)












Balance at September 30, 2018
   $     35,721    $     (3,927)    $     346,503    $     (2,691)    $     3,813    $     379,419


	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
Balance at December 31, 2017	$	35,702		$	58,571		$	255,786		$	(1,763	)	$	3,658		$	351,954
Adoption of new accounting pronouncements		—			(61,375	)		61,304			—			—			(71	)
Net earnings (loss)		—			—			(1,138	)		—			67			(1,071	)
Other comprehensive income, net		—			327			—			—			8			335
Issuance (acquisition) of common stock		24			—			—			—			—			24
Transactions with noncontrolling interests		(37	)		—			—			—			(82	)		(119	)

Balance at March 31, 2018	$	35,689		$	(2,477	)	$	315,952		$	(1,763	)	$	3,651		$	351,052


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

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)


	First Nine Months				First Quarter
	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)					$	21,732		$	(1,071	)
Adjustments to reconcile net earnings (loss) to operating cash flows:
Investment (gains) losses						(19,552	)		7,809
Depreciation and amortization		7,169		6,835		2,417			2,387
Other		(677)		1,110		(469	)		(1	)
Changes in operating assets and liabilities:
Losses and loss adjustment expenses		2,272		22,615		778			69
Deferred charges reinsurance assumed		827		(5,525)		273			271
Unearned premiums		2,974		2,253		2,054			2,352
Receivables and originated loans		(4,781)		(2,890)		(2,237	)		(2,186	)
Other assets		(1,788)		(1,287)		(990	)		(881	)
Other liabilities		805		360		(1,800	)		(392	)
Income taxes		2,791		2,593		5,371			(801	)

Net cash flows from operating activities		26,555		37,499		7,577			7,556


Cash flows from investing activities:
Purchases of U.S. Treasury Bills and fixed maturity securities		(85,502)		(106,597)		(30,918	)		(13,037	)
Purchases of equity securities		(38,552)		(14,936)		(1,527	)		(14,765	)
Sales of U.S. Treasury Bills and fixed maturity securities		26,903		35,143		2,334			13,577
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities		83,742		65,666		21,114			35,088
Sales and redemptions of equity securities		14,164		10,572		2,063			4,240
Purchases of loans and finance receivables		(1,748)		(1,392)		(14	)		(41	)
Collections of loans and finance receivables		266		1,599		93			100
Acquisitions of businesses, net of cash acquired		(521)		(2,640)		(262	)		(112	)
Purchases of property, plant and equipment		(10,040)		(8,411)
Purchases of property, plant and equipment and equipment held for lease						(3,151	)		(2,589	)
Other		257		(150)		67			(153	)

Net cash flows from investing activities		(11,031)		(21,146)		(10,201	)		22,308


Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses		55		1,321		1,996			37
Proceeds from borrowings of railroad, utilities and energy businesses		7,019		2,812		2,945			3,613
Proceeds from borrowings of finance businesses		2,339		1,298
Repayments of borrowings of insurance and other businesses		(2,661)		(1,763)		(2,811	)		(4,192	)
Repayments of borrowings of railroad, utilities and energy businesses		(3,658)		(1,944)		(1,431	)		(1,221	)
Repayments of borrowings of finance businesses		(4,661)		(3,605)
Changes in short term borrowings, net		(2,754)		122		(503	)		(1,929	)
Acquisition of treasury stock		(928)		—		(1,585	)		—
Other		(277)		(108)		(289	)		(102	)

Net cash flows from financing activities		(5,526)		(1,867)		(1,678	)		(3,794	)

Effects of foreign currency exchange rate changes		(109)		222		15			92

Increase in cash and cash equivalents and restricted cash		9,889		14,708
Increase (decrease) in cash and cash equivalents and restricted cash						(4,287	)		26,162
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
Cash and cash equivalents and restricted cash at end of first quarter *					$	26,524		$	58,374

*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—
End of first quarter—
Insurance and Other	$	36,506	$	35,247	$	22,487		$	54,331
Railroad, Utilities and Energy		3,297		4,448		3,652			3,550
Finance and Financial Products		1,635		3,011
Restricted cash, included in other assets		663		645		385			493

	$	42,101	$	43,351	$	26,524		$	58,374

See accompanying Notes to Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2018~~March 31, 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 are~~standard is 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 fromnon-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 contracts 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 our 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 thenon-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 lease assets or liabilities unless it is reasonably certain that options will be exercised. Generally, incremental borrowing rates are used in measuring lease liabilities. Lease assets are subject to review for impairment.

On January 1, 2018, we adopted Accounting Standards Update (“ASU”)2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial ~~Liabilities” (“ASU2016-01”),~~Liabilities,” ASU2018-02 “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”)~~. 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 2016, the Financial Accounting Standards Board (“FASB”) issued ASU2016-02~~ “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 ASU2016-13 “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 foravailable-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 new disclosures and is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are evaluating the effect this standard will have on our Consolidated Financial Statements.

Note 3. Investments in fixed maturity securities

Investments in fixed maturity securities as of March 31, 2019 and December 31, 2018 are summarized by type below (in millions).


	Amortized Cost		Unrealized Gains			Unrealized Losses			Fair Value
March 31, 2019
U.S. Treasury, U.S. government corporations and agencies	$	3,901	$	29		$	(12	)	$	3,918
States, municipalities and political subdivisions		145		6			—			151
Foreign governments		8,047		60			(16	)		8,091
Corporate bonds		6,259		470			(5	)		6,724
Mortgage-backed securities		470		63			(2	)		531

	$	18,822	$	628		$	(35	)	$	19,415

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 well as instruments that are unconditionally guaranteed by such entities. As of March 31, 2019, approximately 88% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies.

Notes to Consolidated Financial Statements(Continued)

~~Note 3. Revenues from contracts with customers~~

As discussed in Note 2, on January 1, 2018, we adopted ASC 606 “Revenues from Contracts with Customers.” Except 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 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 us 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. As of September 30, 2018 and December 31, 2017, trade receivables were approximately $2.2 billion and $2.0 billion, respectively, and were included in other assets of our railroad, utilities and energy businesses on 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.

The primary performance obligation under our freight rail transportation service contracts is to move freight from a point 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 billion 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 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~~Investments in fixed maturity securities(Continued)

The ~~following table summarizes customer contract revenues disaggregated~~amortized cost and estimated fair value of fixed maturity securities at March 31, 2019 are summarized below by ~~reportable segment and the source of the revenue for the three and nine months ending September 30, 2018 (in millions). Other revenues included~~contractual maturity dates. Amounts are 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.~~millions. 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

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


	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	$	7,198	$	10,331	$	364	$	459	$	470	$	18,822
Fair value		7,242		10,443		410		789		531		19,415

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~~March 31, 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 *
March31, 2019*
Banks, insurance and finance	$	42,010	$	51,499	$	93,509	$	44,710	$	46,029	$	90,739
Consumer products		38,793		39,858		78,651		38,909		31,232		70,141
Commercial, industrial and other		21,035		14,137		35,172		19,280		11,611		30,891

	$	101,838	$	105,494	$	207,332	$	102,899	$	88,872	$	191,771

Approximately ~~69%~~68% of the aggregate fair value was concentrated in five companies (American Express Company – ~~$16.1~~$16.6 billion; Apple Inc. – ~~$57.6~~$48.5 billion; Bank of America Corporation – ~~$26.5~~$25.4 billion; The Coca-Cola Company – ~~$18.5~~$18.7 billion and Wells Fargo & Company – ~~$24.4~~$20.9 billion).

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

~~Note 5. Investments in equity securities~~~~(Continued)~~


	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

	$	74,676	$	95,864	$	170,540	$	102,867	$	69,890	$	172,757

Approximately ~~65%~~68% of the aggregate fair value was concentrated in five 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 26.7% of the outstanding shares. Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $10.6 billion at March 31, 2019 and $14.0 billion at December 31, 2018. The carrying value of our investment was approximately $13.7 billion at March 31, 2019 and $13.8 billion at December 31, 2018. As of May 3, 2019, Kraft Heinz has not filed its 2018 Form10-K with the Securities and Exchange Commission. In addition, Kraft Heinz has not made its financial statements for the first quarter of 2019 available to Berkshire. Accordingly, Berkshire does not have the necessary financial information to determine its share of the earnings and other comprehensive income of Kraft Heinz for the first quarter of 2019. As a result, Berkshire’s first quarter 2019 earnings and other comprehensive income exclude such amounts. Berkshire will record its share of Kraft Heinz’s earnings and other comprehensive income for the three months ended March 31, 2019 during the period that such information becomes available. We recorded equity method earnings in the first quarter of 2018 of approximately $265 million. We received dividends on the common stock of $130 million and $203 million in the first quarter of 2019 and 2018, respectively, which we recorded as reductions of our investment.

Notes to Consolidated Financial Statements(Continued)

Note 5. Equity method investments(Continued)

Summarized unaudited financial information of Kraft Heinz as of December 29, 2018 and for the first quarter of 2018 follows (in millions).


	December 29, 2018
Assets	$	103,627
Liabilities		51,721
	First Quarter
	2018
Sales	$	6,304

Net earnings attributable to Kraft Heinz common shareholders	$	993

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 $3.6 billion as of March 31, 2019 and $3.5 billion as of December 31, 2018. Our equity method earnings in these entities in the first quarter were $167 million in 2019 and $136 million in 2018. Additional information concerning these investments follows.

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. On March 31, 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 forone-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 first quarter 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


	2019			2018
Equity securities:
Unrealized investment gains (losses) on securities held at the end of the period	$	19,393		$	(7,807	)
Investment gains (losses) during the period		161			(240	)

		19,554			(8,047	)
Fixed maturity securities:
Gross realized gains		5			359
Gross realized losses		(10	)		(138	)
Other		3			17

	$	19,552		$	(7,809	)

Prior to 2018, we recognized investment gains and losses in earnings when we sold equity securities based on the difference between the proceeds from the sale 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.

Notes to Consolidated Financial Statements(Continued)

~~Included in other assets.~~

Note 6. Investment gains/losses(Continued)

In the first quarter of 2019 and 2018, as reflected in the Consolidated Statements of Cash Flows, we received proceeds of approximately $2.1 billion and $4.2 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 during the first quarter of 2019 and 2018, which are generally the difference between the proceeds from sales and our original cost, were $518 million and $727 million, respectively.

Note 7. Loans and finance receivables

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


	March 31, 2019			December 31, 2018
Loans and finance receivables before allowances and discounts	$	16,767		$	16,622
Allowances for uncollectible loans		(176	)		(177	)
Unamortized acquisition discounts		(159	)		(165	)

	$	16,432		$	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 quarter were $32 million in 2019 and $34 million in 2018. Loan charge-offs, net of recoveries in the first quarter, were $33 million in 2019 and $35 million in 2018. At March 31, 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 ornon-performing. At March 31, 2019, we considered approximately 99% of the loan balances to be performing and approximately 97% 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 March 31, 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).


	March 31, 2019			December 31, 2018
Insurance premiums receivable	$	13,766		$	12,452
Reinsurance recoverable on unpaid losses		3,164			3,060
Trade receivables		12,957			12,617
Other		4,188			3,823
Allowances for uncollectible accounts		(365	)		(388	)

	$	33,710		$	31,564

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


	March 31, 2019			December 31, 2018
Trade receivables	$	3,237		$	3,433
Other		354			362
Allowances for uncollectible accounts		(131	)		(129	)

	$	3,460		$	3,666

Trade receivables include unbilled revenue of $569 million and $554 million as of March 31, 2019 and December 31, 2018, respectively, attributable to the regulated utility businesses.

Notes to Consolidated Financial Statements(Continued)

Note 9. Inventories

Inventories are comprised of the following (in millions).


	March 31, 2019		December 31, 2018
Raw materials	$	4,249	$	4,182
Work in process and other		2,678		2,625
Finished manufactured goods		4,789		4,541
Goods acquired for resale		7,738		7,721

	$	19,454	$	19,069

Note 10. Property, plant and equipment

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


	March 31, 2019			December 31, 2018
Land	$	2,549		$	2,536
Buildings and improvements		10,128			9,959
Machinery and equipment		22,682			22,574
Furniture, fixtures and other		5,049			4,758

		40,408			39,827
Accumulated depreciation		(19,583	)		(19,199	)

	$	20,825		$	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.


	March 31, 2019			December 31, 2018
Railroad:
Land, track structure and other roadway	$	60,328		$	59,509
Locomotives, freight cars and other equipment		13,185			13,016
Construction in progress		574			664

		74,087			73,189
Accumulated depreciation		(10,865	)		(10,004	)

		63,222			63,185

Utilities and energy:
Utility generation, transmission and distribution systems		77,659			77,288
Interstate natural gas pipeline assets		7,547			7,524
Independent power plants and other assets		8,318			8,324
Construction in progress		3,388			3,110

		96,912			96,246
Accumulated depreciation		(27,964	)		(27,651	)

		68,948			68,595

	$	132,170		$	131,780

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


	2019		2018
Insurance and other	$	542	$	535
Railroad, utilities and energy		1,256		1,225

	$	1,798	$	1,760

Notes to Consolidated Financial Statements(Continued)

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).


	March 31, 2019			December 31, 2018
Railcars	$	8,992		$	8,862
Aircraft		7,485			7,376
Other equipment held for lease		4,478			4,379

		20,955			20,617
Accumulated depreciation		(6,526	)		(6,319	)

	$	14,429		$	14,298

Depreciation expense for equipment held for lease in the first quarter was $286 million in 2019 and $275 million in 2018.

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 leaseright-of-use assets and lease liabilities included in our March 31, 2019 Consolidated Balance Sheet were approximately $6.2 billion and $6.0 billion, respectively. Such amounts 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 7.7 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 March 31, 2019 and December 31, 2018 follows (in millions).


	2019		2020		2021		2022		2023		Thereafter		Total lease payments		Amount representing interest			Lease liabilities
March 31, 2019	$	933	$	1,312	$	1,091	$	859	$	685	$	2,183	$	7,063	$	(1,053	)	$	6,010
December 31, 2018		1,310		1,268		1,048		820		658		2,079		7,183

Components of operating lease costs by type were as follows (in millions).

Operating

lease cost

Short-term

lease cost

Variable

lease cost

Sublease
income

Total

lease cost

First quarter of 2019

361

)

468

We are also party to contracts where we lease property to others as a lessor. Operating lease revenues by type were as follows (in millions).


	Fixed lease revenue			Variable lease revenue			Total
First quarter of 2019		$	1,074		$	362		$	1,436

Future operating lease rentals to be received on assets we lease to others were as follows (in millions).


	2019		2020		2021		2022		2023		Thereafter		Total
As of March 31, 2019	$	1,932	$	1,928	$	1,363	$	893	$	529	$	485	$	7,130

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 of goodwill during 2019 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 during the first nine months of 2018 and 2017 were $635 million and $800 million, respectively. We received dividends on the common stock of $610 million in the first nine months of 2018 and $594 million in the first nine months of 2017, which we recorded as reductions of our investment.

~~Summarized consolidated financial information of Kraft Heinz~~ 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


	March 31, 2019		December 31, 2018
Balance at beginning of year	$	81,025	$	81,258
Acquisitions of businesses		159		376
Other, including foreign currency translation		36		(609	)

Balance at end of period	$	81,220	$	81,025

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”). Our investments in these entities were approximately $3.6 billion as of September 30, 2018 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 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~~13. Goodwill and other intangible assets(Continued)

~~We own a 50% interest in Berkadia with Jefferies Financial Group Inc. (“Jefferies”), formerly known~~Our other intangible assets and related accumulated amortization are summarized 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 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 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 in the third quarter and first nine months of 2018 and 2017~~ follows (in millions).

   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


	March 31, 2019				December 31, 2018
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Insurance and other	$	40,553	$	9,287	$	40,493	$	8,994
Railroad, utilities and energy		1,011		373		1,011		362

	$	41,564	$	9,660	$	41,504	$	9,356


Trademarks and trade names	$	5,367	$	757	$	5,368	$	750
Patents and technology		4,472		2,862		4,446		2,790
Customer relationships		28,426		4,782		28,375		4,573
Other		3,299		1,259		3,315		1,243

	$	41,564	$	9,660	$	41,504	$	9,356

Intangible asset amortization expense in the first quarter was $333 million in 2019 and $352 million in 2018. Intangible assets with indefinite lives as of March 31, 2019 and December 31, 2018 were $18.9 billion and 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 subsidiaries. Currently, the most significant derivative contracts consist of equity index put option contracts. The liabilities and related notional values of these contracts follows (in millions).


	Liabilities		Notional Value
March 31, 2019	$	1,682	$	26,522
December 31, 2018		2,452		26,759

Notional value 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 recordedpre-tax gains of $770 million in the first quarter of 2019 and losses of $206 million in the first quarter of 2018 with respect to our equity index put option contracts.

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 2019 and October 2025. The weighted average life of unexpired contracts at March 31, 2019 was approximately 1.65 years. Contracts with notional values of $12.2 billion will expire over the remainder 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 $4.0 billion on the contract inception dates with respect to unexpired contracts at March 31, 2019 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 $957 million at March 31, 2019 and $1,653 million at December 31, 2018. 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 in the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of March 31, 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 eitherA- by Standard & Poor’s or A3 by Moody’s, collateral of up to $1.1 billion could be required to be posted.

Our regulated utility subsidiaries are exposed to variations in the prices of fuel required to generate electricity, wholesale electricity purchased and sold and natural gas supplied for customers. 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 included in other assets and were $171 million as of March 31, 2019 and $172 million as of December 31, 2018. Derivative contract liabilities are included in accounts payable, accruals and other liabilities and were $99 million as of March 31, 2019 and $111 million as of December 31, 2018.

Notes to Consolidated Financial Statements(Continued)

~~Note 8. Investment gains/losses~~~~(Continued)~~

Prior to 2018, we recognized investment gains and losses in earnings when we sold or otherwise disposed of equity securities based on the difference between the proceeds from the sale 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. 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 of the equity security sold at the beginning of the period or the purchase date, if later. Our taxable gains on equity securities sold during the third quarter and first nine months of 2018, which 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 in the first nine months of 2018 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 to Consolidated Financial Statements~~~~(Continued)~~

~~Note 11. Property, plant and equipment and assets held for lease~~~~(Continued)~~

Assets held for lease and property, plant and equipment of our finance and financial products businesses are summarized below (in millions). Assets held for lease 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 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 in the first nine months was $1,052 million in 2018 and $1,108 million in 2017. Intangible assets with indefinite lives were approximately $18.9 billion as of September 30, 2018 and December 31, 2017.

~~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~~A summary of supplemental cash flow information for the first quarter of 2019 and ~~financial products and our utilities and energy businesses. Currently,~~2018 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⁾


	2019		2018
Cash paid during the period for:
Income taxes	$	464	$	289
Interest:
Insurance and other		395		421
Railroad, utilities and energy		683		747
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions		61		4
Right-of-use assets obtained in exchange for new operating lease liabilities		170		—

Note 16. Unpaid losses and loss adjustment expenses

⁽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~~Our liabilities ~~at fair value~~for unpaid losses and ~~include the changes in the fair values of such contracts in earnings~~loss adjustment expenses (also referred to as ~~derivative contract gains/losses. A summary of derivative contract gains/losses included in our Consolidated Statements of Earnings follows (in millions).~~

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

~~The equity index put option~~“claim liabilities”) under short-duration property and casualty insurance and reinsurance contracts are ~~European style options written prior to March 2008 on four major equity indexes. The remaining contracts expire between April 2019 and January 2026. At September 30, 2018,~~based upon estimates of the ~~remaining weighted average life of all contracts was approximately 2.25 years. In the second quarter of 2018, one equity index put option contract expired~~ultimate claim costs associated with ~~no payment to the counterparty.~~

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 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 ratesclaim occurrences as of the balance sheet ~~date) was $919 million at September 30, 2018~~date and ~~$789 million at December 31, 2017. These contracts may not be unilaterally terminated or fully settled before~~include estimates forincurred-but-not-reported (“IBNR”) claims. Reconciliations of 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 in ~~the fair value or intrinsic value~~claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 17), for each of the ~~contracts and/or a downgrade of Berkshire’s credit ratings. As of September 30,~~three months ending March 31, 2019 and 2018 ~~we did not have any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard & Poor’s~~follow (in millions).


	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		9,787			9,475
Prior accident years’ events		112			(753	)

Total incurred losses and loss adjustment expenses		9,899			8,722


Paid losses and loss adjustment expenses:
Current accident year events		(3,123	)		(3,091	)
Prior accident years’ events		(5,884	)		(4,759	)

Total payments		(9,007	)		(7,850	)


Foreign currency translation adjustment		81			253
Balances – March 31:
Net liabilities		66,371			59,046
Reinsurance recoverable on unpaid losses		3,164			3,048

Gross liabilities	$	69,535		$	62,094

Incurred losses and ~~Aa2 from Moody’s) are downgraded below either~~A- ~~by Standard & Poor’s or A3 by Moody’s, collateral of up to $1.1 billion could be required to be posted.~~

~~Our regulated utility subsidiaries are exposed to variations~~loss adjustment expenses in the ~~prices~~first quarter of ~~fuel required~~2019 included a net increase of estimated ultimate liabilities for prior accident years of $112 million compared to ~~generate electricity, wholesale electricity purchased~~a net decrease of $753 million in the first quarter of 2018. Increases and ~~sold~~decreases in estimated ultimate liabilities produce corresponding decreases and ~~natural gas supplied for customers. We may use forward purchases and sales, futures, swaps and options~~increases to ~~manage a portion~~pre-tax earnings. Such amounts as percentages of ~~these price risks. Most~~net liabilities at the beginning of the ~~net derivative contract assets or liabilities of our regulated utilities are probable of recovery through rates~~year were 0.2% in 2019 and ~~are offset by regulatory liabilities or assets. Derivative contract assets are included~~1.3% 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 in other liabilities and were $80 million as of September 30, 2018 and $82 million as of December 31, 2017.

2018.

Notes to Consolidated Financial Statements(Continued)

Note ~~14. Supplemental cash flow information~~

~~Supplemental cash flow information follows (in millions).~~16. Unpaid losses and loss adjustment expenses(Continued)

       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

In the first quarter of 2019, we reduced estimated ultimate liabilities of primary insurance for prior years’ events by $100 million, compared to a reduction of $571 million in 2018. In each period, these liability reductions primarily derived from private passenger automobile, medical malpractice and workers’ compensation insurance, although the liability reductions in the first quarter of 2019 were lower than in the first quarter of 2018 for private passenger automobile and medical malpractice. In addition, we increased estimated liabilities in the first quarter of 2019 for legacy casualty exposures and other commercial insurance business.

In the first quarter of 2019, we increased estimated ultimate property and casualty reinsurance liabilities for prior years’ events by $212 million, compared to a decrease of $182 million in the first quarter of 2018. The losses in 2019 derived primarily from casualty claims.

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 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~~three months ending ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ 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)		—			—			—			—
Prior years’ contracts		(36)		827		(409)		645		2			273			(30	)		271

Total		(36)		827		16,804		(5,525)		2			273			(30	)		271


Paid losses and loss adjustment expenses		(966)		—		(783)		—		(203	)		—			(563	)		—


Balances – September 30:	$	41,935	$	(14,451)	$	40,993	$	(13,572)
Balances – March 31:									$	41,633		$	(13,831	)	$	42,344		$	(15,007	)

Incurred losses and loss adjustment expenses, net of deferred charges	$	791			$	11,279			$	275					$	241

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 related to contracts written in prior years were $275 million in 2019 and $241 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 ~~September 30, 2018~~March 31, 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~~$6.8 billion at ~~September 30, 2018~~March 31, 2019 and ~~$7.5~~$6.9 billion at December 31, ~~2017, which included an additional $1.7 billion~~2018.

Notes to Consolidated Financial Statements(Continued)

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 following tables are based on borrowings as of March 31, 2019.


	Weighted Average Interest Rate			March 31, 2019		December 31, 2018
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2019-2047		3.1	%	$	9,066	$	9,065
Euro denominated due 2020-2035		1.1	%		7,638		7,806
Berkshire Hathaway Finance Corporation (“BHFC”) due 2019-2049		3.8	%		9,928		10,650
Other subsidiary borrowings due 2019-2045		4.0	%		5,519		5,597
Subsidiary short-term borrowings		4.4	%		1,696		1,857

				$	33,847	$	34,975

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 ~~aforementioned increase to ultimate claim liabilities~~changes in the ~~fourth quarter.~~

~~Incurred losses~~Euro/U.S. Dollar exchange rate during the period are recorded in earnings as a component of selling, general and ~~loss adjustment expenses related to contracts written~~administrative expenses. Changes in ~~prior years were $791~~the Euro/U.S. Dollar exchange rate resulted inpre-tax gains of $170 million in the first ~~nine months~~quarter of ~~2018 and $236~~2019 compared topre-tax losses of $217 million in the first ~~nine months~~quarter of ~~2017.~~2018. The carrying values of the Euro denominated senior notes reflected corresponding decreases with respect to the gains and increases with respect to the losses in those periods.

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 equipment held for lease of certain finance subsidiaries. In the first quarter of 2019, BHFC issued $2.0 billion of 4.25% senior notes due in 2049 and repaid $2.7 billion of maturing notes. Such ~~losses~~borrowings are fully and unconditionally guaranteed by Berkshire. In addition to BHFC’s borrowings, Berkshire guaranteed approximately $1.6 billion of other subsidiary borrowings at March 31, 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			March 31, 2019		December 31, 2018
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2020-2049		4.6	%	$	8,578	$	8,577
Subsidiary and other debt due 2019-2064		4.5	%		29,337		28,196
Short-term borrowings		3.2	%		2,214		2,516
Burlington Northern Santa Fe and subsidiaries due 2019-2097		4.7	%		23,217		23,226

				$	63,346	$	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 quarter of 2019, BHE and its subsidiaries issued approximately $3.0 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. As of March 31, 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 March 31, 2019, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $7.3 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included ~~recurring amortization of deferred charge assets~~approximately $5.8 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~~March 31, 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
March 31, 2019
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies	$	3,599	$	3,599	$	2,378	$	1,221	$	—	$	3,918	$	3,918	$	2,846	$	1,072	$	—
U.S. states, municipalities and political subdivisions		290		290		—		290		—
States, municipalities and political subdivisions												151		151		—		151		—
Foreign governments		7,370		7,370		5,162		2,208		—		8,091		8,091		5,840		2,251		—
Corporate bonds		6,458		6,458		—		6,453		5		6,724		6,724		—		6,720		4
Mortgage-backed securities		554		554		—		554		—		531		531		—		531		—
Investments in equity securities		207,332		207,332		206,985		47		300		191,771		191,771		191,420		50		301
Investment in Kraft Heinz common stock		17,453		17,935		17,935		—		—		13,686		10,626		10,626		—		—
Loans and finance receivables		14,477		14,735		—		59		14,676		16,432		16,459		—		1,641		14,818
Derivative contract assets⁽¹⁾		154		154		3		41		110		171		171		—		52		119
Derivative contract liabilities:
Railroad, utilities and energy⁽¹⁾		80		80		1		63		16		99		99		1		83		15
Equity index put options		1,869		1,869		—		—		1,869		1,682		1,682		—		—		1,682
Notes payable and other borrowings:
Insurance and other		24,271		24,422		—		24,422		—		33,847		35,242		—		35,216		26
Railroad, utilities and energy		62,599		66,823		—		66,823		—		63,346		69,937		—		69,937		—
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~~three months ~~ending September 30,~~ended March 31, 2019 and 2018 ~~and 2017~~ 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)


	Net derivative contract liabilities
Three months ending March 31, 2019
Balance at December 31, 2018	$	(2,343	)
Gains (losses) included in:
Earnings		820
Other comprehensive income		—
Regulatory assets and liabilities		(11	)
Acquisitions, dispositions and settlements		(44	)
Transfers into/out of Level 3		—

Balance at March 31, 2019	$	(1,578	)

Three months ending March 31, 2018
Balance at December 31, 2017	$	(2,069	)
Gains (losses) included in:
Earnings		(176	)
Other comprehensive income		(1	)
Regulatory assets and liabilities		(9	)
Acquisitions, dispositions and settlements		(26	)

Balance at March 31, 2018	$	(2,281	)

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.

Notes to Consolidated Financial Statements(Continued)

Note ~~18.~~ 19. Fair value measurements(Continued)

Quantitative information as of ~~September 30, 2018,~~March 31, 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

Derivative contract liabilities – Equity index put options

1,682

Option pricing model

Volatility

Our equity index put option contracts are illiquid and contain contract terms that are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts and certain of the contracts have relatively long durations. For these and other reasons, we classified these contracts as Level 3 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 ~~nine months ending September 30, 2018~~first quarter 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 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		(4,303	)		—			(4,303	)		6,616,673		—			6,616,673
Treasury stock acquired		—			(1,258	)		(1,258	)		—		(6,519,830	)		(6,519,830	)

Balance at March 31, 2019		737,910			(14,155	)		723,755			1,380,175,656		(12,658,739	)		1,367,516,917

Each Class A common share is entitled to one 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~~1,635,433 shares outstanding as of ~~September 30, 2018~~March 31, 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.

Notes to Consolidated Financial Statements(Continued)

Note 20. Common stock(Continued)

For several years, Berkshire had a common stock repurchase program, which 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.

Note 21. Accumulated other comprehensive income

A summary of the net changes inafter-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders and amounts reclassified out of accumulated other comprehensive income for the three months ending March 31, 2019 and 2018 follows (in millions).


	Unrealized appreciation of investments, net			Foreign currency translation			Defined benefit pension plans			Other			Accumulated other comprehensive income
2019
Balance at December 31, 2018	$	370		$	(4,603	)	$	(816	)	$	34		$	(5,015	)
Other comprehensive income, net before reclassifications		89			157			38			(13	)		271
Reclassifications into net earnings:
Reclassifications before income taxes		5			—			16			2			23
Applicable income taxes		(1	)		—			(4	)		(1	)		(6	)

Balance at March 31, 2019	$	463		$	(4,446	)	$	(766	)	$	22		$	(4,727	)


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		(74	)		585			(17	)		2			496
Reclassifications into net earnings:
Reclassifications before income taxes		(221	)		—			10			(5	)		(216	)
Applicable income taxes		46			—			(1	)		2			47

Balance at March 31, 2018	$	504		$	(2,594	)	$	(392	)	$	5		$	(2,477	)

Note 22. Income taxes

Our consolidated effective income tax rates for the first quarter of 2019 and 2018 were 21.4% and 29.7%, 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 ofpre-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.

Notes to Consolidated Financial Statements(Continued)

Note ~~20. Accumulated~~23. 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 first quarters of 2019 and 2018 (in millions). Other revenues included in consolidated revenues were primarily insurance premiums earned, interest, dividend and other ~~comprehensive~~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 March 31, 2019
Manufactured products:
Industrial and commercial products	$	6,459	$	—	$	46	$	—	$	—	$	—	$	6,505
Building products		3,552		—		—		—		—		—		3,552
Consumer products		3,290		—		—		—		—		—		3,290
Grocery and convenience store distribution		—		8,035		—		—		—		—		8,035
Food and beverage distribution		—		4,125		—		—		—		—		4,125
Auto sales		—		—		1,937		—		—		—		1,937
Other retail and wholesale distribution		544		—		2,921		—		—		—		3,465
Service		348		20		990		5,713		725		—		7,796
Electricity and natural gas		—		—		—		—		3,687		—		3,687

Total		14,193		12,180		5,894		5,713		4,412		—		42,392
Other revenue		865		19		1,110		12		260		16,020		18,286

	$	15,058	$	12,199	$	7,004	$	5,725	$	4,672	$	16,020	$	60,678


	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Insurance, Corporate and other		Total
Three months ending March 31, 2018
Manufactured products:
Industrial and commercial products	$	6,554	$	—	$	54	$	—	$	—	$	—	$	6,608
Building products		2,920		—		—		—		—		—		2,920
Consumer products		3,696		—		—		—		—		—		3,696
Grocery and convenience store distribution		—		8,158		—		—		—		—		8,158
Food and beverage distribution		—		3,997		—		—		—		—		3,997
Auto sales		—		—		1,931		—		—		—		1,931
Other retail and wholesale distribution		498		—		2,712		—		—		—		3,210
Service		218		17		950		5,580		700		—		7,465
Electricity and natural gas		—		—		—		—		3,524		—		3,524

Total		13,886		12,172		5,647		5,580		4,224		—		41,509
Other revenue		812		17		1,140		10		288		14,697		16,964

	$	14,698	$	12,189	$	6,787	$	5,590	$	4,512	$	14,697	$	58,473

Notes to Consolidated Financial Statements(Continued)

Note 23. Revenues from contracts with customers(Continued)

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 September 30, 2018 and 2017~~one year as of March 31, 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	$	918	$	5,796	$	6,714
Other sales and service contracts		1,278		1,750		3,028

Note ~~21.~~24. Contingencies and ~~Subsequent Event~~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 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~~On April 30, 2019, Berkshire committed to invest a ~~definitive agreement~~total of $10 billion in Occidental Petroleum Corporation (“Occidental”) in connection with Occidental’s proposal to acquire ~~Medical Liability Mutual Insurance Company,~~Anadarko Petroleum Corporation (“~~Medical Liability Mutual”~~Anadarko”),. The investment is contingent upon Occidental entering into and completing its proposed acquisition of Anadarko. If completed, Berkshire’s investment would include newly issued Occidental Cumulative Perpetual Preferred Stock with an aggregate liquidation value of $10 billion, together with warrants to purchase up to 80.0 million shares of Occidental common stock at an exercise price of $62.50 per share. The preferred stock will accrue dividends at 8% per annum and will be redeemable at the option of Occidental commencing on the tenth anniversary of issuance at a ~~writer of medical professional liability insurance domiciled in New York. The acquisition~~redemption price ~~was approximately $2.5 billion. The acquisition involved the conversion of Medical Liability Mutual from a mutual company~~equal to ~~a stock company. The closing~~105% of the ~~transaction was subject to various regulatory approvals, customary closing conditions~~liquidation preference plus any accumulated and unpaid dividends, or mandatorily under certain specified capital return events. Dividends will be paid in cash or, at Occidental’s option, in shares of Occidental common stock. The warrants issued with the ~~approval~~preferred stock may be exercised in whole or in part until one year after the redemption 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.preferred stock.

~~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. The accompanying business segment information for the first quarter of 2018 reflects certain reclassifications to conform to presentations as of December 31, 2018. Specifically, business units that previously were reported as the finance and financial products segment in the first quarter of 2018 were reclassified to manufacturing (Clayton Homes and UTLX), services and retailing (CORT and XTRA leasing) and corporate and other (principally investment income).

Notes to Consolidated Financial Statements(Continued)

Note 25. Business segment data(Continued)

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


	Third Quarter				First Nine Months				First Quarter
	2018		2017		2018		2017		2019			2018
Operating Businesses:
Revenues of Operating Businesses:
Insurance:
Underwriting:
GEICO	$	8,506	$	7,543	$	24,705	$	21,632	$	8,622		$	7,915
Berkshire Hathaway Reinsurance Group		3,777		3,954		11,229		20,550		3,546			3,540
Berkshire Hathaway Primary Group		2,050		1,852		5,921		5,287		2,151			1,918
Investment income		1,446		1,248		4,058		3,664		1,487			1,213

Total insurance		15,779		14,597		45,913		51,133		15,806			14,586
BNSF		6,147		5,314		17,649		15,749		5,762			5,624
Berkshire Hathaway Energy		5,706		5,351		15,268		14,184		4,672			4,512
Manufacturing		13,552		12,819		40,339		37,654		15,070			14,722
McLane Company		12,822		12,798		37,438		37,480		12,199			12,189
Service and retailing		6,974		6,527		20,623		19,170		7,025			6,815
Finance and financial products		2,432		2,153		6,861		6,019

										60,534			58,448
		63,412		59,559		184,091		181,389
Reconciliation of segments to consolidated amount:
Corporate, eliminations and other		38		(52)		32		(256)		144			25

	$	63,450	$	59,507	$	184,123	$	181,133	$	60,678		$	58,473


									First Quarter
									2019			2018
Earnings (Loss) Before Income Taxes of Operating Businesses:
Insurance:
Underwriting:
GEICO									$	770		$	677
Berkshire Hathaway Reinsurance Group										(253	)		(258	)
Berkshire Hathaway Primary Group										(30	)		99
Investment income										1,485			1,205

Total insurance										1,972			1,723
BNSF										1,665			1,513
Berkshire Hathaway Energy										540			487
Manufacturing										2,194			2,207
McLane Company										111			60
Service and retailing										621			573

										7,103			6,563

Reconciliation of segments to consolidated amount:
Investment and derivative gains (losses)										20,322			(8,015	)
Interest expense, not allocated to segments										(109	)		(120	)
Equity method investments										168			401
Corporate, eliminations and other										163			(352	)

									$	27,647		$	(1,523	)

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

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

Insurance:

Underwriting:

GEICO
     $         627      $ (416)    $         1,977       $ (122)
Berkshire Hathaway Reinsurance Group
   (163)    (1,845)    (124)    (2,963)
Berkshire Hathaway Primary Group
   135    52    468          473
Investment income
   1,455        1,246    4,052    3,658








Total insurance
   2,054    (963)    6,373    1,046
BNSF
   1,879    1,710    5,047    4,592
Berkshire Hathaway Energy
   1,165    1,243    2,238    2,481
Manufacturing
   2,012    2,002    6,002    5,428
McLane Company
   44    45    171    202
Service and retailing
   628    491    1,840    1,439
Finance and financial products
   530    496    1,589    1,438








   8,312    5,024    23,260    16,626
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)








     $       23,147    $ 5,630    $ 36,722      $ 17,447

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

Results of Operations

Net earnings (loss) 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				First Quarter
	2018		2017		2018		2017		2019			2018
Insurance – underwriting	$	441	$	(1,439)	$	1,791	$	(1,728)	$	389		$	407
Insurance – investment income		1,239		1,044		3,393		2,917		1,237			1,012
Railroad		1,393		1,042		3,847		2,838		1,253			1,145
Utilities and energy		1,091		952		2,257		1,941		605			585
Manufacturing, service and retailing		2,097		1,694		6,060		4,673		2,200			2,127
Finance and financial products		390		319		1,193		933
Investment and derivative gains/losses		11,660		623	��	10,352		1,270		16,106			(6,426	)
Other		229		(168)		520		(455)		(129	)		12

Net earnings attributable to Berkshire Hathaway shareholders	$	18,540	$	4,067	$	29,413	$	12,389
Net earnings (loss) attributable to Berkshire Hathaway shareholders									$	21,661		$	(1,138	)

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. The business segment data (Note 25 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

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~~exceptionally large given the size of our current holdings and the inherent volatility in securities prices. Prior to 2018, the changes in unrealized gains and losses pertaining to such investments were recorded in other comprehensive income. Thus, the new accounting treatment has no effect on consolidated shareholders’ equity. The business segment data (Note 22 to the accompanying Consolidated Financial Statements) should be read in conjunction with this discussion.

~~Ourafter-tax~~ earnings in the third quarter and first nine months of 2018 were favorably affected by lower U.S. income tax expense, primarily attributable to a reduction 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 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 comparative~~after-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~~$389 million ~~and $1.8 billion~~ in the ~~third~~first quarter of 2019 and ~~first nine months of~~$407 million in 2018. Results in 2019 and 2018 ~~respectively, compared to~~included net underwriting gains from primary insurance and net underwriting losses ~~of $1.4 billion and $1.7 billion, respectively,~~from reinsurance.After-tax earnings 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~~first 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.~~2019 from insurance investments increased 22.2% over 2018, reflecting increased short-term interest rates and ~~Puerto Rico and an earthquake in Mexico. Underwriting results in 2017 also included foreign currency exchange rate losses from the revaluation of certainnon-U.S.~~ ~~Dollar denominated liabilities.~~dividend income.

Our railroad business generated ~~increased~~ a 9.4% increase inafter-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 compared to ~~2017, reflecting an increase~~2018. Results in ~~unit volume,~~2019 benefited from higher ~~average revenue~~rates per car/unit and a ~~lower effective income tax rate,~~curtailment gain related to an amendment to a retirement plan, partly offset by ~~increased fuel~~lower unit volume. Severe winter weather and ~~other~~flooding across themid-U.S. in the first quarter of 2019 had a significant negative impact on freight volumes and operating ~~costs.~~ results.

Our utilities and energy ~~businesses~~business produced ~~higher~~a 3.4% increase inafter-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 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~~2018. Earnings from our manufacturing, service and retailing businesses in the ~~third~~first quarter ~~and~~of 2019 increased 3.4% over 2018. First quarter 2019 results of our underlying business operations were mixed, with several of these businesses experiencing lower first ~~nine months~~quarter earnings from a variety 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.~~factors.

After-tax investment and derivative gains in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 from investments~~2019 were $16.1 billion compared toafter-tax losses of $6.4 billion in 2018. In the table above, investment and derivative ~~contracts were $11.7~~gains/losses include a gain of approximately $15.1 billion in 2019 and ~~$10.4~~a loss of approximately $7.0 billion ~~respectively. Investment gains/losses included~~in 2018 due to changes during the first quarters of 2019 and 2018 in the amount of unrealized gains that existed in our equity security investment holdings and also includeafter-tax realized gains on sales of ~~approximately $11.4 billion in the third quarter~~equity and ~~$9.6 billion in~~fixed maturity securities of $392 million and $747 million during the first ~~nine months from changes in market values~~quarters of ~~our investments 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 recordedafter-tax~~ ~~unrealized gains on our investments in equity securities of approximately $10.9 billion in other comprehensive income.~~2019 and 2018, respectively. 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. 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

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 our insurance businesses as possessing two distinct ~~operations~~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 asnon-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.~~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 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~~$111 billion as of ~~September 30, 2018.~~March 31, 2019. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuation ofnon-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				First Quarter
	2018		2017		2018		2017		2019			2018
Underwriting gain (loss):
GEICO	$	627	$	(416)	$	1,977	$	(122)	$	770		$	677
Berkshire Hathaway Reinsurance Group		(163)		(1,845)		(124)		(2,963)		(253	)		(258	)
Berkshire Hathaway Primary Group		135		52		468		473		(30	)		99

Pre-tax underwriting gain (loss)		599		(2,209)		2,321		(2,612)
Pre-tax underwriting gain										487			518
Income taxes and noncontrolling interests		158		(770)		530		(884)		98			111

Net underwriting gain (loss)	$	441	$	(1,439)	$	1,791	$	(1,728)
Net underwriting gain									$	389		$	407

Effective income tax rate		25.9%		35.1%		22.6%		34.4%		22.5%			21.4%

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								First Quarter
	2018				2017				2018				2017				2019				2018
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
Premiums written	$	8,952			$	8,130			$	25,878			$	22,987			$	9,263			$	8,689

Premiums earned	$	8,506		100.0	$	7,543		100.0	$	24,705		100.0	$	21,632		100.0	$	8,622		100.0	$	7,915		100.0

Losses and loss adjustment expenses		6,725		79.1		6,933		91.9		19,305		78.1		18,631		86.1		6,556		76.1		6,075		76.7
Underwriting expenses		1,154		13.5		1,026		13.6		3,423		13.9		3,123		14.5		1,296		15.0		1,163		14.7

Total losses and expenses		7,879		92.6		7,959		105.5		22,728		92.0		21,754		100.6		7,852		91.1		7,238		91.4

Pre-tax underwriting gain (loss)	$	627			$	(416)			$	1,977			$	(122)
Pre-tax underwriting gain																	$	770			$	677

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

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

GEICO (Continued)

Premiums written and earned in the ~~third~~first quarter of 2019 increased 6.6% and ~~first nine months of 2018 were approximately $9.0 billion and $25.9 billion, respectively, representing increases of 10.1% and 12.6%~~8.9%, respectively, compared to ~~2017.~~2018. These increases reflected ~~increases in~~ voluntary auto~~policies-in-force~~policy-in-force growth of ~~3.7%~~3.6% and increased premiums per auto policy of approximately ~~7.8%~~4.0% over the past twelve months. The increase in premiums per policy was attributable to rate increases from 2018, coverage changes and changes in state and risk mix. The ~~rate~~ increases in rates were in response to accelerating ~~claim costs in recent years. Althoughpolicies-in-force~~ ~~increased 461,000 during the first nine months of 2018, the rate of increase slowed, as voluntary~~losses. Voluntary auto new business sales ~~decreased 6.6%~~in the first quarter of 2019 increased 6.2% compared to ~~2017.~~the first quarter of 2018, while our voluntary autopolicies-in-force increased approximately 342,000 during the first quarter of 2019.

Losses and loss adjustment expenses ~~decreased $208 million (3.0%) in the third quarter and increased $674 million (3.6%)~~ in the first ~~nine months~~quarter of ~~2018~~2019 were approximately $6.6 billion, an increase of $481 million (7.9%) compared to ~~2017. Our ratios~~2018. GEICO’s ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) ~~for~~in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 were 79.1% and 78.1%~~2019 was 76.1%, ~~respectively, declines~~a decline of ~~12.8 and 8.0~~0.6 percentage points compared to 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).2018.

~~Our losses and loss adjustment expenses incurred in the first nine months of 2018 also included reductions of $478 million with respect to~~GEICO reduced ultimate claim loss estimates for prior years’ loss events ~~which~~by $83 million in the first quarter of 2019 and $407 million in 2018. These reductions produced a corresponding ~~increase in~~pre-tax underwriting gains. ~~By comparison, we increased loss estimates for prior years’ events~~The gains in 2019 were primarily due to lower losses from collision, property damage and bodily injury claims, partially offset by ~~$37 million in the first nine months of 2017.~~higher losses from personal injury protection claims. Claims frequencies in the first ~~nine months~~quarter of ~~2018~~2019 for property damage and collision ~~and bodily~~coverages and personal injury protection ~~coverages declined~~coverage were down (two to ~~three~~four percent range) compared to ~~2017.~~2018 and were flat for bodily injury coverage. Average claims severities in the first ~~nine months~~quarter 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 underwriting~~Underwriting expenses in the first ~~nine months~~quarter of ~~2018~~2019 were approximately ~~$3.4~~$1.3 billion, an increase of ~~$300~~$133 million ~~(9.6%~~(11.4%) over ~~2017. Our~~2018. GEICO’s expense ratio (underwriting expenses to premiums earned) ~~for~~in the first ~~nine months~~quarter of ~~2018 decreased 0.6~~2019 was 15.0%, 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 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).


	Premiums earned								Pre-tax underwriting gain (loss)								First Quarter
	Third Quarter				First Nine Months				Third Quarter				First Nine Months				Premiums earned				Pre-tax underwriting gain (loss)
	2018		2017		2018		2017		2018		2017		2018		2017		2019		2018		2019			2018
Property/casualty	$	2,157	$	2,061	$	6,479	$	5,763	$	67	$	(1,486)	$	535	$	(1,856)	$	2,322	$	2,026	$	(40	)	$	130
Retroactive reinsurance		1		550		1		10,736		(246)		(287)		(704)		(881)		3		—		(323	)		(311	)

		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		1,027		1,234		280			96
Periodic payment annuity		312		197		894		647		(92)		(185)		(279)		(528)		194		280		(170	)		(173	)

		1,619		1,343		4,749		4,051		16		(72)		45		(226)	$	3,546	$	3,540	$	(253	)	$	(258	)

	$	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).

   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)


	First Quarter
	2019				2018
	Amount		%		Amount		%
Premiums written	$	3,542			$	3,346

Premiums earned	$	2,322		100.0	$	2,026		100.0

Losses and loss adjustment expenses		1,774		76.4		1,391		68.7
Underwriting expenses		588		25.3		505		24.9

Total losses and expenses		2,362		101.7		1,896		93.6

Pre-tax underwriting gain (loss)	$	(40)			$	130

~~NICO Group’s~~Property/casualty premiums earned in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 decreased 11.5% and 2.7%, respectively,~~2019 were approximately $2.3 billion, an increase of $296 million (14.6%) compared to 2017. 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.2018. The effect of significant catastrophe losses in 2018 on the timing of premiums earned was relatively insignificant. For the first nine months of 2018, approximately 40% of NICO Group’s premiums earned derived from a~~10-year,~~ 20% quota-share contract with Insurance Australia Group Ltd. that expires in 2025. General Re Group’s premiums earned in the third quarter and first nine months of 2018 increased $236 million (28.0%) and $810 million (35.6%), respectively, compared to 2017. The increasesincrease primarily reflected higher direct and broker markets business and 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 in the first nine months of 2017. We incurred estimated losses of approximately $267 million in the third quarter of 2018 related to Hurricane Florence and Typhoon Jebi and approximately $2.29 billion in the third quarter of 2017 related to Hurricanes Harvey, Irma and Maria and an earthquake in Mexico. Our losses from significant catastrophe events were approximately $2.45 billion for the first nine months of 2017.

In addition, we reduced estimated ultimate claims liabilities in the first nine months of 2018 for prior years’ loss events by $581 million. We increased estimated ultimate liabilities for prior years’ loss events by $108 million in the first nine months of 2017, which reflected the U.K. Ministry of Justice’s decision in the first 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 in the first ~~nine months of 2017~~quarter included ~~$10.2 billion~~$432 million in 2019 and $448 million in 2018 from ~~an aggregate~~a~~excess-of-loss~~10-year, ~~retroactive reinsurance agreement~~20% quota-share contract entered into by NICO with ~~various subsidiaries of American International~~Insurance Australia Group ~~Inc. (the “AIG Agreement”),~~Limited, which ~~became effective on February 2, 2017. We also recorded losses~~expires in 2025.

Losses and loss adjustment expenses ~~incurred~~in 2019 were approximately $1.8 billion, an increase of ~~$10.2 billion at the inception of the AIG Agreement, representing our initial estimate of the unpaid losses~~$383 million (27.5%) compared to 2018. Losses and loss adjustment expenses ~~assumed~~in the first quarter of ~~$16.4 billion, partly offset by an initial deferred charge asset~~2019 included increases in estimated ultimate claim liabilities attributable to prior years’ loss events of ~~$6.2 billion. Thus, on the effective date, the AIG Agreement had no effect on our~~$212 million compared to decreases of $182 million in 2018, which produced corresponding decreases and increases inpre-tax underwriting ~~results.~~gains. Such gains and losses were less than 1% of the unpaid claim liabilities as of the beginning of the applicable year. Losses and loss adjustment expenses in 2019 also reflected a decline in the overall loss ratio for current accident year business as compared to the first quarter of 2018. There were no significant catastrophe loss events in the first quarter of 2019 or 2018.

Retroactive reinsurance

There were no new retroactive reinsurance contracts written in the first quarter of 2019 or 2018.Pre-tax underwriting losses from retroactive reinsurance contracts in the ~~third~~first quarter were $323 million in 2019 and ~~first nine months of 2018 were $246~~$311 million ~~and $704 million, respectively, compared to $287 million and $881 million, respectively,~~ in ~~the same periods in 2017.~~2018. Certain liabilities ~~relating~~related to retroactive reinsurance contracts written by our U.S. subsidiaries are denominated in foreign currencies. Underwriting results ~~include gains~~in the first quarter includedpre-tax losses of $52 million in 2019 and ~~losses from~~$60 million in 2018 associated with there-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~~quarter were $271 million in 2019 and $251 million in 2018, which derived from deferred charge amortization and changes in the estimated timing and amount of ~~2018~~future claim payments. Deferred charge amortization in the first quarter included approximately $156 million in 2019 and ~~2017 were $803~~$147 million ~~and $630 million, respectively. The increase~~ in~~pre-tax~~ ~~losses was primarily due to amortization charges~~ 2018 related to ~~the AIG Agreement, which included the effects~~an aggregateexcess-of-loss retroactive reinsurance agreement with various subsidiaries 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.~~American International Group, Inc.

Gross unpaid losses assumed under retroactive reinsurance contracts were approximately ~~$41.9~~$41.6 billion at ~~September 30, 2018~~March 31, 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~~$13.8 billion at ~~September 30, 2018~~March 31, 2019 and ~~$15.3~~$14.1 billion at December 31, ~~2017.~~2018. Deferred charge ~~asset balances~~assets will be ~~amortized as charges~~charged topre-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).

   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


	First Quarter
	2019				2018
	Amount		%		Amount		%
Premiums written	$	1,027			$	1,237

Premiums earned	$	1,027		100.0	$	1,234		100.0

Life and health insurance benefits		598		58.2		936		75.9
Underwriting expenses		149		14.5		202		16.4

Total benefits and expenses		747		72.7		1,138		92.3

Pre-tax underwriting gain (loss)	$	280			$	96

~~General Re Group’s~~Life/health premiums earned in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased $178~~2019 were approximately $1.0 billion, a decrease of $207 million ~~(22.6%~~(16.8%) ~~and $495 million (21.3%), respectively,~~ compared to ~~2017.~~2018. The ~~increases were~~decrease was primarily attributable to the effects of an amendment in the first quarter of 2019 to a reinsurance contract, partially offset by growth in the Asia life markets. In the first quarter of 2019, BHLN amended its yearly renewable term life insurance contract with a major U.S. reinsurer. The amendment effectively eliminates BHLN’s exposure under the contract in the future. BHLN recorded a reduction in earned premiums on this contract of $49 million in the first quarter of 2019, largely attributable to the contract amendment. Premiums earned from this contract were $189 million in the first quarter of 2018 and ~~Australia markets and foreign currency translation effects of a comparatively weaker U.S. Dollar.~~ approximately $1 billion for the year ending December 31, 2018.

The ~~General Re Group~~life/health business producedpre-tax underwriting gains of $280 million in the first ~~nine months~~quarter of ~~$152 million in 2018 and~~2019 compared to $96 million in 2017. The comparative increase in the first nine months reflected increased earnings from international business, primarily due to increased volumes and foreign currency translation, improved earnings from life business in North America and lower losses from the run-off of long-term care and disability business.

BHLN Group’s life reinsurance premiums earned in the third quarter and first nine months of 2018 were $340 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~~2018. Underwriting results in the first ~~nine months~~quarter of ~~2018~~2019 included aone-timepre-tax gain of approximately $160 million attributable to the BHLN contract amendment, which resulted in reductions of benefits incurred and ~~2017~~premiums earned. First quarter underwriting results in 2019 also included~~pre-tax~~ increased gains ~~of $166 million and $197 million, respectively,~~ from therun-off of variable annuity contracts, partially offset by increased losses from U.S. individual life business and therun-off of U.S. long-term care business. Variable annuity guarantee reinsurance ~~contracts that provide guarantees on closed blocks~~producedpre-tax underwriting gains of ~~variable annuity business. Periodic underwriting~~$89 million in the first quarter of 2019 versus $45 million in 2018. Underwriting results from this business reflect changes in estimated liabilities for guaranteed benefits, which result from changes in securities markets and interest rates and from the periodic amortization of expected profit margins. Underwriting results from variable annuity contracts can be volatile, reflecting the volatility of securities markets, interest rates and foreign currency exchange rates. Estimated variable annuity guarantee liabilities were approximately $1.6 billion at September 30, 2018 and $1.8 billion at December 31, 2017.

Periodic payment annuity

Periodic payment annuity premiums earned in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased $115~~2019 were $194 million, ~~(58.4%) and $247~~a decrease of $86 million ~~(38.2%~~(30.7%)~~, 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 producedpre-tax losses in the first quarter of ~~$92 million and $279~~$170 million in ~~the third quarter~~2019 and ~~first nine months of 2018, respectively, compared topre-tax~~ ~~losses of $185~~$173 million ~~and $528 million, respectively, for the same periods~~ in ~~2017.~~2018. Certain contracts written by our U.S. subsidiaries are denominated in foreign ~~currencies, primarily the Great Britain Pound Sterling.~~currencies. First quarter~~Pre-tax~~pre-tax underwriting results ~~in 2018~~ includedpre-tax ~~gains~~losses of ~~$21~~$28 million in ~~the third quarter~~2019 and ~~$57~~$70 million in ~~the first nine months from~~2018 associated with there-measurement of such liabilities due to changes in exchange ~~rates compared to~~rates.

Before foreign currency gains and losses,pre-tax underwriting losses ~~of $63 million in the third quarter and $173~~were $142 million in the first ~~nine months~~quarter of ~~2017. Before the effect of foreign currency gains~~2019 and ~~losses, this business generatedpre-tax~~ ~~underwriting losses of $336~~$103 million in the first ~~nine months~~quarter of ~~2018 and $355 million in the first nine months of 2017.~~2018. These losses ~~were~~derived primarily ~~attributable to~~from the recurring discount accretion of annuity ~~liabilities.~~liabilities, as well as the impact of mortality and interest rate changes. Discounted annuity liabilities approximated ~~$12.2~~$12.7 billion at ~~September 30, 2018~~March 31, 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~~ Central States Indemnity ~~Company.~~Company and MLMIC Insurance Company, acquired October 1, 2018.

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

Insurance—Underwriting(Continued)

Berkshire Hathaway Primary Group (Continued)

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


	Third Quarter								First Nine Months								First Quarter
	2018				2017				2018				2017				2019					2018
	Amount		%		Amount		%		Amount		%		Amount		%		Amount			%		Amount		%
Premiums written	$	2,227			$	1,995			$	6,498			$	5,645			$	2,341				$	2,161

Premiums earned	$	2,050		100.0	$	1,852		100.0	$	5,921		100.0	$	5,287		100.0	$	2,151			100.0	$	1,918		100.0

Losses and loss adjustment expenses		1,419		69.2		1,342		72.5		3,884		65.6		3,426		64.8		1,570			73.0		1,251		65.2
Underwriting expenses		496		24.2		458		24.7		1,569		26.5		1,388		26.3		611			28.4		568		29.6

Total losses and expenses		1,915		93.4		1,800		97.2		5,453		92.1		4,814		91.1		2,181			101.4		1,819		94.8

Pre-tax underwriting gain	$	135			$	52			$	468			$	473
Pre-tax underwriting gain (loss)																	$	(30	)			$	99

Premiums written and earned in the ~~third~~first quarter of 2019 increased 8.3% and ~~first nine months of 2018 increased 11.6% and 15.1%~~12.1%, respectively, compared to ~~the corresponding 2017 periods. These~~2018. The increases in premiums written were primarily attributable to BH Specialty ~~MedPro Group,~~(19.6%), GUARD (19.0%) and ~~BHHC. Premiums~~NICO Primary (11.9%). The increase in premiums earned in the first ~~nine months~~quarter of ~~2018 increased $634 million (12.0%) compared to~~2019 also reflected the ~~first nine months~~impact of ~~2017, reflecting~~ the ~~written premium increases of these businesses.~~MLMIC acquisition.

BH Primary producedpre-tax underwriting ~~gains~~losses of ~~$135 million and $468~~$30 million in the ~~third~~first quarter ~~and first nine months~~ of ~~2018, respectively,~~2019 compared to ~~$52 million and $473~~pre-tax gains of $99 million in 2018. BH Primary’s aggregate loss ratios for the ~~third~~first quarter were 73.0% in 2019 and ~~first nine months of 2017, respectively. Underwriting results~~65.2% in ~~the third quarter included estimated losses of approximately $75 million in 2018 from Hurricane Florence and $225 million in 2017 from Hurricanes Harvey, Irma and Maria.~~

2018. Losses and loss adjustment expenses incurred in the first ~~nine months also included net reductions of estimated ultimate liabilities~~quarter for prior years’ loss events included reductions of ~~$507~~$17 million in ~~2018~~2019 and ~~$606~~$164 million in ~~2017, which produced corresponding increases~~2018. In the first quarter of 2019, we recorded additional estimated claim liabilities for legacy casualty exposures. In addition, the net gains from the reductions of prior accident years’ liabilities in~~pre-tax~~ ~~underwriting gains. The liability reductions in each year primarily related~~ 2019 were lower as compared to ~~healthcare malpractice and workers’ compensation business.~~ 2018.

BH Primary ~~writes~~units 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
   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)~~


	First Quarter
	2019		2018
Interest and other investment income	$	513	$	452
Dividend income		972		753

Investment income before income taxes and noncontrolling interests		1,485		1,205
Income taxes and noncontrolling interests		248		193

Net investment income	$	1,237	$	1,012

Effective income tax rate		16.6%		15.9%

Pre-tax interest and other investment income in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 increased ~~$151~~$61 million ~~(43.9%~~(13.5%) ~~and $476 million (54.7%), respectively,~~ compared to ~~the same periods~~2018, attributable to an increase in ~~2017. The increases reflected the effect of~~interest income, primarily due to higher ~~short-term~~ interest rates ~~in 2018 and~~on short-term investments, partially offset by lower income from a limited partnership ~~investment~~investments. Dividend income in the first quarter ~~partly offset by lower interest from reduced investments~~of 2019 increased $219 million (29.1%) compared to the first quarter of 2018. The increase in ~~fixed maturity securities. Our invested assets~~dividend income was attributable to an overall increase in investment levels over the past year and higher dividend rates. We continue to ~~include significant levels~~hold large balances of ~~short-term investments.~~cash, cash equivalents and U.S. Treasury Bills. 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~~$124 billion at ~~September 30, 2018~~March 31, 2019 and ~~$114~~$123 billion at December 31, ~~2017. Our combined insurance operations generatedpre-tax~~ ~~underwriting earnings of $2.3 billion in the first nine months of 2018, and consequently, the average cost of float for that period was negative.~~2018. Our average cost of float ~~for~~was negative in the ~~year ending December 31, 2017 was approximately 3%, reflecting~~first quarter of 2019 as our underwriting operations generatedpre-tax ~~underwriting losses~~earnings of ~~approximately $3.2 billion, most~~$487 million.

Item 2. Management’s Discussion and Analysis of ~~which was incurred in the second half~~Financial Condition and Results of ~~the year.~~Operations

Insurance—Investment Income(Continued)

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


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Cash, cash equivalents and U.S. Treasury Bills	$	59,292	$	73,285	$	66,969	$	64,548
Equity securities		199,860		163,134		184,953		166,385
Fixed maturity securities		18,057		21,092		19,226		19,690

	$	277,209	$	257,511	$	271,148	$	250,623

Fixed maturity ~~investments~~securities as of ~~September 30, 2018~~March 31, 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	$	3,893	$	17	$	3,910
States, municipalities and political subdivisions		259		14		273		141		6		147
Foreign governments		7,360		8		7,368		8,045		44		8,089
Corporate bonds, investment grade		5,321		388		5,709		5,627		435		6,062
Corporate bonds,non-investment grade		563		42		605		498		29		527
Mortgage-backed securities		457		53		510		429		62		491

	$	17,578	$	479	$	18,057	$	18,633	$	593	$	19,226

U.S. government ~~obligations~~securities are rated AA+ or Aaa by the major rating agencies. Approximately 88% 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~~and include consumer products, coal, industrial products and agricultural products. A summary of BNSF’s earnings follows ~~(in~~(dollars in millions).


	First Quarter
	2019			2018
Revenues	$	5,762		$	5,624

Operating expenses:
Compensation and benefits		1,400			1,315
Fuel		711			767
Purchased services		713			692
Depreciation and amortization		591			571
Equipment rents, materials and other		414			510

Total operating expenses		3,829			3,855
Interest expense		268			256

		4,097			4,111

Pre-tax earnings		1,665			1,513
Income taxes		412			368

Net earnings	$	1,253		$	1,145

Effective income tax rate		24.7	%		24.3	%

   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 were $6.1 billion and $17.6 billion, respectively, representing increases of $833 million (15.7%) and $1.9 billion (12.1%), respectively, versus the corresponding periods in 2017. During the first nine months of 2018, our overall average revenue per car/unit increased 6.1% and our aggregate volume increased 4.6%. Our~~year-to-date~~ volume was approximately 8.0 million cars/units compared to 7.6 million in 2017. The 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.~~Pre-tax earnings were~~ ~~approximately $1.9 billion and $5.0 billion in the third quarter and first nine months of 2018, respectively, increases of 9.9% compared to the corresponding periods in 2017.~~

Revenues from consumer products were $2.0 billion in the third quarter and $5.8 billion in the first nine months of 2018, representing increases of 11.7% and 12.0%, respectively, from 2017. The increases reflected higher average revenue per unit and volume increases of 0.9% in the third quarter and 3.9% in the first nine months. The volume increases were attributable to the intermodal business, due to general economic growth and tight 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.

Revenues from industrial products in 2018 were $1.6 billion in the third quarter and $4.4 billion for the first nine months, or increases of 24.3% and 17.3%, respectively, from the comparable 2017 periods. These increases were attributable to volume increases of 13.1% in the third quarter and 10.9% in the first nine months as well as higher average revenue per car. Volumes in 2018 were higher primarily due to strength in the industrial and energy sectors, 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%, 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 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)

BNSF’s revenues were approximately $5.8 billion in the first quarter of 2019, an increase of $138 million (2.5%) versus 2018. During the first quarter of 2019, BNSF’s revenues reflected an 8.5% comparative increase in average revenue per car/unit, driven by increased rates per car/unit and higher fuel surcharge revenue. Aggregate volumes in the first quarter of 2019 were approximately 2.5 million cars, a decrease of 5.4% from 2.6 million cars in the first quarter of 2018.Pre-tax earnings were approximately $1.7 billion in the first quarter of 2019, an increase of 10.0% compared to 2018. BNSF experienced severe winter weather and flooding on parts of the network in the first quarter of 2019, which negatively affected revenues, expenses and service levels. BNSF’s first quarter results also included 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 a retirement plan.

Revenues from consumer products were $2.0 billion in the first quarter of 2019, representing an increase of 7.6% compared to 2018. The increase reflected higher average revenue per car/unit, partially offset by volume decreases of 5.7%. The volume decrease was attributable to lower international intermodal market share, increased truck competition, and the adverse weather conditions.

Revenues from industrial products were $1.5 billion in the first quarter of 2019, an increase of 8.4% from 2018. The increase was attributable to higher average revenue per car/unit and a volume increase of 1.3%. Volumes in the first quarter of 2019 were higher primarily due to strength in the energy and industrial sectors, which drove higher demand for petroleum products, liquefied petroleum gas, and aggregates, partially offset by lower sand and taconite volumes as well as the aforementioned weather conditions.

Revenues from agricultural products in the first quarter of 2019 were $1.1 billion, a decrease of 3.4% compared to 2018. The revenue decline reflected lower volumes of 7.4%, partially offset by higher average revenue per car/unit. Volumes decreased primarily due to the weather conditions, partially offset by higher soybean exports.

Revenues from coal in the first quarter of 2019 were $869 million, a decrease of 8.3% compared to 2018. This decrease reflected lower volumes of 10.3%, partially offset by higher average revenue per car/unit. The volume decrease in the first quarter of 2019 was primarily attributable to the weather conditions, partially offset by higher market share.

BNSF’s operating expenses were $3.8 billion in the first quarter of 2019, a decrease of $26 million (0.7%) compared to 2018. The ratio of operating expenses to revenues in the first quarter of 2019 decreased 2.0 percentage points to 66.5% versus 2018. BNSF’s expenses reflected lower volume-related costs and the aforementioned retirement plan curtailment gain, substantially offset by the impact of the adverse weather conditions. Compensation and benefits expenses increased ~~$205~~$85 million ~~(17.5%~~(6.5%) ~~for the third quarter of 2018 and $296 million (7.9%) for the first nine months of 2018,~~compared to 2018. The increase was primarily due to wage inflation ~~including a change in estimate of the effect of a pending labor agreement recorded in 2017, increased headcount~~ and higher employee counts and related training costs. Fuel expenses ~~increased $264~~decreased $56 million ~~(44.4%~~(7.3%) ~~for the third quarter and $679 million (38.2%) for the first nine months of~~compared to 2018, primarily due to ~~higher~~lower average fuel prices and ~~increased volumes.~~

Purchased services expenses increased $110 million (18.1%) in the third quarter and $281 million (15.2%) in the first nine months of 2018 as compared to 2017. The increases were due to higher purchased transportation costs of our logistics services business, as well as increased intermodal ramping, drayage and other volume-related costs.

~~In the third quarter and first nine months of 2018, equipment~~lower fuel volumes, partially offset by unfavorable efficiency. Equipment rents, materials and other expense ~~increased $87~~decreased $96 million ~~(22.7%~~(18.8%) ~~and $206 million (15.9%), respectively,~~ compared to ~~2017. These increases resulted from~~2018. The decrease was primarily attributable to the retirement plan curtailment gain, partially offset by higher ~~locomotive materials,~~ personal injury expenses and ~~property taxes. The first nine months also included higher derailment-related~~casualty-related costs.

BNSF’s effective income tax rate was 25.9% and 23.8% for the third quarter and first nine months of 2018, respectively, as compared to 39.1% and 38.2%, respectively, in the corresponding periods in 2017. The reduction in the U.S. statutory income tax rate under the TCJA, effective January 1, 2018, drove most of the effective income tax rate reduction. In addition, certain states enacted income tax rate reductions in 2018.

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
   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)~~


	First Quarter
	Revenues				Earnings
	2019		2018		2019		2018
PacifiCorp	$	1,281	$	1,202	$	222	$	173
MidAmerican Energy Company		872		767		84		40
NV Energy		628		625		36		40
Northern Powergrid		263		275		99		109
Natural gas pipelines		376		379		238		219
Other energy businesses		464		500		(7)		20
Real estate brokerage		788		764		(24)		(10)
Corporate interest		—		—		(108)		(104)

	$	4,672	$	4,512

Pre-tax earnings						540		487
Income tax benefit						(130)		(167)

Net earnings					$	670	$	654
Noncontrolling interests						65		69

Net earnings attributable to Berkshire Hathaway shareholders					$	605	$	585

Effective income tax rate						(24.1)%		(34.3)%

PacifiCorp

PacifiCorp operates a regulated electric utility in portions of several Western states, including Utah, Oregon and Wyoming. Revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 decreased 4% and 5%, respectively,~~2019 were $1.3 billion, an increase of $79 million (7%) compared to the same ~~periods~~period in ~~2017.~~2018. Retail revenues in the ~~third~~first quarter of ~~2018 decreased $40~~2019 increased $95 million ~~and $218 million in the first nine months,~~ compared to ~~2017. The declines reflected the effects of lower average rates ($185 millionyear-to-date),~~ ~~including the impact of the TCJA ($53 million~~2018, reflecting a 4.3% increase in ~~the third quarter and $159 million in the first nine months), and ayear-to-date~~ ~~reduction in~~ volumes ~~(0.9%),~~ largely attributable to weather and higher average rates ($39 million) due to lower net tax deferrals related to the ~~impacts of weather.~~TCJA and to business mix changes. Wholesale and other revenues decreased $20 million due to lower volumes and rates.

Pre-tax earnings ~~decreased $70~~increased $49 million ~~(18%) in the third quarter and $208 million (23%~~(28%) in the first ~~nine months~~quarter of ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017.~~2018. Utility margin (operating revenues less cost of fuel and ~~purchased energy costs)~~energy) in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 were $904~~2019 was $794 million, ~~and $2,446 million, respectively, representing decreases~~an increase of ~~$61~~$43 million (6%) ~~and $205 million (8%), respectively,~~ versus ~~the comparable periods~~2018. The increase in ~~2017. These decreases were primarily~~utility margin was due to the ~~declines~~increase in revenues, ~~which included the effects of the TCJA.~~partially offset by higher energy costs. PacifiCorp’safter-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 were ~~$270~~$180 million, ~~and $603 million, respectively, representing~~ an increase of $7$32 million ~~(3%~~(22%) ~~in the third quarter and a decrease of $15 million (2%) from the first nine months of 2017.~~compared to 2018.

MidAmerican Energy Company

MEC operates a regulated electric and natural gas utility primarily in Iowa and Illinois. Revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased $25~~2019 were $872 million, ~~(3%) and $145~~an increase of $105 million ~~(7%~~(14%)~~, respectively,~~ as compared to the same periods in 2017. Electric operating revenues in 2018 increased $20 million in the third quarter and $108 million in the first nine months versus 2017. The third quarter increase was due to higher wholesale and other revenues due to increases in volumes and average prices. The increase in the first nine months was primarily attributable to higher retail revenues of $96 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.2018. In the first ~~nine months~~quarter of ~~2018,~~2019, electric operating revenues increased $73 million and natural gas revenues increased $20 million versus 2018. The increase in electric revenues was attributable to higher retail revenues ($55 million), reflecting increases in aggregate volumes and average rates from higher recoveries through bill riders, including a favorable ratemaking outcome in 2018 related to 2017 tax reform, and increased wholesale and other revenue ($18 million). The increase in natural gas revenues was primarily due to increased ~~volumes, partially offset by a lower averageper-unit~~ ~~price~~volumes.

Item 2. Management’s Discussion and ~~the effects~~Analysis of ~~the TCJA.~~Financial Condition and Results of Operations

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

MidAmerican Energy Company (“Continued”)

Pre-tax earnings in the ~~third~~first quarter of ~~2018 were relatively unchanged and in the first nine months decreased $55~~2019 increased $44 million ~~(14%)~~ compared to the same ~~periods~~period in ~~2017.~~2018. Electric utility margin in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 was ~~$587~~$428 million, ~~and $1,419~~an increase of $67 million ~~respectively, increases of $10 million and $84 million, respectively, over the corresponding 2017 periods, which were primarily due~~compared to ~~the net increase in retail revenues in the first nine months. However, theyear-to-date~~2018. The increase in electric utility margin was ~~more than~~partially offset by increased depreciation ($19 million) and maintenance and other operating ~~expenses.~~expenses ($17 million). The~~year-to-date~~ depreciation increase reflected increases in ~~depreciation expense included $83 million from Iowa revenue sharing and $47 million from additional wind~~new wind-powered generation and other plant ~~placedin-service.~~

additions. MEC’safter-tax earnings in the third quarter and first nine months of 2018 were $479 million and $685 million, respectively, increases of $96 million (25%) and $69 million (11%), respectively, as compared to the same periods in 2017. MEC’s~~after-tax~~ ~~earnings in 2018 and 2017 were significantly~~are greater than itspre-tax earnings due to the significant production ~~income~~ tax credits ~~received relating~~related to its wind-powered generating facilities. MEC’safter-tax earnings in the first quarter of 2019 were $190 million, an increase of $87 million (84%) compared to 2018.

NV Energy

NV Energy operates regulated electric and natural gas utilities in Nevada. Revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased 1% and 2%, respectively,~~2019 were $628 million, an increase of $3 million compared to ~~the same periods in 2017. Electric~~2018, reflecting increased other income partly offset by lower operating ~~revenues increased $12 million in the third quarter and $34~~revenues. Natural gas operating revenue decreased $4 million in the first ~~nine months~~quarter of ~~2018, reflecting increased pass-through cost adjustments and higher volumes largely attributable~~2019, primarily due to ~~the impacts of weather and retail customer growth, partly~~lower rates, partially offset by ~~reductions from the impact of the TCJA and~~higher customer usage. Retail electric operating revenues were relatively unchanged as lower ~~retail~~ rates resulting from ~~a 2017 regulatory~~ rate ~~review. Natural gas operating revenue increased $8 million in~~reductions effective April 1, 2018 related to the ~~first nine months of 2018, primarily due to a higher averageper-unit~~ ~~price, partially~~TCJA were largely offset by ~~lower~~higher retail customer ~~usage.~~

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

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

~~NV Energy (Continued)~~

wholesale revenue.

Pre-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 decreased ~~$79~~$4 million ~~(23%~~(10%) ~~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.~~2018. Electric utility margin in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 was ~~$623~~$321 million, ~~and $1,366~~a decrease of $7 million ~~respectively, representing decreases of $17 million (3%) and $38 million (3%) versus the comparable periods in 2017.~~compared to 2018. The ~~decreases were~~decrease was primarily due to ~~the effects of the TCJA offset by the higher sales volumes.~~lower retail operating revenues. NV Energy’safter-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 were ~~$201~~$29 million, ~~and $311~~a decrease of $4 million ~~respectively, declines of 10% from each of the corresponding 2017 periods.~~(12%) compared to 2018.

Northern Powergrid

Revenues ~~increased $13 million and $71~~decreased $12 million in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 compared to ~~same periods in 2017,~~2018, primarily due to the ~~favorable~~unfavorable foreign currency translation effects of a ~~weaker~~stronger average U.S. Dollar in ~~the first nine months of 2018 and increased smart meter and distribution revenues.~~2019.Pre-tax earnings in the ~~third~~first quarter of ~~2018 increased~~2019 decreased $10 million ~~(21%~~(9%) ~~and $2 million (1%) in the first nine months of 2018~~ compared to ~~2017,~~2018, 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.~~lower revenues.

Natural gas pipelines

Revenues ~~increased $70 million (35%) in the third quarter and $183 million (26%)~~ in the first ~~nine months~~quarter of ~~2018~~2019 declined $3 million (1%) compared to ~~2017,~~2018. The decline was primarily due to ~~higher~~lower transportation revenues of ~~$58~~$19 million at Kern River (largely offset by lower depreciation) and ~~$102 million, respectively, from higher volumes and rates due to unique market opportunities and increased~~lower gas sales volumes related to system balancing activities at Northern Natural Gas, which were largely offset in cost of ~~sales.~~sales, partially offset by higher transportation revenues at Northern Natural Gas of $20 million.Pre-tax earnings increased ~~$44~~$19 million ~~(73%) and $73 million (24%~~(9%) in the ~~third~~first quarter ~~and first nine months~~ of ~~2018, respectively,~~2019 compared to ~~2017.~~2018. The ~~increases were~~increase was primarily due to the ~~increases~~increase in transportation revenues ~~and lower depreciation expense,~~at Northern Natural Gas, partly offset by a comparative ~~increases~~increase in ~~operations and maintenance~~operating expenses.

Other energy businesses

~~Revenues increased $33 million (5%) in the third quarter and $94 million (6%)~~Other energy revenues in the first ~~nine months~~quarter of ~~2018~~2019 declined $36 million (7%) compared to the same ~~periods~~period in ~~2017, reflecting~~2018. The decline included comparative~~year-to-date~~ ~~increases~~ decreases of 17% from renewable energy and a comparative decline of ~~10% and from~~7% at AltaLink, L.P. ~~of 4%.~~Pre-tax earnings in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased $5~~2019 decreased $27 million ~~and $73 million, respectively,~~ compared to the same ~~periods~~period in ~~2017. The increases were primarily attributable to the~~2018, which reflected increased ~~revenues~~pre-tax losses from tax equity renewable energy ~~and AltaLink, L.P., partly~~investments. Thepre-tax losses from these investments were substantially offset by ~~increased depreciation expense and higher~~income tax benefits.After-tax earnings from other ~~operating expenses.~~energy activities in the first quarter of 2019 were $104 million versus $110 million in 2018.

Real estate brokerage

Revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 increased ~~27% and 30%, respectively,~~3% as compared to the same ~~periods~~period in ~~2017, primarily~~2018 due to recent business ~~acquisitions.~~acquisitions, partially offset by an 11% decrease in closed units at existing brokerage businesses.Pre-tax ~~earnings decreased $17~~losses increased $14 million in the first ~~nine months~~quarter of ~~2018~~2019 as compared to ~~2017,~~2018, primarily due to lower net revenues at existing brokerage businesses and higher ~~operating costs and~~ interest expense, partially offset by ~~higher margin.~~lower operating expenses.

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~~three months of ~~2018~~2019 increased 4% as compared to ~~2017,~~2018, primarily due to ~~lower~~higher average borrowings.

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

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

Income taxes

BHE’s ~~consolidated~~ effective income tax ~~rate~~rates for the first ~~nine months~~quarter of 2019 and 2018 were approximately (24.1%) and ~~2017 was (12.5)% and 11.9%~~(34.3%), 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~~quarter of ~~2018 decreased~~2019 increased primarily due to benefits recognized in 2018 related to foreign earnings and the ~~reduction~~accrued repatriation tax on undistributed foreign earnings in connection with the ~~U.S. federal corporate income tax rate, as well as from lower state income tax expense,~~TCJA, partially offset by an increase in recognized production tax credits ~~lower U.S. income taxes on foreign earnings~~ and favorable impacts of rate making.

~~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								First Quarter
		Revenues				Earnings *				Revenues				Earnings *				Revenues				Earnings *
		2018		2017		2018		2017		2018		2017		2018		2017		2019		2018		2019		2018
Manufacturing		$	13,552	$	12,819	$	2,012	$	2,002	$	40,339	$	37,654	$	6,002	$	5,428	$	15,070	$	14,722	$	2,194	$	2,207
Service and retailing			19,796		19,325		672		536		58,061		56,650		2,011		1,641		19,224		19,004		732		633

		$	33,348	$	32,144					$	98,400	$	94,304					$	34,294	$	33,726

Pre-tax earnings	Pre-tax earnings						2,684		2,538						8,013		7,069						2,926		2,840
Income taxes and noncontrolling interests	Income taxes and noncontrolling interests						587		844						1,953		2,396						726		713

						$	2,097	$	1,694					$	6,060	$	4,673					$	2,200	$	2,127

Effective income tax rate	Effective income tax rate						21.3%		32.7%						23.8%		33.3%						24.5%		24.5%

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 in 2019 and ~~$614~~$218 million in ~~the third quarter and first nine months of 2018, respectively, compared to $184 million and $485 million in the third quarter and first nine months of 2017, respectively.~~2018. These expenses are included in “Other” in the summary of earnings on page 2625 and in the “Other” earnings section on page ~~42.~~39.

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								First Quarter
	Revenues				Pre-tax earnings				Revenues				Pre-tax earnings				Revenues					Pre-tax earnings
	2018		2017		2018		2017		2018		2017		2018		2017		2019		��	2018		2019		2018
Industrial products	$	7,119	$	6,657	$	1,297	$	1,247	$	21,483	$	19,802	$	4,012	$	3,508	$	7,677		$	7,619	$	1,431	$	1,467
Building products		3,389		3,124		375		407		9,563		8,983		1,042		1,057		4,562			4,080		482		447
Consumer products		3,044		3,038		340		348		9,293		8,869		948		863		2,831			3,023		281		293

	$	13,552	$	12,819	$	2,012	$	2,002	$	40,339	$	37,654	$	6,002	$	5,428	$	15,070		$	14,722	$	2,194	$	2,207

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

Manufacturing, Service and Retailing(Continued)

Manufacturing (Continued)

Aggregate revenues of our manufacturing businesses in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 were approximately ~~$13.6~~$15.1 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.Pre-tax~~ ~~earnings in the third quarter of 2018 were approximately $2.0 billion, relatively unchanged from 2017, and $6.0 billion in the first nine months of 2018,~~ an increase of ~~$574~~$348 million ~~(10.6%~~(2.4%) compared to ~~2017.~~2018.Pre-tax earnings in the first ~~nine months~~quarter of ~~2017 includedpre-tax~~ ~~losses~~2019 were approximately $2.2 billion, a decrease of ~~approximately $190~~$13 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.(0.6%) from 2018.

Industrial products

Revenues ~~from~~of the industrial products ~~businesses~~group in the first quarter of 2019 were approximately ~~$7.1~~$7.7 billion, inan increase of $58 million (0.8%) versus 2018.Pre-tax earnings of the ~~third quarter and $21.5~~group were approximately $1.4 billion in the first ~~nine months~~quarter of ~~2018, or increases~~2019, a decrease of ~~$462~~$36 million ~~(6.9%~~(2.5%) ~~and $1.7 billion (8.5%), respectively,~~ compared to ~~2017.~~ 2018.Pre-tax earnings of the group as a percentage of revenues for the first quarter were 18.6% in 2019 and 19.3% in 2018.

PCC’s revenues in the ~~third~~first quarter ~~and first nine months~~ of ~~2018 increased~~2019 were approximately ~~5.9% and 6.3%, respectively,~~$2.6 billion, an increase of 3.1% over ~~the same periods in 2017.~~2018. The ~~increases~~increase reflected ~~increased~~higher demand in aerospace markets in connection with new aircraft programs, partly offset by lower ~~demand for~~ industrial gas turbine ~~products.~~

products sales and lower sales of certain pipe products, primarily attributable to U.S tariffs.

PCC’spre-tax earnings increased 3.4% in the first quarter of 2019 compared to 2018. Results in 2019 reflected higher earnings from aerospace products, partially offset by lower earnings from industrial gas turbine business. While demand for aerospace products has been increasing, we have incurred incremental production and other costs to meet required deliveries to customers, which has negatively affected margins and earnings. However, we expect costs will decline as we increase production capacity where needed and further improve processes and reduce inefficiencies.

Lubrizol’s revenues in the first quarter of 2019 were approximately $1.7 billion, a decrease of 3.6% compared to 2018. The decline was primarily due to lower volumes and unfavorable foreign currency translation effects, partly offset by higher average selling prices. Lubrizol continued to experience increases in average material unit costs, necessitating increases in sales prices. Lubrizol’s consolidated volume in the first quarter of 2019 declined 4% from 2018, reflecting reduced volumes in the Additives product lines, partially offset by volume increases in the Advanced Materials product lines.

Lubrizol’spre-tax earnings decreased 5.2% in the first quarter of 2019 compared to 2018. Results in the first quarter of 2019 were negatively affected by the reduction in sales volume, unfavorable foreign currency translation effects, increased operating expenses and raw materials costs.

Marmon’s revenues in the first quarter of 2019 were approximately $2.0 billion, an increase of 1.2% as compared to 2018. First quarter revenues were higher in the Transportation Products (heavy-duty trucks and trailers), Retail Solutions and Crane Services sectors, partially offset by decreases across the other sectors. The comparative first quarter revenue declines were primarily in the Food & Beverage Equipment and Plumbing & Refrigeration sectors, which included the effects of a 2018 divestiture of a beverage equipment parts business, lower metals prices and volumes and unfavorable foreign currency translation effects of a stronger U.S Dollar.

Marmon’spre-tax earnings in the first quarter of 2019 decreased 3.1% compared to 2018.Pre-tax earnings as a percentage of sales fell to 14.9% in the first quarter of 2019 as compared to 15.5% in 2018.Pre-tax earnings in the first quarter of 2019 of the Rail Products & Leasing sector declined $10 million, which was attributable to lower average railcar lease rates. In addition, we experienced lower earnings from sales volume declines in the Metal Services and Plumbing & Refrigeration sectors, and depressed margins in the Retail Solutions and Industrial Products sectors, with the latter negatively affected by U.S. tariffs. These earnings declines were partially offset by increased earnings in the Transportation Products and Electrical Products sectors and from the effects of 2018 business acquisitions.

IMC’s revenues in the first quarter of 2019 were relatively unchanged from the first quarter of 2018, reflecting increased revenues from recent business acquisitions, offset by unfavorable foreign currency translation effects from a stronger U.S. Dollar. IMC’spre-tax earnings declined in the first quarter of 2019 versus 2018, reflecting increased average raw material costs, unfavorable foreign currency translation effects and changes in business mix.

CTB’s revenues increased 3.9% in the first quarter of 2019 versus 2018, primarily due to increased revenues from grain systems and processing equipment, partially offset by lower protein production revenues and the unfavorable foreign currency translation effects of a stronger U.S. Dollar. CTB’spre-tax earnings in the first quarter of 2019 increased 16.3% versus 2018, primarily due to the increase in revenues, moderation of average costs of certain raw materials, pricing efficiency and ongoing efforts to control operating expenses.

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

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

~~Industrial products (Continued)~~Continued)

Lubrizol’s revenues 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 foreign currency translation. Lubrizol experienced a significant increase in average material unit costs during 2018 and 2017, necessitating increases in sales prices. Lubrizol’s consolidated sales volumes increased 6% and 3%, respectively, in the third quarter and first nine months of 2018, as compared to 2017. IMC’s revenues increased 11.7% in the third quarter and 20.0% in the first nine months of 2018 compared to 2017, due to a combination of factors, including increased unit sales (particularly over the first half of the year), business acquisitions and foreign currency translation effects from a weaker U.S. Dollar in the first half 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 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% in the first nine months of 2018 versus 2017, due to favorable foreign currency effects and modest sales growth in protein production and grain systems during the third quarter.

~~Pre-tax~~ earnings of the industrial products group were $1.3 billion in the third quarter and $4.0 billion in the first nine months of 2018, representing increases of $50 million (4.0%) and $504 million (14.4%), respectively, compared to 2017. Our results in the first nine months of 2017 included~~pre-tax~~ ~~losses of approximately $190 million, substantially all of which were in the first quarter, related to Lubrizol’s disposition of an underperformingbolt-on~~ ~~business and related intangible asset impairments and restructuring charges. Excluding the effects of these losses,pre-tax~~ ~~earnings of the industrial products group increased 8.5% in the first nine months of 2018 as compared to 2017.~~

~~PCC’spre-tax~~ earnings decreased 2.0% in the third quarter and 6.2% in the first nine months of 2018 compared to 2017. Results in 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% 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 a combination of increased sales, increased manufacturing efficiencies, the effects of business acquisitions and ongoing expense control efforts, partly offset by the effects of rising raw material costs.

~~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~~first quarter ~~and first nine months~~ of ~~2018~~2019 were approximately ~~$3.4~~$4.6 billion, an increase of $482 million (11.8%) compared to 2018.Pre-tax earnings of the group in the first quarter of 2019 were $482 million, an increase of 7.8% versus 2018.Pre-tax earnings represented 10.6% and ~~$9.6 billion, respectively, increases~~11.0% of ~~$265~~revenues in the first quarter of 2019 and 2018, respectively.

Clayton Homes produced revenues of $1,554 million ~~(8.5%~~in the first quarter of 2019, an increase of $307 million (25%) over 2018. The comparative increase was primarily due to increased home sales of $281 million (33%) and ~~$580 million (6.5%), respectively,~~increased interest income from lending activities. The sales increase reflected changes in sales mix. Unit sales of site built homes in the first quarter of 2019 increased 157% over 2018, primarily due to business acquisitions completed during 2018, while manufactured homes sold at retail and wholesale declined 10%. The increase in income from lending activities was primarily due to increased average outstanding loan balances. As of March 31, 2019, aggregate loan balances outstanding were approximately $14.8 billion, compared to $13.8 billion as of March 31, 2018.

Pre-tax earnings of Clayton Homes for the ~~corresponding 2017 periods. For~~first quarter of 2019 were $216 million, an increase of $21 million (11%) compared to 2018. The increase was primarily attributable to home building activities, which reflected the ~~third~~increase in home sales. A significant part of Clayton Homes’ earnings derives from manufactured housing lending activities.Pre-tax earnings from lending activities in 2019 were relatively unchanged compared to 2018, as the increase in income from lending activities was substantially offset by higher interest expense, attributable to higher average outstanding debt and interest rates and to higher operating costs.

In the first quarter of 2019, our other building products businesses generated a comparative increase in revenues of 6%, primarily attributable to higher hard surface flooring products and ~~first nine months of 2018, the increases reflected higher~~roofing systems volumes, partly offset by lower carpet volumes. Additionally, average selling prices ~~product mix changes and unit increases with respect~~of these businesses were generally higher in the first quarter of 2019 as compared to ~~certain flooring and insulation products. The selling price increases in~~ 2018, which were in response to ~~significant~~rising raw material ~~cost increases~~and other production costs over the past ~~two years.~~year.

Pre-tax earnings of the other building products ~~group~~businesses in the ~~third~~first quarter ~~and~~of 2019 were $266 million, an increase of 6% over 2018. The ratio ofpre-tax earnings to revenues was relatively unchanged from the first ~~nine months~~quarter of ~~2018 were $375 million and $1,042 million, respectively, decreases of 7.9% and 1.4%, respectively, versus the corresponding 2017 periods. Raw~~2018. As previously noted, rising raw material and production ~~costs rose~~cost increases prevailed over the ~~first nine months of 2018, which together with increased facilities closure costs, more than offset most of the increases in revenues.~~past year. In particular, ~~costs~~the cost increases for steel, titanium dioxide, and certain petrochemicals were ~~substantially higher in 2018 than in 2017. The~~significant. In the first quarter of 2019, these cost 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)~~

moderated.

Consumer products

~~Revenues of the consumer~~Consumer products ~~group~~revenues were approximately $2.8 billion in the ~~third~~first quarter of ~~2018 were approximately $3.0 billion, essentially unchanged~~2019, a decrease of $192 million (6.4%) versus 2018. The first quarter revenue decline was primarily attributable to decreases at Forest River and Duracell, partly offset by higher revenues from ~~2017. Our~~ apparel and footwear ~~businesses generated a comparative third~~businesses. First quarter ~~revenue increase~~2019 revenues of ~~6%, offset by lower revenues from~~ Forest River and Duracell. These increases and decreases were primarily attributable to changes in unit sales, and to a lesser extent, selling prices and sales mix changes. Most significantly, Forest River experienced a comparative 7%declined 16% versus 2018, reflecting an 18% decline in ~~third quarter~~ unit sales. Revenues of Duracell declined 6% in the first ~~nine months~~quarter of ~~2018 were approximately $9.3 billion, an increase of $424 million (4.8%)~~2019 compared to the ~~first nine months~~prior year period due to lower sales in foreign markets and the unfavorable effects of ~~2017. Theyear-to-date~~ ~~increase included increases from Forest River (5%) and our apparel~~foreign currency translation. Apparel and footwear ~~businesses (6%)~~revenues in the first quarter of 2019 increased 6%, ~~which were~~due primarily ~~due~~ to ~~increased volume from~~increases of Brooks Sports ~~and Garan.~~

~~Pre-tax~~ earnings of the consumer products group were $340 million in the third quarter of 2018, a decrease of 2.3% from 2017. 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~~ ~~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%~~(22%) and the apparel group (5%).

Consumer productspre-tax earnings were $281 million in the first quarter of 2019, a decrease of $12 million (4.1%) compared to 2018.Pre-tax earnings as a percentage of revenues were 9.9% in 2019 and ~~footwear businesses (9%),~~9.7% in 2018. The decrease inpre-tax earnings reflected a 24% comparative decline at Forest River, 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 offrom Brooks Sports, the apparel businesses and footwear businesses in 2018 were primarily attributable to revenue increases. Duracell’s earnings increases in 2018 reflected the favorable effects of ongoing operational restructuring efforts and comparatively lower restructuring charges.Richline.

Service and retailing

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


	Third Quarter								First Nine Months								First Quarter
	Revenues				Pre-tax earnings				Revenues				Pre-tax earnings				Revenues				Pre-tax earnings
	2018		2017		2018		2017		2018		2017		2018		2017		2019		2018		2019		2018
Service	$	3,141	$	2,775	$	444	$	315	$	9,219	$	8,184	$	1,268	$	926	$	3,418	$	3,173	$	472	$	415
Retailing		3,833		3,752		184		176		11,404		10,986		572		513		3,607		3,642		149		158
McLane Company		12,822		12,798		44		45		37,438		37,480		171		202		12,199		12,189		111		60

	$	19,796	$	19,325	$	672	$	536	$	58,061	$	56,650	$	2,011	$	1,641	$	19,224	$	19,004	$	732	$	633

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

Manufacturing, Service and Retailing(Continued)

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). ~~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 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 group ~~were approximately $3.1 billion in the third quarter and $9.2 billion~~ in the first ~~nine months~~quarter of ~~2018, representing increases~~2019 were approximately $3.4 billion, an increase of ~~$366~~$245 million ~~(13.2%~~(7.7%) ~~and $1.0 billion (12.6%), respectively,~~ as compared to ~~the same periods in 2017. TTI’s~~2018. The increase was primarily attributable to TTI and NetJets. First quarter 2019 revenues ~~in the third quarter and first nine months~~ of ~~2018~~TTI increased ~~approximately 35%~~15% compared to ~~the same periods in 2017. The increases reflected an~~2018, reflecting industry-wide ~~increase in~~increased demand ~~throughout 2018~~ for electronic components in many geographic markets around the world that began in 2017, and from the effects of business acquisitions, ~~and~~partly offset by foreign currency translation ~~due to~~effects of a ~~weaker~~stronger average U.S. Dollar. ~~While TTI’s revenue increases were significant, we~~We believe ~~that~~the strong growth in electronic components demand experienced recently is beginning to moderate. ~~Otherwise, Charter Brokerage, FlightSafety and WPLG generated comparative~~NetJets revenue increased 5% in the first quarter of 2019, due to increases in the ~~first nine months~~number of ~~2018, while the revenues from most of our other service businesses declined from 2017.~~aircraft on lease and in flight hours.

Pre-tax earnings of the service group in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 were ~~$444~~$472 million, ~~and $1.3 billion, respectively, increases~~an increase of ~~$129~~$57 million ~~(41.0%~~(13.7%) ~~and $342 million (36.9%), respectively,~~ compared to 2018.Pre-tax earnings of the ~~same periods~~group were 13.8% of first quarter revenues in ~~2017.~~2019 compared to 13.1% in 2018. The increase in comparative ~~increases in~~first quarter earnings ~~in 2018 were driven by the aforementioned revenue increases at~~was primarily attributable to TTI ~~which accounted for almost 70% of these increases, as well as from earnings increases at Charter Brokerage~~ and NetJets.

Retailing

Our retailers include Berkshire Hathaway Automotive (“BHA”). BHA includes 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 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 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~~group in the ~~third~~first quarter ~~and first nine months~~ of ~~2018~~2019 were ~~$3.8~~approximately $3.6 billion, ~~and $11.4 billion, respectively, increases~~a decrease of ~~$81~~$35 million ~~(2.2%~~(1.0%) ~~and $418 million (3.8%), respectively,~~ compared to ~~the same periods in 2017.~~2018. BHA’s revenues, which represented approximately ~~64%~~65% of ~~theyear-to-date~~our aggregate retailing revenues, ~~in 2018,~~ increased ~~2.1% in the third quarter and 4.0%~~1.3% in the first ~~nine months~~quarter of ~~2018 as~~2019 compared to ~~2017.~~2018. The ~~increases derived~~increase was primarily from ~~increased~~a 7% increase inpre-owned vehicle sales and higher revenues from finance and service contract activities, partly offset by a 4% reduction in new auto sales. Revenues ~~from new vehicle sales were down 2.3% in the third quarter~~of See’s Candies and ~~relatively unchanged for the first nine months. In addition, Louis revenues increased 9.1%~~Oriental Trading declined 19% and 11%, respectively, in the first ~~nine months~~quarter of 2019 compared to 2018, ~~due~~ primarily attributable to ~~foreign currency translation~~the seasonal effects ~~and comparatively higher sales.~~of the timing of the Easter holiday. Revenues of our home furnishings businesses ~~increased 5.4%~~declined 4% in the first ~~nine months~~quarter of 2019 versus 2018 ~~compared~~attributable to ~~2017, due to higher volumes~~slowing consumer demand and unfavorable weather in certain ~~geographic markets and the effect of a new store, which opened in 2018.~~regions.

Pre-tax earnings of the retailing group in the ~~third~~first quarter of 2019 were $149 million, a decrease of $9 million (5.7%) from 2018. Our home furnishings retailers experienced a 42% decline in comparative first quarter earnings, reflecting lower revenues and generally higher operating expenses.Pre-tax earnings of See’s Candies and Oriental Trading also declined in the first ~~nine months~~quarter of 2019 compared to 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~~the lower revenues previously noted. These earnings ~~increases~~declines were partly offset by increased earnings of BHA, ~~were primarily~~due to increased earnings from finance and ~~insurance~~service contract activities, ~~while the increases at Louis were primarily attributable to the revenue increases.~~partly offset by higher floorplan interest expense.

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 Walmart,~~Wal-Mart,7-Eleven~~7-Eleven, Yum! Brands and ~~Yum! Brands.~~others. Grocery sales comprise approximatelytwo-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 the ~~third~~first quarter ~~and~~of 2019 were $12.2 billion, relatively unchanged from the first ~~nine months~~quarter of 2018, ~~were $12.8 billion and $37.4 billion, respectively, relatively unchanged compared to the same periods~~reflecting a 1.5% decrease in ~~2017. On ayear-to-date~~ ~~basis,~~ grocery sales ~~increased 0.8%~~ and ~~foodservice sales declined 2.4%, compared to 2017. The decline~~a 2.7% increase in foodservice ~~revenues was primarily due to a net loss of customers.~~

sales.Pre-tax earnings in the ~~third~~first quarter of ~~2018~~2019 were ~~$44~~$111 million, ~~essentially unchanged~~an increase of $51 million (85%) compared to 2018. The comparative improvement in first quarter earnings was primarily due to the effects of lower LIFO inventory valuation allowances from ~~2017, whilepre-tax~~ ~~earnings~~lower inventory levels and gains from increased prices related to certain inventory items. Otherwise, pretax-earnings in the first ~~nine months~~quarter of ~~2018 of $171 million declined $31 million (15.3%), compared to 2017. McLane’s grocery and foodservice businesses continue~~2019 were substantially unchanged from 2018. 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~~results and ~~certain other operating expenses, producing a decline in its~~contributing to low operating margin ~~rate compared to 2017.~~rates. We expect ~~the current~~these unfavorable operating conditions will continue ~~into~~in 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
   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)~~


	First Quarter
	2019		2018
Investment gains (losses)	$	19,552	$	(7,809)
Derivative gains (losses)		770		(206)

Gains (losses) before income taxes and noncontrolling interests		20,322		(8,015)
Income taxes and noncontrolling interests		4,216		(1,589)

Net gains (losses)	$	16,106	$	(6,426)

Effective income tax rate		20.7%		19.6%

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 ~~(“ASU~~adopted as of January 1, 2018,~~2016-01”),~~pre-tax ~~which requires~~investment gains/losses reported in earnings in the ~~recognition of~~first quarter included net unrealized gains of approximately $19.4 billion in 2019 and net unrealized losses ~~arising~~of approximately $7.8 billion in 2018 from ~~changes in market values of~~our investments in equity securities instill held the ~~Consolidated Statements~~end of ~~Earnings.~~each period. Prior to 2018, investment gains/losses ~~related to~~on equity securities were ~~generally~~ recorded aswhen the securities were sold ~~redeemed or exchanged and were~~ based on the cost of the disposed securities. While ~~ASU2016-01~~the new accounting standard does not change the affect 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 the amount of investment gains/losses included in earnings, ~~in any given period typically has little analytical or predictive value. The effects of~~including the changes in market prices for equity securities ~~now reported~~ in ~~earnings are unpredictable over~~ any ~~quarterly~~given period, has little analytical or ~~annual period.~~predictive value.

Derivative gains/losses

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

As of ~~September 30, 2018,~~March 31, 2019, the intrinsic value of our equity index put option contracts was approximately ~~$919 million~~$1.0 billion and our recorded liabilities at fair value were approximately ~~$1.9~~$1.7 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 in~~Contracts with an aggregate notional value of approximately $12.2 billion will expire over the ~~first nine months~~remainder of ~~2018 of $303 million, which were primarily due to foreign currency exchange rate changes and the effects of shorter average contract durations, partially offset by lower values on certain indexes.~~ 2019.

Derivative contracts producedpre-tax gains of ~~$703~~$770 million in the first ~~nine months~~quarter of ~~2017, which~~2019 compared topre-tax losses of $206 million in 2018. The gains in 2019 were primarily ~~attributable~~due to higher equity index values, ~~and shorter contract durations, partly offset by unfavorable~~changes in foreign currency exchange ~~rate changes.~~rates and shorter average contract durations.

Other

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


	Third Quarter				First Nine Months				First Quarter
	2018		2017		2018		2017		2019		2018
Equity method earnings	$	269	$	248	$	894	$	807	$	166	$	340
Acquisition accounting expenses		(199)		(196)		(637)		(518)		(192)		(218)
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)
Corporate interest expense, before foreign currency effects										(74)		(77)
Corporate interest expense, Euro note foreign exchange rate effects										134		(163)
Income tax expense adjustment										(377)		—
Other		180		18		283		25		214		130

Net earnings (losses) attributable to Berkshire Hathaway shareholders	$	229	$	(168)	$	520	$	(455)	$	(129)	$	12

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

Other (Continued)

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. As discussed in Note 5 to the accompanying unaudited interim Consolidated Financial Statements, financial statements of Kraft Heinz for the first quarter of 2019 were not made available to us. Accordingly, our consolidated financial statements do not include our share of Kraft Heinz’s earnings for that period.After-tax ~~other~~equity method earnings ~~(losses) also~~from Kraft Heniz were $234 million in the first quarter of 2018. We will include our share of Kraft Heinz’s first quarter 2019 earnings in our earnings in the period such information is made available to Berkshire.

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 primarily from the amortization or impairment of intangible assets recorded in connection with those business acquisitions. ~~Berkshire issued~~

The aggregate par amount of Berkshire’s outstanding Euro denominated debt ~~in 2015, 2016 and 2017 and at September 30, 2018, the aggregate par amount outstanding~~ was €6.85 ~~billion.~~billion during the first quarter of 2019 and 2018. Changes in foreign currency exchange rates ~~in 2018 and 2017~~ produced ~~sizable~~non-cash unrealized gains in the first quarter of 2019 and losses in the first quarter of 2018 from the periodic revaluation of these liabilities into U.S. Dollars.

~~Item 2. Management’s Discussion~~The income tax expense adjustment 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~~March 31, 2019 was ~~$375.6~~approximately $369 billion, ~~increases~~an increase of ~~$17.5 billion since June 30, 2018 and $27.3~~$20.2 billion since December 31, ~~2017.~~2018. Net earnings attributable to Berkshire shareholders in the first ~~nine months~~quarter of ~~2018~~2019 were ~~$29.4~~$21.7 billion, which includedafter-tax gains on our investments of approximately ~~$10.1 billion. Most of these gains derived from changes~~$15.5 billion, which was primarily due to increases during the first quarter in market prices ~~for~~of the equity securities we owned at ~~September 30, 2018.~~March 31, 2019.

At ~~September 30, 2018,~~March 31, 2019, our insurance and other businesses held cash, cash equivalents and U.S. Treasury Bills of approximately ~~$96.5~~$110.5 billion, which included ~~$74.5~~$89.9 billion in U.S. Treasury Bills. Investments in equity and fixed maturity securities (excluding our investment in Kraft Heinz) were ~~$219.5~~approximately $211.2 billion.

Berkshire parent company debt outstanding at ~~September 30, 2018~~March 31, 2019 was approximately ~~$17.0~~$16.7 billion, a decrease of ~~$1.8 billion from~~$167 million since December 31, ~~2017, reflecting maturities of $1.55 billion in term debt and a $273 millionyear-to-date~~ ~~decrease~~2018, which was attributable to foreign currency exchange rate changes applicable to the €6.85 billion par amount of Euro denominated senior notes. ~~The next maturity of~~ Berkshire parent company debt isof $750 million matures in August 2019.

Berkshire’s insurance and other subsidiary outstanding borrowings declined approximately $1 billion in the first quarter of 2019 to approximately $17.1 billion at March 31, 2019, primarily attributable to a net decrease in borrowings of Berkshire Hathaway Finance Corporation (“BHFC”), a wholly-owned financing subsidiary. 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. In the first quarter of 2019, BHFC repaid $2.7 billion of maturing senior notes and issued $2.0 billion of 4.25% senior notes due in 2049. An additional $1.25 billion of BHFC senior notes will mature in August 2019. Berkshire 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.~~quarter of 2019 were $2.0 billion and we forecast additional capital expenditures of approximately $9.0 billion over the remainder of 2019.

BNSF’s outstanding debt approximated ~~$23.3~~$23.2 billion as of ~~September 30, 2018, an increase of $758 million~~March 31, 2019, which was substantially unchanged since December 31, ~~2017. In August 2018,~~2018. BNSF ~~issued~~debentures of $750 million ~~of 4.15% senior unsecured debentures due~~will mature in ~~2048.~~2019. Outstanding borrowings of BHE and its subsidiaries were approximately ~~$39.3~~$40.1 billion at ~~September 30, 2018, a decrease~~March 31, 2019, an increase of ~~$337~~$840 million since December 31, ~~2017.~~2018. In ~~July 2018,~~the first quarter of 2019, BHE and its subsidiaries issued ~~$1.0~~debt aggregating $3.0 billion with maturity dates ranging from 2029 to 2050 and repaid approximately $1.4 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 $666 million will mature inover the ~~fourth quarter of 2018, and another $1.4 billion will mature in the first quarter~~remainder 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~~

Item 2. Management’s Discussion and ~~financial products assets were approximately $38.3 billion as~~Analysis of ~~September 30, 2018, a decrease~~Financial Condition and Results 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.Operations

~~Berkshire has a~~

Financial Condition(Continued)

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~~first quarter 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 approximately $1.7 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, and 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 as a result of 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.

~~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~~March 31, ~~2017~~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.

Our Consolidated Balance Sheet as of ~~September 30, 2018~~March 31, 2019 includes estimated liabilities for unpaid losses and loss adjustment expenses from property and casualty insurance and reinsurance contracts of approximately ~~$106~~$111 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~~March 31, 2019 includes goodwill of acquired businesses of approximately $81 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.

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

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,~~March 31, 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 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 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~~first 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	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:
February 26 through February 28:
Class A common stock		225		$312,806.74		225	*		293	$	302,622.16		293		*
Class B common stock									595,412	$	201.73		595,412		*

March 1 through March 29:
Class A common stock									965	$	304,175.15		965		*
Class B common stock		4,139,192		$207.09		4,139,192	*		5,924,418	$	200.63		5,924,418		*

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)		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 4, 2016.

12		~~Calculation of Ratio of Consolidated Earnings to Consolidated Fixed Charges~~

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

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

32.1		Section 1350 Certifications

32.2		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,~~March 31, 2019, formatted in XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, (ii) the Consolidated Statements of Earnings for each of the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ (iii) the Consolidated Statements of Comprehensive Income for each of the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ (iv) the Consolidated Statements of Changes in Shareholders’ Equity for each of the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ (v) the Consolidated Statements of Cash Flows for each of the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ and (vi) the Notes to Consolidated Financial Statements, tagged in summary and detail.

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.~~
			BERKSHIRE HATHAWAY INC.
			(Registrant)

Date: ~~November 3, 2018~~May 4, 2019			/S/ MARC D. HAMBURG

		(Signature)
			Marc D. Hamburg,
			Senior Vice President and
			Principal Financial Officer


	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
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
Adoption of new accounting pronouncements		—		(61,375)		61,304		—		—		(71)
Net earnings		—		—		29,413		—		300		29,713
Other comprehensive income, net		—		(1,123)		—		—		(29)		(1,152)
Issuance (acquisition) of common stock		54		—		—		(928)		—		(874)
Transactions with noncontrolling interests		(35)		—		—		—		(116)		(151)

Balance at September 30, 2018	$	35,721	$	(3,927)	$	346,503	$	(2,691)	$	3,813	$	379,419


	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


					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)