Mail Stop 6010
Via Facsimile and U.S. Mail
April 19, 2006
Marc D. Hamburg
Vice President and
Principal Financial Officer
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, NE 68131
Re: Berkshire Hathaway Inc.
Form 10-K for the fiscal year ended December 31, 2005
Filed March 13, 2006
File No. 1-14905
Dear Mr. Bancroft:
We have limited our review of your filing to those issues
we
have addressed in our comments. In our comments, we ask you to
provide
us with information so we may better understand your disclosure.
After reviewing this information, we may raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the year ended December 31, 2005
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Policies
Property and casualty losses, page 37
1. We believe your disclosure in Management`s Discussion and
Analysis
regarding the reserve for loss and loss adjustment expenses could
be
improved to better explain the judgments and uncertainties
surrounding
this estimate and the potential impact on your financial
statements.
Please provide to us in disclosure-type format the following for
each
line of business:
a. It is our understanding that included in the actuarially
determined
loss reserves for property and casualty insurance is a provision
for
uncertainty, which is intended to capture the uncertainty in
measuring
all the factors inherent in the loss reserving process. As such,
please describe how management determined its provision for
uncertainty and quantify the provision for uncertainty for each
period
presented.
b. Describe the methodologies used to determine your loss
reserves.
For example this might include a discussion of the various
actuarial
methods used that may vary depending on the nature of the business
underwritten.
c. It appears that management calculates point estimates in
determining the loss reserve recorded in the financial statements
and
has identified the key assumptions used in determining its loss
reserves, as such please disclose the following:
1. Discuss the historical development of your key assumptions for
latest periods presented.
2. Discuss how management has adjusted the key assumptions used in
calculating the current year reserves given the historical
development
of the key assumptions. This discussion should show the link
between
what has happened to the key assumptions in the past to what
management is currently using as its key assumptions.
3. Include quantified and narrative disclosure of the impact that
reasonably likely changes in one or more of the variables (i.e.
key
assumptions used) would have on reported results, financial
position
and liquidity. In your discussion and analysis of the impact of
reasonably likely changes in your key assumptions clearly state
the
following:
a. The quantification of the variability of the key assumption is
the
reasonably likely change.
b. Management`s basis for determining the reasonably likely range.
For example if the reasonably likely change is a percent change of
a
key assumption, disclose how management determined the percent
change
range.
c. If you do not discuss and analyze the reasonably likely change
in
the key assumptions for all your lines of business you should
state
for each of those lines of businesses either (a) the key
assumptions
are not reasonably likely to change or (b) the reasonably likely
change in the key assumptions will not have a material impact on
reported results, financial position and liquidity.
2. For the GEICO segment, please disclose the IBNR separately from
the
case reserve for each line of business.
3. In the fourth paragraph under your discussion of the GEICO loss
reserves you state average reserve amounts are established for
auto
damage and new liability claims prior to the development of an
individual case reserve and it appears that these average reserve
amounts are separate from IBNR. Please explain to us how
recording a
loss reserve prior to the development of an individual case
reserve
complies with paragraph 17 of SFAS 60.
4. We note for your General Re and BHRG segments that you set your
claim reserves for assumed reinsurance operations based upon
information received from the cedant. If this poses a potential
for a
higher degree of uncertainty in establishing the estimate of
assumed
loss reserves as compared to direct loss reserves, please consider
expanding the disclosure in the critical accounting estimates
section
of MD&A related to this uncertainty. Include in this disclosure
the
risks associated with making this estimate and the effects and
expected effects this uncertainty has or will have on management`s
judgments and assumptions in establishing the assumed loss
reserve.
Please provide to us in disclosure-type format your proposed
disclosure regarding the uncertainty and also please consider the
following items which could help describe the uncertainty:
a. The nature and extent of the information received from the
cedants
related to policies, claims, unearned premiums and loss reserves;
b. The time lag from when claims are reported to the cedant to
when
the cedant reports them to the company and whether, how, and to
what
extent this time lag effects the loss reserve estimate;
c. How management uses the information received from the cedants
in
its determination of its assumed loss reserves, whether
reinsurance
intermediaries are used to transact and service reinsurance
policies,
and how that impacts the loss reserving methodology;
d. The amount of any backlog related to the processing of assumed
reinsurance information, whether the backlog has been reserved for
in
the financial statements and, if applicable, when the backlog will
be
resolved;
e. What process management performs to determine the accuracy and
completeness of the information received from the cedants;
f. How management resolves disputes with cedants, how often
disputes
occur, and the magnitude of any current, material disputes; and
g. Whether management uses historical loss information to validate
its
existing reserves and/or as a means of noticing unusual trends in
the
information received from the cedants.
Contractual Obligations, page 36
5. Please provide in a disclosure-type format a reconciliation
between
what appears as the `total unpaid losses and loss expenses` in the
contractual obligation table and what appears as the `losses and
loss
adjustment expenses` in the consolidated balance sheets.
Consolidated Financial Statements
Note (12) Unpaid losses and loss adjustment expenses, page 60
6. Please provide to us in disclosure-type format a reconciliation
between the amounts reported as `total incurred losses` in your
SOP
94-5 rollforward and what appears as `insurance losses and loss
adjustment expenses` in your consolidated statements of earnings.
7. Please explain to us why you reduced the beginning of the year
net
loss and loss adjustment expense liability in 2005 and 2004, which
seems to be distinct from your general reserve development in
those
periods. In your explanation please include the underlying events
in
your insurance business that caused the reduction.
* * * *
Please respond to the comments within 10 business days or
tell us
when you will provide us with a response. Please furnish a letter
that keys your responses to our comments and provides requested
information. Detailed letters greatly facilitate our review.
Please
file your letter on EDGAR under the form type label CORRESP
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Exchange
Act of
1934 and that they have provided all information investors require
for
an informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide, in
your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in our review of your filing or in response to
our
comments on your filing.
You may contact Joseph Roesler, Accounting Branch Chief, at (202)
551-
3628 if you have questions regarding the comment. In this regard,
do
not hesitate to contact me, at (202) 551-3715.
Sincerely,
Jeffrey Riedler
Assistant Director
Mr. Marc D. Hamburg
Berkshire Hathaway Inc.
April 19, 2006
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