Edgar Filing: BERKSHIRE HATHAWAY INC

a6021509.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2009

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

For the transition period from to

Commission file number 001-14905

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

Delaware	47-0813844
(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 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 and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

Number of shares of common stock outstanding as of July 31, 2009:

Class A — 1,057,259

Class B —14,834,062

BERKSHIRE HATHAWAY INC.

		Page No.
Part I – Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets— June 30, 2009 and December 31, 2008	2
	Condensed Consolidated Statements of Earnings— Second Quarter and First Six Months 2009 and 2008	3
	Condensed Consolidated Statements of Cash Flows— First Six Months 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements	5-20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21-33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

Part II – Other Information

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

Signature		35

Part I Financial Information

Item 1. Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	June 30, 2009		December 31, 2008
	(Unaudited)
ASSETS
Insurance and Other:
Cash and cash equivalents	$	21,439	$	24,302
Investments:
Fixed maturity securities		32,018		27,115
Equity securities		45,794		49,073
Other		30,365		21,535
Receivables		15,778		14,925
Inventories		6,387		7,500
Property, plant and equipment		17,016		16,703
Goodwill		27,535		27,477
Other		13,306		13,257
		209,638		201,887

Utilities and Energy:
Cash and cash equivalents		875		280
Property, plant and equipment		29,987		28,454
Goodwill		5,363		5,280
Other		5,597		7,556
		41,822		41,570

Finance and Financial Products:
Cash and cash equivalents		2,197		957
Investments in fixed maturity securities		4,150		4,517
Loans and finance receivables		13,631		13,942
Goodwill		1,024		1,024
Other		3,184		3,502
		24,186		23,942
	$	275,646	$	267,399

LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses	$	58,867	$	56,620
Unearned premiums		8,831		7,861
Life and health insurance benefits		3,898		3,619
Accounts payable, accruals and other liabilities		14,676		14,987
Notes payable and other borrowings		4,379		4,349
		90,651		87,436
Utilities and Energy:
Accounts payable, accruals and other liabilities		5,800		6,175
Notes payable and other borrowings		19,708		19,145
		25,508		25,320

Finance and Financial Products:
Accounts payable, accruals and other liabilities		2,580		2,656
Derivative contract liabilities		12,299		14,612
Notes payable and other borrowings		14,697		13,388
		29,576		30,656
Income taxes, principally deferred		11,074		10,280
Total liabilities		156,809		153,692

Shareholders’ equity:
Common stock and capital in excess of par value		27,089		27,141
Accumulated other comprehensive income		7,505		3,954
Retained earnings		79,933		78,172
Berkshire Hathaway shareholders’ equity		114,527		109,267
Noncontrolling interests		4,310		4,440
Total shareholders’ equity		118,837		113,707
	$	275,646	$	267,399

See accompanying Notes to Condensed Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

	Second Quarter						First Six Months
	2009			2008			2009			2008
	(Unaudited)						(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned	$	6,485		$	6,231		$	14,668		$	12,440
Sales and service revenues		15,587			17,332			29,897			32,092
Interest, dividend and other investment income		1,454			1,261			2,772			2,445
Investment gains/losses		33			671			(429	)		786
Other-than-temporary impairments of investments		(30	)		(429	)		(3,126	)		(429	)
		23,529			25,066			43,782			47,334
Utilities and Energy:
Operating revenues		2,502			2,992			5,471			6,348
Other		153			43			133			81
		2,655			3,035			5,604			6,429
Finance and Financial Products:
Interest income		419			458			837			896
Investment gains/losses		(30	)		4			62			4
Derivative gains/losses		2,357			689			840			(952	)
Other		677			841			1,266			1,557
		3,423			1,992			3,005			1,505
		29,607			30,093			52,391			55,268
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses		4,072			3,695			10,086			7,735
Life and health insurance benefits		403			452			885			942
Insurance underwriting expenses		1,885			1,524			3,233			2,921
Cost of sales and services		13,128			14,106			25,086			26,214
Selling, general and administrative expenses		2,073			2,049			4,036			3,909
Interest expense		38			40			72			73
		21,599			21,866			43,398			41,794

Utilities and Energy:
Cost of sales and operating expenses		1,955			2,410			4,310			4,994
Interest expense		298			296			589			590
		2,253			2,706			4,899			5,584

Finance and Financial Products:
Interest expense		174			157			337			306
Other		790			893			1,509			1,660
		964			1,050			1,846			1,966
		24,816			25,622			50,143			49,344

Earnings before income taxes and equity method earnings		4,791			4,471			2,248			5,924
Income tax expense		1,520			1,443			506			1,851
Earnings from equity method investments		113			—			196			—

Net earnings		3,384			3,028			1,938			4,073
Less: Earnings attributable to noncontrolling interests		89			148			177			253
Net earnings attributable to Berkshire Hathaway	$	3,295		$	2,880		$	1,761		$	3,820
Average common shares outstanding *		1,551,724			1,548,982			1,550,610			1,548,688
Net earnings per share attributable to Berkshire Hathaway shareholders *	$	2,123		$	1,859		$	1,136		$	2,467

Average shares outstanding include average Class A common shares and average Class B common shares determined on an equivalent Class A common stock basis. Net earnings per common share attributable to Berkshire Hathaway shown above represents net earnings per equivalent Class A common share. Net earnings per Class B common share is equal to one-thirtieth (1/30) of such amount.

See accompanying Notes to Condensed Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

	First Six Months
	2009			2008
	(Unaudited)
Net cash flows from operating activities	$	7,497		$	4,991
Cash flows from investing activities:
Purchases of fixed maturity securities		(7,450	)		(26,754	)
Purchases of equity securities		(974	)		(5,513	)
Purchases of other investments		(6,068	)		—
Sales of fixed maturity securities		2,282			11,950
Redemptions and maturities of fixed maturity securities		2,716			6,807
Sales of equity securities		1,343			1,764
Purchases of loans and finance receivables		(148	)		(1,045	)
Principal collections on loans and finance receivables		356			370
Acquisitions of businesses		(221	)		(5,424	)
Purchases of property, plant and equipment		(2,633	)		(2,538	)
Other		1,156			959
Net cash flows from investing activities		(9,641	)		(19,424	)
Cash flows from financing activities:
Proceeds from borrowings of finance businesses		1,504			4,118
Proceeds from borrowings of utilities and energy businesses		992			1,047
Proceeds from other borrowings		58			84
Repayments of borrowings of finance businesses		(216	)		(2,602	)
Repayments of borrowings of utilities and energy businesses		(230	)		(1,120	)
Repayments of other borrowings		(306	)		(133	)
Change in short term borrowings		(339	)		(107	)
Acquisitions of noncontrolling interests and other		(387	)		(31	)
Net cash flows from financing activities		1,076			1,256
Effects of foreign currency exchange rate changes		40			7
Decrease in cash and cash equivalents		(1,028	)		(13,170	)
Cash and cash equivalents at beginning of year *		25,539			44,329
Cash and cash equivalents at end of first six months *	$	24,511		$	31,159
Supplemental cash flow information:
Cash paid during the period for:
Income taxes	$	1,333		$	1,921
Interest of finance and financial products businesses		299			257
Interest of utilities and energy businesses		556			592
Interest of insurance and other businesses		74			93
Non-cash investing activity:
Liabilities assumed in connection with acquisitions of businesses		—			4,309

* Cash and cash equivalents are comprised of the following:
Beginning of year—
Insurance and Other	$	24,302		$	37,703
Utilities and Energy		280			1,178
Finance and Financial Products		957			5,448
	$	25,539		$	44,329

End of first six months—
Insurance and Other	$	21,439		$	28,148
Utilities and Energy		875			1,002
Finance and Financial Products		2,197			2,009
	$	24,511		$	31,159

See accompanying Notes to Condensed Consolidated Financial Statements

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2009

Note 1. General

The accompanying unaudited Condensed 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. Reference is made to Berkshire’s most recently issued Annual Report on Form 10-K (“Annual Report”) that included information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. In particular, Berkshire’s significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report. Certain immaterial amounts in 2008 have been reclassified to conform with the current year presentation. Financial information in this Report reflects any 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, Berkshire’s 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 relatively more significant to results of interim periods than to results for a full year. Variations in the amounts and timing of investment gains/losses and other-than-temporary impairments of investments can cause significant variations in periodic net earnings. Investment gains/losses are recorded when investments are sold or in instances when investments are required to be marked-to-market. In addition, changes in the fair value of derivative assets/liabilities associated with derivative contracts that do not qualify for hedge accounting treatment can cause significant variations in periodic net earnings.

Note 2. Accounting pronouncements adopted in 2009

As of January 1, 2009, Berkshire adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires that noncontrolling interests (formerly known as “minority interests”) be displayed in the consolidated balance sheet as a separate component of shareholders’ equity and that the consolidated net earnings attributable to the noncontrolling interests be clearly indentified and presented in the consolidated statement of earnings. In addition, changes in ownership interests where the parent retains a controlling interest are to be reported as transactions affecting shareholders’ equity. Previously such transactions were reported as additional investment purchases (potentially resulting in recognition of additional other assets, including goodwill, or liabilities). During the first six months of 2009, Berkshire acquired certain noncontrolling interests in subsidiaries that resulted in a reduction to shareholders’ equity attributable to Berkshire of approximately $118 million, representing the excess of consideration paid over the previously recorded balance sheet carrying amount of the acquired noncontrolling (minority) interests.

Effective April 1, 2009, Berkshire adopted three Staff Positions (“FSP”) that were issued by the FASB in April 2009 to amend Financial Accounting Standards (“FAS”) relating to financial instruments. These FSP’s are discussed in the following three paragraphs.

FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” amends the recognition, measurement and presentation standards for other-than-temporary impairments of debt securities and requires additional disclosure requirements for both debt and equity securities. With respect to an investment in a debt security, an other-than-temporary impairment occurs if the investor (a) intends to sell before amortized cost is recovered, (b) will more likely than not be required to sell before amortized cost is recovered or (c) does not expect to ultimately recover the amortized cost basis even if it does not intend to sell. Under (a) and (b) the entire other-than-temporary loss is recognized in earnings. Under (c) a credit loss is recognized in earnings to the extent that the present value of expected cash flows is less than the amortized cost basis and any difference between fair value and the amortized cost basis net of the credit loss is reflected in other comprehensive income net of applicable income taxes. The effect of adopting this FSP was not material to Berkshire’s Consolidated Financial Statements.

FSP FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”) clarifies that adjustments to quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value in accordance with SFAS 157 “Fair Value Measurements” and provides guidance on the circumstances indicating whether markets are illiquid or disorderly. FSP FAS 157-4 prescribes no specific methodology for making adjustments to quoted prices but rather confirms that different valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction. The effect of adopting this FSP was not material to Berkshire’s Consolidated Financial Statements.

Notes To Condensed Consolidated Financial Statements (Continued)

Note 2. Accounting pronouncements adopted in 2009 (Continued)

FSP FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments” requires publicly traded companies to make fair value disclosures of financial instruments in interim financial statements whether or not such instruments are carried in the financial statements at fair value. Previously, these disclosures were required only in annual statements. See Note 10.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 sets forth general accounting and disclosure requirements for events that occur subsequent to the balance sheet date but before the company’s financial statements are issued and is effective for the periods ending after June 15, 2009. Events that occurred subsequent to June 30, 2009 have been evaluated by Berkshire’s management in accordance with SFAS 165 through the time of filing this report on August 7, 2009.

Note 3. Accounting pronouncements to be adopted

In June 2009, the FASB issued two Financial Accounting Standards relating to securitizations and special-purpose entities. SFAS No. 166, “Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140” (“SFAS 166”) eliminates the concept of a qualifying special-purpose entity (“QSPE”) and the exemption for QSPE’s from the consolidation guidance prescribed in FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities (revised December 2003)—an interpretation of ARB No. 51.” SFAS 166 also modifies the derecognition criteria for transfers of financial assets. SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”) includes new criteria for determining the primary beneficiary of variable interest entities and increases the frequency in which reassessments must be made to determine the primary beneficiary of such variable interest entities. SFAS 166 and SFAS 167 also require additional disclosures and are effective for financial statements issued for fiscal periods beginning after November 15, 2009. Berkshire is currently evaluating the impact that these accounting standards will have on its consolidated financial statements.

In June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162” (“SFAS 168”). SFAS 168 supersedes existing Financial Accounting Standards and introduces FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative GAAP. The Codification does not change existing GAAP and accordingly, SFAS 168 will not have a material impact on Berkshire’s consolidated financial statements. SFAS 168 is effective for financial statements issued for interim periods ending after September 15, 2009.

Note 4. Business acquisitions

Berkshire’s long-held acquisition strategy is to purchase businesses with consistent earnings, good returns on equity, able and honest management and at sensible prices. On March 18, 2008, Berkshire acquired 60% of Marmon Holdings, Inc. (“Marmon”), a private company owned by trusts for the benefit of members of the Pritzker Family of Chicago, for $4.5 billion. In the second quarter of 2008, subsequent to this acquisition, Berkshire acquired additional shares of Marmon and currently owns 63.6%. Under the terms of the original purchase agreement, Berkshire will acquire the remaining interests in Marmon between 2011 and 2014 for consideration based on the future earnings of Marmon. Berkshire also acquired several other relatively small businesses during 2008. Consideration paid for all businesses acquired in 2008 (including Marmon) was approximately $6.1 billion.

Marmon consists of approximately 130 manufacturing and service businesses that operate independently within eleven diverse business sectors. These sectors are: Engineered Wire & Cable, serving energy related markets, residential and non-residential construction and other industries; Building Wire, producing copper electrical wiring for residential, commercial and industrial buildings; Transportation Services & Engineered Products, including railroad tank cars and intermodal tank containers; Highway Technologies, primarily serving the heavy-duty highway transportation industry; Distribution Services for specialty pipe and steel tubing; Flow Products, producing a variety of metal products and materials for the plumbing, HVAC/R, construction and industrial markets; Industrial Products, including metal fasteners, safety products and metal fabrication; Construction Services, providing the leasing and operation of mobile cranes primarily to the energy, mining and petrochemical markets; Water Treatment equipment for residential, commercial and industrial applications; Retail Store Fixtures, providing store fixtures and accessories for major retailers worldwide; and Food Service Equipment, providing food preparation equipment and shopping carts for restaurants and retailers worldwide. Marmon operates more than 250 manufacturing, distribution and service facilities, primarily in North America, Europe and China.

Notes To Condensed Consolidated Financial Statements (Continued)

Note 4. Business acquisitions (Continued)

The results of operations for businesses acquired in 2008 are included in Berkshire’s consolidated results from the effective date of each acquisition. The following table sets forth certain unaudited pro forma consolidated earnings data for the first six months of 2008 as if each acquisition occurring during 2008 was consummated on the same terms at the beginning of the year. Pro forma data for 2009 was not materially different from the amounts reported. Amounts are in millions, except earnings per share.

	2008
Total revenues	$	56,678
Net earnings attributable to Berkshire Hathaway		3,867
Earnings per equivalent Class A common share attributable to Berkshire Hathaway shareholders		2,497

Note 5. Investments in fixed maturity securities

Investments in securities with fixed maturities as of June 30, 2009 and December 31, 2008 are shown below (in millions).

	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses *			Value
June 30, 2009
U.S. Treasury, U.S. government corporations and agencies	$	2,425	$	61	$	(2	)	$	2,484
States, municipalities and political subdivisions		4,052		266		(2	)		4,316
Foreign governments		11,077		351		(42	)		11,386
Corporate bonds and redeemable preferred stocks		13,227		1,238		(1,070	)		13,395
Mortgage-backed securities		4,318		326		(57	)		4,587
	$	35,099	$	2,242	$	(1,173	)	$	36,168

Insurance and other		31,261		1,859		(1,102	)		32,018
Finance and financial products		3,838		383		(71	)		4,150
	$	35,099	$	2,242	$	(1,173	)	$	36,168

	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses *			Value
December 31, 2008
U.S. Treasury, U.S. government corporations and agencies	$	2,107	$	123	$	(2	)	$	2,228
States, municipalities and political subdivisions		4,504		242		(5	)		4,741
Foreign governments		9,106		343		(59	)		9,390
Corporate bonds and redeemable preferred stocks		10,798		394		(1,568	)		9,624
Mortgage-backed securities		5,400		338		(89	)		5,649
	$	31,915	$	1,440	$	(1,723	)	$	31,632

Insurance and other		27,618		1,151		(1,654	)		27,115
Finance and financial products		4,297		289		(69	)		4,517
	$	31,915	$	1,440	$	(1,723	)	$	31,632

*	Includes unrealized losses of $199 million at June 30, 2009 and $176 million at December 31, 2008 related to securities that have been in an unrealized loss position for 12 months or more.

The amortized cost and estimated fair value of securities with fixed maturities at June 30, 2009 are summarized below by contractual maturity dates. Actual maturities will differ from contractual maturities because issuers of certain of the securities retain early call or prepayment rights. Amounts are in millions.

			Due after one		Due after five
	Due in one		year through		years through		Due after		Mortgage-backed
	year or less		five years		ten years		ten years		securities		Total
Amortized cost	$	4,805	$	15,459	$	6,566	$	3,951	$	4,318	$	35,099
Fair value		4,944		16,028		6,106		4,503		4,587		36,168

Notes To Condensed Consolidated Financial Statements (Continued)

Note 6. Investments in equity securities

Investments in equity securities are summarized below (in millions).

			Unrealized		Unrealized			Fair
	Cost Basis		Gains		Losses			Value
June 30, 2009
American Express Company	$	1,287	$	2,236	$	—		$	3,523
The Coca-Cola Company		1,299		8,299		—			9,598
ConocoPhillips		2,525		187		—			2,712
Johnson & Johnson		2,322		6		(152	)		2,176
Kraft Foods Inc.		4,330		—		(1,029	)		3,301
The Procter & Gamble Company		5,484		—		(786	)		4,698
Wells Fargo & Company		6,917		2,368		(1,600	)		7,685
Other		12,098		2,433		(2,430	)		12,101
	$	36,262	$	15,529	$	(5,997	)	$	45,794

			Unrealized		Unrealized			Fair
	Cost Basis		Gains		Losses			Value
December 31, 2008
American Express Company	$	1,287	$	1,525	$	—		$	2,812
The Coca-Cola Company		1,299		7,755		—			9,054
ConocoPhillips		6,820		—		(2,422	)		4,398
Johnson & Johnson		1,847		24		(76	)		1,795
Kraft Foods Inc.		4,330		—		(832	)		3,498
The Procter & Gamble Company		5,484		200		—			5,684
Wells Fargo & Company		6,703		2,850		(580	)		8,973
Other		12,370		2,428		(1,939	)		12,859
	$	40,140	$	14,782	$	(5,849	)	$	49,073

Berkshire uses no bright-line test in determining whether impairments are temporary or other-than-temporary. Berkshire considers several factors in determining other-than-temporary impairment losses including the current and expected long-term business prospects of the issuer, the length of time and relative magnitude of the price decline and its ability and intent to hold the investment until the price recovers.

Unrealized losses at June 30, 2009 included $1,034 million related to securities that have been in an unrealized loss position for 12 months or more. Approximately 90% of the gross unrealized losses at June 30, 2009 were concentrated in six issuers. Unrealized losses generally ranged from 15% to 50% of cost. In management’s judgment, the future earnings potential and underlying business economics of these companies are favorable and Berkshire possesses the ability and intent to hold these securities until their prices recover. Changing market conditions and other facts and circumstances may change the business prospects of these issuers as well as Berkshire’s ability and intent to hold these securities until the prices recover. Accordingly, other-than-temporary impairment charges may be recorded in future periods with respect to one or more of these securities.

Note 7. Other Investments

A summary of other investments as of June 30, 2009 and December 31, 2008 follows (in millions).

	June 30, 2009
	Cost		Unrealized Gains		Fair Value		Carrying Value
Fixed maturity and equity	$	20,089	$	3,036	$	23,125	$	22,907
Equity method		6,350		561		6,911		7,458
	$	26,439	$	3,597	$	30,036	$	30,365


	December 31, 2008
	Cost		Unrealized Gains		Fair Value		Carrying Value
Fixed maturity and equity	$	14,452	$	36	$	14,488	$	14,675
Equity method		5,919		352		6,271		6,860
	$	20,371	$	388	$	20,759	$	21,535

Notes To Condensed Consolidated Financial Statements (Continued)

Note 7. Other Investments (Continued)

Fixed maturity and equity investments in the preceding table include perpetual preferred stock and common stock warrants of The Goldman Sachs Group, Inc. (“GS”) and The General Electric Company (“GE”) and preferred stock and subordinated notes of Wm. Wrigley Jr. Company (“Wrigley”). These securities were acquired in the fourth quarter of 2008.

Berkshire owns 50,000 shares of 10% Cumulative Perpetual Preferred Stock of GS (“GS Preferred”) and Warrants to purchase 43,478,260 shares of common stock of GS (“GS Warrants”) which were acquired for a combined cost of $5 billion. The GS Preferred may be redeemed at any time by GS at a price of $110,000 per share ($5.5 billion in aggregate). The GS Warrants expire in 2013 and can be exercised for an additional aggregate cost of $5 billion ($115/share). Berkshire also owns 30,000 shares of 10% Cumulative Perpetual Preferred Stock of GE (“GE Preferred”) and Warrants to purchase 134,831,460 shares of common stock of GE (“GE Warrants”) which were acquired for a combined cost of $3 billion. The GE Preferred may be redeemed beginning in October 2011 by GE at a price of $110,000 per share ($3.3 billion in aggregate). The GE Warrants expire in 2013 and can be exercised for an additional aggregate cost of $3 billion ($22.25/share).

Berkshire owns $4.4 billion par amount of 11.45% subordinated notes due 2018 of Wrigley (“Wrigley Notes”) and $2.1 billion of 5% preferred stock of Wrigley (“Wrigley Preferred”). The Wrigley Notes and Wrigley Preferred were acquired in connection with Mars, Incorporated’s acquisition of Wrigley.

On March 23, 2009, Berkshire acquired a 12% convertible perpetual capital instrument issued by Swiss Re at a cost of 3 billion Swiss Francs (“CHF”), which is also the face amount of the instrument. The instrument has no maturity or mandatory redemption date but can be redeemed under certain conditions at the option of Swiss Re at 140% of the face amount until March 23, 2011 and thereafter at 120% of the face amount. The instrument possesses no voting rights and is subordinated to senior securities of Swiss Re as defined in the agreement. Beginning March 23, 2012, the instrument can be converted into 120,000,000 common shares of Swiss Re (a rate of 25 CHF per share of Swiss Re common stock).

On April 1, 2009, Berkshire acquired 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of The Dow Chemical Company (“Dow Preferred”) for a cost of $3 billion. The Dow Preferred was issued in connection with Dow’s acquisition of the Rohm and Haas Company. Under certain conditions, each share of the Dow Preferred is convertible into 24.201 shares of Dow common stock. The Dow Preferred is entitled to dividends at a rate of 8.5% per annum.

Equity method investments include Burlington Northern Santa Fe Corporation (“BNSF”) and Moody’s Corporation (“Moody’s”). During the fourth quarter of 2008, Berkshire’s investment in each of these companies exceeded 20%. Accordingly, Berkshire adopted the equity method of accounting with respect to these investments as of December 31, 2008. As of June 30, 2009, Berkshire owned 22.6% of BNSF’s and 20.3% of Moody’s outstanding common stock. Prior to December 31, 2008, the BNSF and Moody’s investments were accounted for as available-for-sale equity securities recorded in the financial statements at fair value. The cumulative effect of adopting the equity method with respect to the investments in BNSF and Moody’s was recorded in the financial statements as of December 31, 2008. Prior years’ financial statements were not restated due to immateriality.

In July 2009, Berkshire’s ownership of Moody’s common stock declined to about 17% as a result of dispositions by Berkshire. As a result, Berkshire will discontinue the use of the equity method with respect to its investment in Moody’s beginning in the third quarter of 2009. Thereafter, Berkshire will carry its investment in Moody’s common stock at fair value. This change is not expected to have a material impact on Berkshire’s Consolidated Financial Statements.

Note 8. Investment Gains/Losses

Investment gains/losses are summarized below (in millions).

	Second Quarter						First Six Months
	2009			2008			2009			2008
Fixed maturity securities:
Gross gains from sales and other disposals	$	22		$	82		$	172		$	106
Gross losses from sales and other disposals		—			(1	)		(9	)		(1	)
Equity securities:
Gross gains from sales		61			600			95			677
Gross losses from sales		(51	)		(4	)		(559	)		(4	)
Other		(29	)		(2	)		(66	)		12
	$	3		$	675		$	(367	)	$	790

Notes To Condensed Consolidated Financial Statements (Continued)

Note 8. Investment Gains/Losses (Continued)

Net investment gains/losses are reflected in the Condensed Consolidated Statements of Earnings as follows (in millions).

	Second Quarter					First Six Months
		2009			2008		2009			2008
Insurance and other	$	33		$	671	$	(429	)	$	786
Finance and financial products		(30	)		4		62			4
	$	3		$	675	$	(367	)	$	790

Note 9. Derivative contracts of finance and financial products businesses

Derivative contracts of Berkshire’s finance and financial products businesses, with limited exceptions, are not designated as hedges for financial reporting purposes. These contracts were initially entered into with the expectation that the premiums received would exceed the amounts ultimately paid to counterparties. Changes in the fair values of such contracts are reported in earnings as derivative gains/losses. A summary of derivative contracts outstanding as of June 30, 2009 and December 31, 2008 follows (in millions).

	June 30, 2009							December 31, 2008
	Assets (3)		Liabilities		Notional Value			Assets (3)		Liabilities		Notional Value
Equity index put options	$	—	$	8,233	$	37,480	(1)	$	—	$	10,022	$	37,134	(1)
Credit default obligations: