FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

     (Mark One)

For the quarterly period ended June 30, 2004

OR

        For the transition period from                   to                   

        Commission file number 001-14905

BERKSHIRE HATHAWAY INC.

1440 Kiewit Plaza, Omaha, Nebraska 68131

(402) 346-1400

     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 o

		Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO o
		Number of shares of common stock outstanding as of July 31, 2004:

Class A — 1,272,286 Class B — 7,968,175

FORM 10-Q
BERKSHIRE HATHAWAY INC.

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FORM 10-Q

Part I Financial Information

See accompanying Notes to Interim Consolidated Financial Statements

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FORM 10-Q

BERKSHIRE HATHAWAY INC.
and Subsidiaries

*

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 share 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 Interim Consolidated Financial Statements

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FORM 10-Q

BERKSHIRE HATHAWAY INC.
and Subsidiaries

See accompanying Notes to Interim Consolidated Financial Statements

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FORM 10-Q

BERKSHIRE HATHAWAY INC.
and Subsidiaries

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 a controlling financial interest as of the financial statement date. Beginning as of January 1, 2004, Berkshire’s Consolidated Financial Statements also include the accounts of Value Capital, L.P. (“Value Capital”) as a result of the adoption of FASB’s revised Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”). See Note 1(r) to the December 31, 2003 audited Consolidated Financial Statements for additional information concerning this new accounting pronouncement and Note 11 below for additional information concerning Value Capital.

     Reference is made to Berkshire’s most recently issued 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 audited Consolidated Financial Statements included in that Report. Certain amounts in 2003 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 generally accepted accounting principles (“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. Investment gains/losses are recorded when investments are sold, other-than-temporarily impaired or in certain instances, as required by GAAP, when investments are marked-to-market. Variations in the amounts and timing of investment gains/losses can cause significant variations in periodic net earnings.

Note 2. Significant business acquisitions

     Berkshire’s long-held acquisition strategy is to purchase businesses with consistent earning power, good returns on equity, able and honest management and at sensible prices. Businesses with these characteristics typically have market values that exceed net asset value, thus producing goodwill for accounting purposes.

     On May 23, 2003, Berkshire acquired McLane Company, Inc. (“McLane”), from Wal-Mart Stores, Inc. for cash consideration of approximately $1.5 billion. McLane is one of the nation’s largest wholesale distributors of groceries and nonfood items to convenience stores, wholesale clubs, mass merchandisers, quick service restaurants, theaters and others.

     On August 7, 2003, Berkshire acquired all the outstanding common stock of Clayton Homes, Inc. (“Clayton”) for cash consideration of approximately $1.7 billion in the aggregate. Clayton is a vertically integrated manufactured housing company that manufactures homes, which are sold through a system of company owned stores and independent retailers. Clayton also operates manufactured housing communities and provides mortgage loans and services and insurance protection to customers.

     The results of operations for each of the entities acquired are included in Berkshire’s consolidated results of operations from the effective date of each acquisition. The following table sets forth certain unaudited consolidated earnings data for the first half of 2003, as if each of the acquisitions discussed above were consummated on the same terms at the beginning of the year. Dollars are in millions, except per share amount.

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FORM 10-Q

Notes To Interim Consolidated Financial Statements (Continued)

     On March 14, 2000, Berkshire acquired 900,942 shares of common stock and 34,563,395 shares of convertible preferred stock of MidAmerican Energy Holdings Company (“MidAmerican”) for $35.05 per share, or approximately $1.24 billion in the aggregate. During March 2002, Berkshire acquired 6,700,000 additional shares of the convertible preferred stock for $402 million. Such investments currently give Berkshire about a 9.9% voting interest and an 83.7% economic interest in the equity of MidAmerican (80.5% on a diluted basis). Since March 2000, Berkshire and certain of its subsidiaries also acquired approximately $1,728 million of 11% non-transferable trust preferred securities, of which $150 million were redeemed in August 2003. Mr. Walter Scott, Jr., a member of Berkshire’s Board of Directors, controls approximately 88% of the voting interest in MidAmerican. The convertible preferred stock is, in substance, a substantially identical subordinate interest to a share of common stock and economically equivalent to common stock. Therefore, Berkshire accounts for its investments in MidAmerican pursuant to the equity method. Reference is made to the Notes to the Consolidated Financial Statements included in Berkshire’s Annual Report on Form 10-K for the year ending December 31, 2003 for additional information concerning terms of the convertible preferred stock. Berkshire’s equity in earnings from MidAmerican includes Berkshire’s proportionate share (83.7% in 2004) of MidAmerican’s undistributed net earnings reduced by deferred taxes on such undistributed earnings in accordance with SFAS 109, reflecting Berkshire’s expectation that such deferred taxes will be payable as a consequence of dividends from MidAmerican. However, no dividends from MidAmerican are likely for some time. It is possible that when, and if, a dividend is paid MidAmerican will then be eligible for inclusion in Berkshire’s consolidated tax return and a tax on the dividend would not be due. Berkshire’s share of interest expense (after-tax) on its investments in MidAmerican’s trust preferred (debt) securities has been eliminated.

     MidAmerican is a U.S. based global energy company. Through its subsidiaries it owns and operates a combined electric and natural gas utility company in the United States, two natural gas pipeline companies in the United States, two electricity distribution companies in the United Kingdom and a diversified portfolio of domestic and international electric power projects. MidAmerican also operates the second largest residential real estate brokerage firm in the United States.

     Condensed consolidated balance sheets of MidAmerican are as follows. Amounts are in millions.

     Condensed consolidated statements of earnings of MidAmerican for the second quarter and first half of 2004 and 2003 are as follows. Amounts are in millions.

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FORM 10-Q

Notes To Interim Consolidated Financial Statements (Continued)

Note 3. Investments in MidAmerican Energy Holdings Company (Continued)

     MidAmerican, through its subsidiaries, owns the rights to proprietary processes for the extraction of zinc, manganese, silica, and other elements in the geothermal brine and fluids utilized in energy production at certain geothermal energy generation facilities. Mineral extraction facilities have been installed near the energy generation sites (“the Project”). MidAmerican’s management has been assessing the long-term economic viability of the Project in light of current cash flow and operating losses and continuing efforts to increase production. Based upon preliminary estimates of projected cash flows, which includes increased future mineral production rates, MidAmerican’s management believes that the capitalized cost of the Project (approximately $400 million, net of deferred income taxes) is recoverable. MidAmerican’s management will continue to evaluate these estimates during the third quarter of 2004, including the expected impact of planned improvements to the mineral extraction processes. MidAmerican’s management has also begun exploring other operating alternatives, such as establishing strategic partnerships and consideration of taking the facilities out of operation if it is concluded that the Project cannot be operated economically on a long-term basis. While no decisions have been reached, MidAmerican’s management expects to decide on the future of the Project by the end of 2004. If it decides to curtail or cease operations or sell the Project, a write-off of some or all of the capitalized costs of the Project may be required.

Note 4. Investments in fixed maturity securities

     Data with respect to investments in fixed maturity securities, which are classified as available-for-sale, are shown in the tabulation below (in millions).

Note 5. Investments in equity securities

     Data with respect to investments in equity securities are shown in the tabulation below (in millions).

Note 6. Loans and Receivables

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

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FORM 10-Q

Notes To Interim Consolidated Financial Statements (Continued)

Note 6. Loans and Receivables (Continued)

     Loans and finance receivables of finance and financial products businesses are comprised of the following (in millions).

     Loans and finance receivables are not held for sale and are stated at amortized cost less allowances for uncollectible accounts. Berkshire has the ability and intent to hold such loans and receivables to maturity. Amortized cost represents acquisition cost, plus or minus origination and commitment costs paid or fees received which together with acquisition premiums or discounts are required to be deferred and amortized as yield adjustments over the life of the loan. Allowances for uncollectible accounts were immaterial as of June 30, 2004 and December 31, 2003.

     Note 7. Deferred income tax liabilities

     The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).

Note 8. Notes payable and other borrowings

     Notes payable and other borrowings of Berkshire and its subsidiaries are summarized below. Amounts are in millions.

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FORM 10-Q

Notes To Interim Consolidated Financial Statements (Continued)

Note 9. Common stock

     The following table summarizes Berkshire’s common stock activity during the first half of 2004.

     Each share of Class A common stock is convertible, at the option of the holder, into thirty shares of Class B common stock. Class B common stock is not convertible into Class A common stock. Class B common stock has economic rights equal to one-thirtieth (1/30) of the economic rights of Class A common stock. Accordingly, on an equivalent Class A common stock basis, there are 1,537,813 shares outstanding at June 30, 2004 and 1,536,630 shares outstanding at December 31, 2003. Each Class A common share is entitled to one vote per share. Each Class B common share possesses the voting rights of one-two-hundredth (1/200) of the voting rights of a Class A share. Class A and Class B common shares vote together as a single class.

Note 10. Comprehensive income

     Berkshire’s comprehensive income for the second quarter and first half of 2004 and 2003 is shown in the table below (in millions).

Note 11. Value Capital

     Value Capital L.P., (“Value Capital”), a limited partnership, commenced operations in 1998. A wholly owned Berkshire subsidiary is a limited partner in Value Capital. The partnership’s objective is to achieve income and capital growth from investments and arbitrage in fixed income investments. Profits and losses (after fees to the general partner) are allocated to the partners based upon each partner’s investment. As of June 30, 2004, Berkshire’s share of such profit and loss was approximately 90%, although as a limited partner Berkshire’s exposure to loss is limited to the carrying value of its investment. Through December 31, 2003, Berkshire accounted for its limited partnership investment pursuant to the equity method. Beginning in 2004, Berkshire consolidates Value Capital in connection with the adoption of revised FIN 46. FIN 46 encourages but does not require restatement of previously issued financial statements. Berkshire has elected to not restate its prior year financial statements. Value Capital is being consolidated solely to comply with the requirements of FIN 46. Berkshire does not guarantee any of Value Capital’s liabilities and has no control over decisions made by the management of Value Capital or those of its general partner.

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FORM 10-Q

Notes To Interim Consolidated Financial Statements (Continued)

Note 12. Business segment data

     A disaggregation of Berkshire’s consolidated data for the second quarter and first half of each of the two most recent years is as follows. Amounts are in millions.

*

Amounts of interest expense represent interest on notes payable and other borrowings exclusive of that of finance businesses and interest allocated to certain businesses.

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FORM 10-Q

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

Results of Operations

     Net earnings for the second quarter and first half of 2004 and 2003 are disaggregated in the table that follows. Amounts are after deducting minority interests and income taxes. Dollar amounts are in millions.

     Insurance – Underwriting

     A summary follows of underwriting results from Berkshire’s insurance businesses for the second quarter and first half of 2004 and 2003. Dollar amounts are in millions.

     Berkshire engages in both primary insurance and reinsurance of property and casualty risks. Through General Re, Berkshire also reinsures life and health risks. In primary insurance activities, Berkshire subsidiaries assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance activities, Berkshire subsidiaries assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in their own insuring activities. Berkshire’s principal insurance businesses are: (1) GEICO, (2) General Re, (3) Berkshire Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway Primary Group. Berkshire’s management views insurance businesses as possessing two distinct operations—underwriting and investing. Accordingly, Berkshire evaluates the performance of underwriting operations without allocation of investment income.

     GEICO

     GEICO Corporation through its affiliates (“GEICO”) provides private passenger auto insurance to customers in 48 states and the District of Columbia. GEICO policies are marketed mainly through direct response methods, in which insureds apply directly to the company for insurance coverage over the telephone, through the mail or via the Internet. This is a significant element in GEICO’s strategy to be a low cost insurer. In addition, GEICO strives to provide excellent service to customers with the goal of establishing long-term customer relationships.

     GEICO’s pre-tax underwriting results for the second quarter and first half of 2004 and 2003 are summarized in the table below. Dollar amounts are in millions.

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FORM 10-Q

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

     GEICO (Continued)

     Premiums earned in the second quarter of 2004 were $2,180 million, an increase of 14.6% over the second quarter of 2003. For the six months ended June 30, 2004 earned premiums were $4,288 million, an increase of 15.2% over 2003. The growth in premiums earned for voluntary auto was 15.0% and reflects a 10.4% increase in policies-in-force during the past year and average premium rate increases of less than two percent.

     Over the twelve months ending June 30, 2004, policies-in-force increased 7.3% in the preferred risk auto line and increased 21.3% in the standard and nonstandard auto lines. Voluntary auto new business sales in the first six months of 2004 increased 10.9% as compared to 2003. Voluntary auto policies-in-force at June 30, 2004 were 275 thousand higher than at December 31, 2003. Management attributes the growth of in-force policies to competitive rates and dedication to customer service. Several competitors have recently initiated rate decreases, so the rate of growth of policies-in-force may slow over the remainder of 2004.

     Losses and loss expenses increased 5.7% to $1,588 million in the second quarter of 2004 and 7.6% to $3,092 million for the first six months of 2004. The loss ratio was 72.1% in the first six months of 2004 compared to 77.2% in 2003. Overall the number of claims to loss exposure units (“claim frequency”) declined in 2004 as compared to 2003. Claims frequencies for physical damage coverages have decreased in the five to eight percent range from 2003, which included more weather related losses, while frequencies for bodily injury coverages have decreased in the two to four percent range. Bodily injury severity (or the estimated cost per claim) has increased in the six to eight percent range over 2003 while physical damage severity has increased in the three to five percent range. Incurred losses from catastrophe events for the first six months of 2004 totaled approximately $14 million compared to $31 million last year.

     Policy acquisition expenses, which represent approximately 55% of total underwriting expenses, increased 14.5% in the first six months of 2004 to $405 million, reflecting a 44% increase in advertising costs. Other underwriting expenses for the first six months of 2004 of $339 million increased about 5% over 2003, primarily due to higher salary and other employee benefit expenses, including profit sharing accruals.

     General Re

     General Re conducts a reinsurance business, which offers reinsurance coverage of essentially all types of property, casualty, life and health risks in the United States and worldwide. General Re’s principal reinsurance operations are internally comprised of: (1) North American property/casualty, (2) international property/casualty, which principally consists of business written through 89%-owned Cologne Re, (3) London-market property/casualty through the Faraday operations, and (4) global life/health.

     General Re’s pre-tax underwriting results for the second quarter and first half of 2004 and 2003 are summarized below. Dollars are in millions.

     General Re strives to generate long-term pre-tax underwriting gains in essentially all of its product lines. Underwriting performance is not evaluated based upon market share and underwriters are instructed to reject inadequately priced risks. Management expects written and earned premiums to decline over the remainder of 2004 when compared with 2003 premium volume, mostly due to maintaining underwriting discipline in an increasingly price-competitive property/casualty market.

North American property/casualty

     General Re’s North American property/casualty operations underwrite predominantly excess reinsurance across essentially all lines of property and casualty business. Excess reinsurance provides indemnification of losses above a stated retention on either an individual claim basis or in the aggregate across all claims in a portfolio. Reinsurance contracts are written on both a treaty (group of risks) and facultative (individual risk) basis.

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FORM 10-Q

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

     General Re (Continued)

North American property/casualty (Continued)

     Premiums written in the first half totaled $1,584 million in 2004 and $1,610 million in 2003. Premiums written and earned in the second quarter and first six months of 2004 included $241 million from a retroactive reinsurance contract. No retroactive contracts were written in the first half of 2003. Excluding retroactive reinsurance, premiums earned in the second quarter and first half of 2004 declined $136 million (15.4%) and $261 million (14.7%), respectively, compared with 2003 periods. The decline in first half premiums earned reflects reductions from cancellations/non-renewals over new contracts (estimated at $391 million), partially offset by renewal rate increases and changes in renewal terms and conditions across all lines of business (estimated at $130 million).

     The North American property/casualty business produced pre-tax underwriting gains of $26 million and $44 million in the second quarter and first half of 2004, compared with gains of $18 million and $29 million in the comparable 2003 periods. Results for the first half of 2004 consisted of $114 million in current accident year gains, partially offset by $70 million in prior accident years’ losses. Results for the first half of 2003 included $69 million in current accident year gains, partially offset by $40 million in prior accident years’ losses. Results for both 2004 and 2003 periods reflect the favorable effects of re-pricing efforts and improved contract terms and conditions implemented over the past three years. Additionally, underwriting results for both 2004 and 2003 benefited from the absence of major catastrophes and other large individual property losses ($20 million or greater), a condition that is unusual and should not be expected to occur consistently in the future.

     First half underwriting results included losses related to prior years of $70 million in 2004 and $40 million in 2003. Included in these amounts are $54 million in 2004 and $49 million in 2003 related to discount accretion on workers’ compensation reserves and deferred charge amortization on retroactive reinsurance contracts. Additionally, during the first half of 2004 losses incurred reflected increases for prior years’ casualty losses of $51 million (primarily in the workers’ compensation, errors and omissions and directors and officers’ liability lines). Offsetting these losses were decreases of $35 million in prior years’ property losses. The revised estimates in 2004 on prior years’ casualty loss reserves reflect escalating medical utilization and inflation that adversely affect workers’ compensation losses, and an increased frequency in corporate bankruptcies, scandals and accounting restatements which increased losses under errors and omissions and directors and officers’ coverages.

     General Re continuously estimates its liabilities and related reinsurance recoverables for environmental and asbestos claims and claim expenses. Most liabilities for such claims arise from exposures in the United States. Environmental and asbestos exposures do not lend themselves to traditional methods of loss development determination and therefore reserves related to these exposures may be considered less reliable than reserves for standard lines of business (e.g., automobile). The estimate for environmental and asbestos losses is composed of four parts: known claims, development on known claims, incurred but not reported (“IBNR”) losses and direct excess coverage litigation expenses. At June 30, 2004, environmental and asbestos loss reserves for North America were approximately $1,192 million ($865 million net of reinsurance). As of December 31, 2003 such amounts totaled $1,240 million ($890 million net of reinsurance). The changing legal environment concerning asbestos and environmental claims has made quantification of potential exposures very difficult. Future changes to the legal environment may precipitate significant changes in reserves.

     Due to the long-tail nature of casualty losses, a higher level of uncertainty is involved in estimating loss reserves for current accident year occurrences. Thus, the ultimate level of underwriting gain or loss with respect to the 2004 accident year will not be fully known for many years. North American property/casualty loss reserves were $14.3 billion ($13.3 billion net of reinsurance) at June 30, 2004 and $15.5 billion ($14.3 billion net of reinsurance) at December 31, 2003. The decline during 2004 was primarily attributable to a commutation (unwinding) of an unusually large reinsurance contract. About 52% of the reserves at June 30, 2004 were estimates of IBNR losses.

     Although total loss reserve levels are believed to be adequate, there can be no guarantees. A relatively small change in the estimate of net reserves can produce large changes in periodic underwriting results. For instance, a one-percentage point change in net loss reserves at June 30, 2004 would produce a pre-tax underwriting gain or loss of $133 million, or roughly 3.8% of annualized first half 2004 premiums earned. In addition, the timing and magnitude of catastrophe and large individual property losses are expected to continue to contribute to volatile periodic underwriting results in the future.

International property/casualty

     The international property/casualty operation writes quota-share and excess reinsurance on risks around the world, with its largest markets in Continental Europe and the United Kingdom. International property/casualty business is written on a direct reinsurance basis primarily through Cologne Re.

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FORM 10-Q

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

     General Re (Continued)

International property/casualty (Continued)

     Premiums written in the first half of 2004 were $901 million, a decline of $51 million (5.4%) from the first half of 2003. Premiums earned in the second quarter and first half of 2004 decreased $49 million (10.8%) and $56 million (6.5%), respectively, from the comparable 2003 periods. In local currencies, premiums earned declined 17% in the second quarter and 16% in the first half of 2004 compared with the second quarter and first half of 2003. The decrease in premiums earned was primarily due to maintaining underwriting discipline by not accepting risks that were believed to be inadequately priced.

     The international property/casualty operations produced pre-tax underwriting losses of $18 million in the second quarter and $6 million in the first half of 2004, compared with underwriting gains of $11 million and $15 million in the comparable 2003 periods. Underwriting results in 2004 included prior years’ losses of $23 million in the second quarter and $13 million in the first six months. The prior years’ losses were primarily in Australian motor excess and workers’ compensation business and other European casualty lines. First half underwriting gains in 2003 reflected rate increases and the lack of large individual property and catastrophe losses, partially offset by casualty losses.

     At June 30, 2004, the international property/casualty operations had gross loss reserves of $5.7 billion, ($5.6 billion net of reinsurance) compared to $6.4 billion in gross loss reserves at December 31, 2003 ($6.0 billion net of reinsurance).

Faraday (London-market)

     London-market business is written through Faraday Holdings Limited (“Faraday”). Faraday owns the managing agent of Syndicate 435 at Lloyd’s of London and provides capacity and participates in the results of Syndicate 435. Through Faraday, General Re’s participation in Syndicate 435 was 100% in 2004 and 2003. Also included in the London-market segment are Cologne Re’s UK and Continental Europe broker-market subsidiaries.

     Premiums written in the first half of 2004 totaled $410 million, a decline of $145 million (26.1%) from the first half of 2003. Premiums earned in the London-market operations increased $30 million (19.5%) in the second quarter of 2004 and decreased $66 million (14.8%) in the first half of 2004 compared with the same periods in 2003. In local currencies, premiums earned increased 7% in the second quarter and decreased 25% in the first half of 2004 from 2003 amounts. The decrease in first half 2004 premiums earned was primarily due to declines in premiums earned on property business as well as from Cologne Re’s Continental Europe broker-market subsidiary, which was placed in run-off in June 2003.

     London-market operations produced pre-tax underwriting gains in the second quarter and first half of 2004 of $9 million and $16 million, respectively, compared with gains of $13 million in the second quarter and $27 million in the first half of 2003. Underwriting gains in the first half of 2004 occurred primarily in property and aviation lines, reflecting selective underwriting and a lack of catastrophes and other large losses. These gains were partially offset by losses in casualty coverages.

     At June 30, 2004, the Faraday operations had gross loss reserves of $2.1 billion, ($1.8 billion net of reinsurance) compared to $1.9 billion in gross reserves at December 31, 2003 ($1.7 billion net of reinsurance).

Global life/health

     General Re’s global life/health affiliates reinsure such risks worldwide. Second quarter and first half 2004 premiums earned were relatively unchanged when compared with the same periods in 2003. Adjusting for the effects of foreign currency exchange, premiums earned declined 1.6% in the second quarter and 4.9% in the first half of 2004 from the comparable 2003 periods.

     Second quarter and first half 2004 underwriting results for the global life/health operations produced pre-tax underwriting gains of $22 million and $27 million, respectively, compared with gains of $11 million and $14 million for the same periods in 2003. Underwriting gains in 2004 and 2003 were generated primarily from international life business. The improvement in 2004 underwriting results was principally attributable to favorable claim experience in Continental Europe and in the United Kingdom.

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FORM 10-Q

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

     Berkshire Hathaway Reinsurance Group

     The Berkshire Hathaway Reinsurance Group (“BHRG”) underwrites excess-of-loss reinsurance and quota-share coverages for insurers and reinsurers around the world. BHRG is believed to be one of the leaders in providing catastrophe excess-of-loss reinsurance. Since July 2001, BHRG has also written a number of policies for large or otherwise unusual discrete commercial property risks on a direct and facultative reinsurance basis. This business is referred to as individual risk.

     BHRG’s pre-tax underwriting results are summarized in the table below. Amounts are in millions.