Equity Research April 12, 2010 United States of America Financial Services Insurance/Non-Life

Jay Gelb, CFA 1.212.526.1561 jay.gelb@barcap.com BCI, New York

Berkshire Hathaway Inc. (BRK.B - US$ 80.49) 2-Equal Weight
Initiation of Coverage
BRK.B: Initiating Coverage With 2-EW

Investment Conclusion
We are initiating coverage of BRK.B with a 2-EW rating and $88 price target, which is 1.30x YE11 estimated book value of $68. Led by Warren Buffett, we expect Berkshire to generate stable operating EPS, slowing book value growth, and reduced return on equity through 2011.

EPS (US$) (FY Dec)
2009
Actual 1Q 0.73A 2Q 0.76A 3Q 0.88A 4Q 0.87A Year 3.25A P/E Old N/A N/A N/A N/A N/A

2010
New 0.71E 0.83E 0.88E 0.92E 3.34E 24.1 St. Est. N/A N/A N/A N/A N/A Old N/A N/A N/A N/A N/A

2011
New N/A N/A N/A N/A 3.47E 23.2 St. Est. N/A N/A N/A N/A N/A

% Change
2010 -3% 9% 0% 6% 3% 2011 N/A N/A N/A N/A 4%

Summary
We expect earnings to decline in Insurance (50% of earnings), and recover slowly in MidAmerican (utility), as well as the cyclical Manufacturing, Service & Retail segment. The addition of Burlington Northern (railroad) should be an important contributor to BRK's earnings. We do not expect any large acquisitions near term. BRK's operations appear strong, although we doubt the stock will benefit from valuation multiple expansion in a weakening P&C (re)insurance market, and CEO succession issues persist. BRK shares are up 21% YTD versus a 6% increase in the S&P 500, and appear to already reflect being added to the S&P 500 Index and expectations of improved results as the economy recovers. Conference call is April 12 at 11ET.

Market Data
Market Cap (Mil.) Dividend Yield 52 Week Range 196767 N/A 83.57 - 54.66

Financial Summary
Revenue TTM (Mil.) 112493.0

Stock Overview
Ber k shir e Hat haway Inc. - 0 4 / 0 9 / 2 0 1 0
85

Reuters ADR

BRK.B BRK.B

Bloomberg

75

65

Stock Rating
New: 2-Equal Weight Old: 0-Not Rated

Target Price
New: Old: US$ 88.00 N/A
55 Vol um e 300M

Sector View: 2-Neutral

100M May J n u J ul Au g S ep Oct Nov Dec J an Feb Mar Ap r

Source: Barclays Capit al Live

Note: This report is a summary of our forthcoming full report on Berkshire Hathaway. A conference call for Barclays Capital clients is being held Monday, April 12, 2010 at 11:00AM ET. Dial in details: U.S. (800) 706-8249, International (706) 634-5881, Passcode: 67690752.

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 60 AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 61
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INITIATING COVERAGE ON BERKSHIRE HATHAWAY WITH A 2-EW RATING We are initiating coverage on Berkshire Hathaway with a 2-Equal Weight rating and $88 price target ($132,000 per Class A share) based on 1.30x YE11 estimated book value per Class B share of approximately $68 ($101,500 per Class A share). Berkshire Hathaway, led by Warren Buffett, is a holding company with significant operations in investments, insurance, railroads, utilities, manufacturing, services, retail, and homebuilding. We estimate the company’s annual earning power to be $8-$9 billion including the recently completed Burlington Northern Santa Fe (BNSF) railroad acquisition, and investment results recovered in 2009 after a disappointing outcome in 2008. Warren Buffett anticipates that business conditions will improve at a slow place and currently are nowhere near 2007 levels. Based on our projections, Berkshire’s operating EPS growth will likely be constrained through 2011, reflecting declining earnings in Insurance, a strong contribution from BNSF, and a slow recovery in the other major units including MidAmerican (utilities and energy), Manufacturing, Service, and Retail, and Finance and Financial Products (Clayton Homes). We Recommend Waiting For A More Attractive Entry Point Before Adding To Positions Berkshire Hathaway shares rose 21% (versus a 6% increase in the S&P 500) year-to-date 2010 in part, we believe, because of increased demand and liquidity in BRK shares resulting from being added to the S&P 500 Index and the Class B share split, as well as anticipated benefits from an economic recovery. The stock’s current valuation of 1.41x book value per share probably already reflects anticipated benefits of an economic recovery. Plus, our 2010 and 2011 operating EPS estimates are 8%-10% below consensus expectations, reflecting our outlook for a modest earnings recovery including contributions from the BNSF acquisition. As a result, we recommend investors wait for a more attractive entry point before adding to positions. Berkshire Hathaway’s Operating Business Is Diversified The largest contributors to Berkshire’s operating earnings are the Insurance, BNSF, and the Manufacturing, Service, and Retail segments. We expect BNSF (railway operator) to generate the strongest earnings growth among the operating segments. Meanwhile, we anticipate earnings could decline in Insurance (accounts for one-half of Berkshire’s operating earnings), and recover slowly in MidAmerican (utilities and energy), as well as in the economically sensitive Manufacturing, Service, and Retail, and Finance and Financial Services units. Figure 1. Berkshire Hathaway’s Business Mix - 2009
Revenues
BNSF 11% Finance and Financial Products 4% Insurance 27% Finance and Financial Products 6%

Pre-tax Earnings
BNSF 19%

Insurance 49% Manufacturing, Service, and Retail 15% MidAmerican 9% MidAmerican 11%

Manufacturing, Service, and Retail 49%

Total 2009 Revenues Proforma for BNSF Acquisition: $124.8 billion

Total 2009 Pre-tax Earnings Proforma for BNSF Acquisition: $13.7 billion

Note: Revenues and pre-tax earnings are pro forma for BNSF acquisition. Source: Barclays Capital research.

Book Value per Share Growth Has Resumed Berkshire Hathaway has a successful long-term track record of increasing book value per share (a key valuation metric). Berkshire’s book value per share increased 20% to an all-time high of $56 per Class B share ($84,487 per Class A share) in 2009 helped by a recovery in investment and derivative valuations after declining 10% to $47 per Class B share ($70,530 per Class A share) in 2008 due to the financial crisis. By year-end 2011, we anticipate Berkshire’s book value per Class B share could increase to roughly $68 ($101,500 per Class A share) driven in part by estimated operating EPS of $3.34 per B Class share ($5,015 per Class A share) in 2010 and $3.47 per Class B share ($5,200 per Class A share) in 2011 and assuming ongoing 8% annualized equity investment returns. Despite losing its AAA ratings from the rating agencies, the company’s balance sheet and liquidity position remain strong, in our view. As a point of reference, Class B shares are valued at 1/1,500th of Class A shares.
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Figure 2. Berkshire Hathaway’s Book Value Per Class B Share
$80 $70 Book Value Per Class B Share $60 $50 $40 $30 $20 $10 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Book Value Per Class B Share % Change in BV 25% 20% 15% % Change in BV
Book Value Per Class B Share and ROE $80 $4.15 $3.25 $3.34 $3.47 $70 $60 $50 $2.16 $2 $1 $0 2005 2006 2007 2008 2009 2010E 2011E $40 $30 $20 $10 $0 2005 2006 2007 2008 2009 Book Value Per Class B Share 2010E 2011E Operating ROE 10% 9% 8% 6% 5% 4% 3% 2% 1% 0% Operating ROE 7%

10% 5% 0% -5% -10% -15%

Source: Company data, Barclays Capital research.

Operating Earnings Appear Stalled Berkshire’s operating earnings per share could be mostly unchanged, and we expect return on equity to decline through 2011 reflecting our outlook of reduced earnings in property-casualty (P&C) Insurance, the new contribution to earnings from BNSF, and a slow recovery in earnings elsewhere in the enterprise. Berkshire’s annual earning power is roughly $8-$9 billion, we believe. Accurately estimating the company’s future operating EPS and book value per share present significant challenges because Berkshire Hathaway is highly diversified, with volatile earnings in its reinsurance business, and it offers limited transparency into business and investment operations for modeling purposes, in our view. Berkshire’s excess cash appears to be largely deployed in the early 2010 acquisition of the remainder of BNSF not already owned by Berkshire. As a result, opportunities to generate earnings growth from additional large acquisitions appear curtailed. Figure 3. Berkshire Hathaway Operating EPS Per Class B Share and ROE
Operating Earnings Per Class B Share $5 $4 $3 $4.02 $4.16

Source: Company data, Barclays Capital Research

We expect Berkshire’s Insurance business to generate reduced operating income through 2011 due to declining underwriting profits and reduced investment income. These underwriting results should be driven by: • GEICO’s underwriting margins are compressing and growth is expected to slow in 2010. • We expect General Re to be disciplined, which could result in flat premium volume, and catastrophe losses could increase from low levels.
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Berkshire Hathaway Reinsurance Group’s results will likely reflect modest underwriting profits if catastrophe losses increase to normal levels.

Figure 4. Berkshire Hathaway’s Insurance Business
in $ bil $35 $30 $25 $20 $15 $10 $5 $0 2005 2006 2007 2008 2009 2010E 2011E $22.0 $24.0 Total Insurance Premiums Earned $31.8 $25.5 $27.9 $28.5 $29.4 in $ bil $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 2005 2006 2007 2008 2009 2010E 2011E $3.5 Total Insurance Pre-tax Earnings $8.2 $8.1 $7.5 $6.7 $5.8 $5.4

Source: Company data, Barclays Capital Research

Our outlook for Berkshire’s non-insurance businesses is for a boost to earnings through 2011 from the addition of BNSF and a modest recovery in the other units. After suffering a sharp decline in earnings in 2009 due to the weak economy, we anticipate a slow recovery in earnings (albeit from depressed levels) for the Manufacturing Service & Retail segment, and stable earnings in the Finance and Financial Products unit. The MidAmerican utility business is expected to generate modest normalized annual earnings growth driven by PacifiCorp’s rate cases and a drop in some expenses partially offset by continued investment in the platform. Overall, we estimate that annual pre-tax earnings power is about $7 bn from Berkshire’s non-insurance businesses including BNSF. Figure 5. Berkshire Hathaway’s Non-Insurance Businesses
Non Insurance Revenues BNSF acquisition $120 $100 $80 in $ bil $60 $40 $20 $0 2005 2006 2007 2008 2009 2010E 2011E $58.7 $76.8 $68.4 $85.0 $94.0 $77.7 $98.4 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2005 2006 2007 2008 Non Insurance Total Pre-tax Operating Margin BNSF acquisition

2009

2010E

2011E

Non Insurance Pre-tax Earnings

Non Insurance Pre-tax Earnings Per Class A Share

$9 $8 $7 $6 $5 $4 $3 $2 $1 $0

BNSF acquisition $6.4 $7.2 $7.2

$8.2 Per Class A Share

$6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $2,168 $3,828 $4,123

BNSF acquisition $4,630 $5,004 $4,408 $2,566

$5.9

in $ bil

$4.0 $3.3

2005

2006

2007

2008

2009

2010E

2011E

2005

2006

2007

2008

2009

2010E

2011E

Source: Company data, Barclays Capital Research

CEO Succession Questions The quality of Berkshire’s management team is very strong, in our view, although management succession concerns are warranted. Berkshire Hathaway is synonymous with its chairman and CEO Warren Buffett (age 79), whom we believe is in the twilight of his career. Mr. Buffett’s current succession plan is to split his operating duties between a new CEO (all three leading candidates are internal according to him), who would be responsible for the oversight of business operations, and three or so external people reporting to the CEO to manage the investment portfolio. Clearly, the “Buffett premium” embedded within Berkshire’s share price appears to be at risk of eroding once he retires. Warren Buffett probably has enough time to set his succession plan in motion to minimize disruption, although other complex companies with iconic CEOs faced challenges during the leadership transition phase.

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According to press reports, Warren Buffett’s successor as CEO is presumed to be David Sokol, chairman of MidAmercan Energy (Berkshire’s utility business)1. Mr. Sokol (age 53) has been involved in the energy industry for 30 years. He successfully improved results at Berkshire’s NetJets operation and was instrumental in the MidAmerican’s $5 bn acquisition of PacifiCorp. Based on Mr. Sokol’s strong track record, we believe he would be successful as the next CEO of Berkshire Hathaway. Berkshire Hathaway’s Key Metrics Berkshire Hathaway is a challenging company to analyze as a result of its disparate businesses. The main metrics we focus on in terms of tracking business fundamentals include revenue and profit trends in the major business segments, as well as trends in book value per share, investments, float, and free cash flow. Figure 6. Berkshire’s Key Metrics
KEY METRICS AREAS OF FOCUS OPERATING SEGMENTS Insurance Premium growth and underwriting income trends, especially for GEICO and GenRe. This segment’s investment income is an important contributor to operating earnings. Railcar loadings, revenue/revenue ton-mile (a proxy for rail rates), operating margins, CAPEX needs, and general economic conditions. Regulated utility rate changes, economic conditions in the Midwest, free cash flow position, CAPEX needs, as well as inflation and interest rate trends. Monitor for signs of stabilizing revenues and earnings as the lingering impact of the global recession eases. Focus on signs of stabilizing revenues at Clayton Homes, and housing starts data. BALANCE SHEET & CASH FLOW Book value per share Investments Float Critical valuation metric for Berkshire shares. Growth in investments (currently $146 bn) would likely increase Berkshire’s intrinsic value. Increased float (currently $62 bn) from P&C insurance operations offers opportunities for investments and acquisitions. Market value changes in Berkshire’s $57 bn equity investment portfolio are reflected in book value, not operating earnings. Non-cash mark-to-market changes in Berkshire’s $38 bn of notional derivative contacts affect book value but not operating earnings. Free cash flow (approximately $11 bn in 2009) can be deployed in investments or acquisitions. CAPEX are significant for the MidAmerican and BNSF businesses.

Burlington Northern Santa Fe

MidAmerican

Manufacturing, Service, and Retail

Finance & Financial Products

Unrealized investment gains/losses

Derivative gains/losses

Free cash flow

1 “The Next Oracle of Omaha: Mr. Sokol?”, The Wall Street Journal, Feb., 28, 2010. “NetJets Pick More Likely to Succeed Buffett”, Barron’s, August 5, 2009. “For Buffett Fans, the Price Is Right”, Barron’s, July 13, 2009.

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Source: Barclays Capital research.

Financial Outlook Berkshire’s operating EPS declined 22% in 2009 to $3.25 per Class B share ($4,879 per Class A share), reflecting reduced earnings in all major segments. We anticipate earnings growth and return on equity should stall through 2011 owing to declining earnings in Insurance, the addition of BNSF, and a slow recovery for the other Non-Insurance units. We expect operating earnings per class B share to rise 3% year-over-year to $3.34 ($5,015 per Class A share) in 2010, and advance 4% to $3.47 ($5,200 per Class A share) in 2011, although we recognize limitations in accurately forecasting the company’s earnings. We estimate Berkshire’s annual after-tax earnings power is roughly $8-$9 billion inclusive of BNSF. Outstanding shares after the BNSF acquisition are approximately 2.45 billion Class B equivalent shares and 1.65 million Class A equivalent shares. Following is our earnings outlook for Berkshire’s business segments: • • • • • Insurance (49% of total pre-tax segment income pro forma for BNSF). We expect pre-tax income to decline in 2010 & 2011 driven by increased competition, slack demand, rising loss cost inflation, and reduced investment income. BNSF (19% of pre-tax income) could show the most robust earnings growth driven by the anticipated benefits of an economic recovery on freight rail volume as well as positive operating leverage. MidAmerican (11% of pre-tax income) could generate modestly increased normalized earnings reflecting stabilizing economic conditions, continued solid regulatory treatment, and the lingering benefit of several PacifiCorp rate cases (a regulatory proceeding to establish customer rates). Manufacturing, Service & Retail (15% of pre-tax earnings) could generate slightly increased earnings in the second half of 2010 & 2011 as the economy recovers. Finance & Financial Products (6% of pre-tax income) earnings could stabilize despite housing market weakness due to cost cutting.

Berkshire’s book value per share growth is expected to rise, although the company’s return on equity is expected to decline as the increase in book value per share outpaces earnings growth. Typically, price-to-book valuations tend not to increase if ROEs decline. Also, free cash flow is expected to decline in part from BNSF’s CAPEX needs. • By year-end 2011, we estimate Berkshire’s book value per Class B share could increase 20% versus YE09 to approximately $68 ($101,500 per Class A share) based on our operating EPS outlook of $3.34 per Class B share ($5,015 per Class share) in 2010 and $3.47 per Class B share ($5,200 per Class A share) in 2011 and assuming ongoing 8% annualized equity investment returns from current levels. As a point of reference, each 2 percentage point change in equity investment valuations equates to roughly $0.30 per Class B share ($450 per Class A share), or 0.5% of book value per share. • Berkshire’s total operating return on equity (ROE) could decline to 5.7% in 2010 and 5.3% in 2011 from 6.3% in 2009 reflecting reduced in Insurance earnings and a slow recovery in businesses outside Insurance, partially offset by the acquisition of BNSF. Berkshire’s operating ROE is normally depressed because of its significant capital position, as well as low asset and financial leverage. • Berkshire’s comprehensive ROE, which includes contributions from realized and unrealized investment, and derivative gains/losses, could fall to 8.9% in 2010 and 7.6% in 2011 from 18% in 2009, which benefitted from robust investment returns. • Total free cash flow could decline to roughly $8 bn both in 2010 and 2011 versus $11 bn in 2009. Berkshire expects capital expenditures at MidAmerican to be $2.6 bn in 2010 down from $3.4 bn in 2009, and BNSF’s capital expenditures are anticipated to be $2.4 bn in 2010. Our Price Target Is $88 Per Class B Share ($132,000 per Class A share) We determine our price target for Berkshire Hathaway of $88 per Class B share ($132,000 per Class A share) primarily by applying a price-to-book multiple of 1.30x (versus 1.41x currently and a historical average since 2000 of 1.59x) to our YE 2011 book value estimate of around $68 per Class B share ($101,500 per Class A share). As a point of reference, our price target valuation implies a price-to-tangible book multiple of 1.86x, versus 1.91x currently and a historical average since 2000 of 2.26x. Our $132,000 price target on BRK.A shares is 1.30x YE11 estimated book value of $101,500.

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Figure 7. Berkshire Hathaway Price-To-Book & Price-to-Tangible Book
2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Trailing Price-to-Stated Book Multiple 3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Trailing Price-to-Tangible Book Multiple

Source: FactSet, Barclays Capital research.

Berkshire’s operating business remains strong, in our view. However, we believe that Berkshire shares are unlikely to benefit from valuation multiple expansion over the next year because Berkshire’s operating EPS appear constrained, return on equity is likely to decline, and book value growth is expected to slow. As a result, we are applying a price target price-to-book multiple below its historical average level. We also estimate Berkshire’s fair value using sum-of-the-parts and intrinsic value methods, which generate an outlook of approximately $87 per Class B share ($130,000 per Class A) and $73 per Class B share ($110,000 per Class A share), respectively (see our detailed valuation work on page 45). What Could Improve Our Outlook? All else being equal, we would likely need to see a pullback in Berkshire’s share price to around $72 per Class B share ($108,000 per Class A share, and a trailing price-to-book multiple of around 1.3x) before we could potentially view its valuation as attractive. Alternatively, our outlook could improve if we see upside to our estimates for Berkshire’s book value per share (our YE11 estimate is $68 per Class B share and $101,500 per Class A share) and operating EPS (our 2011 estimate is $3.47 per Class B share and $5,200 per Class A share). We view growth in book value per share as being more sustainable if it is driven by operating earnings rather than by mark-to-market gains in investment and derivative valuations. A tight property-casualty reinsurance market or improvement in GEICO’s underwriting margins would also be favorable for the stock, in our view, but neither appears likely. A positive inflection point in Berkshire’s earning power could become evident if a recovery occurs faster than we anticipate in BNSF or the economically sensitive Manufacturing, Service and Retail segment. MidAmerican could generate better than modeled revenues and earnings if economic conditions improve faster than anticipated, particularly in the Midwest, and if its expenses are lower than modeled. Note: Class B shares trade at 1/1,500th the price of Class A shares, and Class B shares have 1/10,000th the voting power of Class A shares. BERKSHIRE HATHAWAY IS A DISTINCTIVE BUSINESS Berkshire Hathaway Inc., led by the legendary Warren Buffett (age 79), is a holding company owning approximately 80 entire companies and others partially across various industries. Berkshire’s annual operating earning power is $8-$9 billion based on its current business profile, we believe. Berkshire’s most significant businesses are P&C insurance and reinsurance, which account for one-half of operating earnings and generate substantial funds available for investment known as float ($62 billion as of year-end 2009). Among Berkshire’s most important insurance and reinsurance units are GEICO, the third largest auto insurer in the United States, and two of the largest global reinsurers—General Re and the Berkshire Hathaway Reinsurance Group. Berkshire’s non-insurance businesses, some of which are economically sensitive, also account for one-half of the company’s earnings. These businesses include rail transportation, utilities and energy, finance, manufacturing, services, retailing, and manufactured housing. In early 2010, Berkshire Hathaway completed its $26 billion acquisition of BNSF, one of the largest railroad freight operators in the U.S. Berkshire is also the majority owner of MidAmerican Energy Holdings Company, a global provider of the generation, transmission, and distribution of energy.

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Intrinsic Value Per Share Growth Berkshire Hathaway’s long-term economic goal is to maximize its average annual rate of gain in intrinsic business value per share. Intrinsic value, which is the discounted value of the cash that can be taken out of a business during its remaining life, is a subjective metric since it involves estimates of future earnings and a discount rate. Warren Buffett views Berkshire’s book value per share growth as a conservative, but reasonably adequate proxy, for growth in the intrinsic value of the company. This conservatism arises because the carrying value of businesses controlled by Berkshire is typically much lower than their intrinsic value (according to him, book value tells you what was put in, while intrinsic value tells you what can be taken out). For instance, the carrying values for many of Berkshire’s acquired businesses are significantly below their economic value, in management’s view. However, we doubt that Warren Buffett would sell any of Berkshire’s operating businesses, which means value is unlikely to be unlocked immediately. Annual book value per share growth is expected to generally move in lockstep with intrinsic value per share growth, although non-cash mark-to-market effects from Berkshire’s derivatives portfolio could increase volatility in book value. Berkshire Hathaway’s book value per Class A share, a key valuation metric, climbed from $19.46 in 1964, the year Warren Buffett assumed management responsibilities, to $84,487 as of 4Q09 (the Class A shares have never split). This result translates into a 20.3% compound annual gain since 1964 – substantially more than the 9.3% return of the S&P 500 Index including dividends. Berkshire’s long-term track record is consistent, with the company reporting annual declines in book value per share in only two years – 2001 and 2008 (book value recovered 19.8% in 2009). Meanwhile, the S&P 500 Index including dividends declined in 11 years since 1964. Berkshire’s compound annual book value growth exceeded that of the S&P in four of the past five years and seven of the past ten years. The average compound annual gain has slowed compared to the early years but is robust nonetheless. Berkshire Hathaway’s Business Model Berkshire’s impressive long term track record of book value and intrinsic value per share growth is all the more interesting because management maintains a consistent perspective on how its diversified business should be run. Berkshire Hathaway has a differentiated and highly successful business model, with operations spanning from insurance and energy to furniture and confections. Warren Buffett controls voting power over 29.5% of Berkshire’s Class A shares. He and his partner Charlie Munger (age 86) have built a collection of companies, both wholly and partially-owned, with attractive economic characteristics and run by their own managers. Mr. Buffett and Mr. Munger’s operating plan is simple: identify talented managers and provide an environment in which they can perform at a high level. Berkshire Hathaway’s core operating businesses are diversified across many industries. A challenge facing Berkshire, in our view, is finding significant acquisitions large enough to have a notable effect on earnings power. As a point of reference, Berkshire generated roughly $9 billion of after-tax income in 2009 if BNSF is included. • Insurance is the company’s largest business and includes GEICO (motor vehicle insurer), General Reinsurance (one of the largest global reinsurers), and Berkshire Hathaway Reinsurance Group, which writes large and unusual risks. GEICO’s growth is expected to slow, and reinsurance pricing should weaken due to excess capacity and slack demand. • The Utilities, Energy, and Railroads unit consists of MidAmerican (utility and energy) and the recently-acquired BNSF (one of the largest operators of railroad systems in North America). Together, these businesses account for about 30% of Berkshire’s earnings. MidAmerican and BNSF are capital intensive operations and represent opportunities for Berkshire to reinvest excess cash at reasonable returns, in our view. • The Manufacturing, Service, and Retail unit, a collection of companies ranging from manufacturers of building products and paint, to apparel makers, to retailers of home furnishings and jewelry. This unit likely exhibits the highest sensitivity to economic conditions. • The Finance and Financial Products unit consists mostly of Clayton Homes, which is the largest company in the manufactured housing industry. The weak housing market has impacted sales, although Clayton’s finance operation has held up well compared to the other lenders.

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Figure 8. Berkshire Hathaway Revenue and Earnings By Segment, 2009
BNSF 11% Finance and Financial Products 4%

Revenues
Insurance 27% Finance and Financial Products 6%

Pre-tax Earnings
BNSF 19%

Insurance 49% Manufacturing, Service, and Retail 15% MidAmerican 9% MidAmerican 11%

Manufacturing, Service, and Retail 49%

Total 2009 Revenues Proforma for BNSF Acquisition: $124.8 billion

Total 2009 Pre-tax Earnings Proforma for BNSF Acquisition: $13.7 billion

Note: Revenues and pre-tax earnings are proforma for BNSF acquisition. Source: Company data, Barclays Capital Research

Berkshire operates a decentralized management structure with only 21 employees located at the Omaha, Nebraska headquarters. This arrangement means the operating managers run their businesses as they see fit with little interference as long as goals are met. Meanwhile, Warren Buffett deploys excess cash generated by Berkshire’s subsidiaries (especially the insurance operations), and focuses on capital allocation decisions. Excess cash from the operating businesses is used to acquire other businesses that are expected to consistently earn above average returns on capital, as well as for buying marketable securities. Mr. Buffett typically prefers using cash for acquisitions rather than stock because he wants to receive as much value in a transaction as he gives up by issuing shares. Warren Buffett says he would like to buy large businesses in any industry with the right management, an attractive economic future, and at a reasonable price. However, we anticipate Berkshire will not be involved in major acquisitions anytime soon because the company deployed the majority of its excess cash in the BNSF transaction. Book Value Growth Recovers Berkshire Hathaway’s book value per share growth is an important valuation metric. The company’s book value per share increased substantially over the years, reflecting excess cash being deployed into new businesses and investments. With the exception of the BNSF and GenRe deals, most of Berkshire’s large acquisitions are for all cash, meaning existing shareholders are not diluted. After a 10% decline in Berkshire’s book value per share in 2008 (the largest in its history), the company’s book value per share recovered 20% in 2009 to a record level of $84,487 per Class A share. The primary factors contributing to changes in Berkshire’s book value per share are earnings from the operating businesses, derivative gains/losses, realized investment gains/losses, and unrealized investment gains/losses (reflected in accumulated comprehensive other income). Berkshire does not, nor does it anticipate, paying a shareholder dividend or repurchasing its shares. In most years, net earnings are expected to be larger than other comprehensive income (OCI). However, in 2008, net earnings of $5.0 bn were more than offset by OCI of $(17) bn due to net unrealized investment losses generated during the financial crisis. In 2009, net earnings were $8.1 billion and OCI was $13.7 billion, reflecting a strong recovery in investment valuations. Berkshire’s compound annual growth rate of book value per share is 20.3% from 1965-2009. Growth averaged 9.2% annually over the past five years, and recovered 19.8% in 2009 after a 9.6% decline in 2008. Berkshire’s book value per share growth exceeded the S&P 500’s total return including dividends by: 11.1% since 1965, 6.1% on average over the past five years, 27.4% in 2008, and (6.7)% in 2009. Notably, Berkshire’s growth is inclusive of taxes while the S&P results are pre-tax. We anticipate Berkshire’s book value per Class B share could grow from $56.32 ($84,487 per Class A share) in 2009, to approximately $62.76 ($94,000 per Class A share) in 2010, and to $67.70 ($101,500 per Class A share) in 2011. Our outlook takes into account our projections of Berkshire’s future earnings, modeled valuation changes in the investment portfolio, and the addition of BNSF along with a modestly increased share count.

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Figure 9. Berkshire Hathaway Book Value Per Share Growth
$120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 2010E 2011E 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 60% 50% 40% 30% 20% 10% 0% -10% -20%

Book Value Per Class A Share

Annual Change in Book Value Per Class A Share

Source: Company data, Barclays Capital research.

Float Is the Fuel for Investments Berkshire’s float from its insurance businesses is a critical driver of new cash available for Warren Buffett to invest. The economic benefits from float are reflected in investment income. Float2 is the money Berkshire holds and invests for its benefit but does not own, and is generated by insurance premiums being received before claims are paid. Most P&C insurers generate float, but not to Berkshire’s extent on either an absolute basis or relative to premium volume. Both the growth and cost of float are important. The growth of float means more cash is available for investment. Berkshire’s cost of float, as measured by the percentage of P&C underwriting losses to premium volume, is negative in most years because the insurance operations generate underwriting profits. Negative cost float is a meaningful benefit for Berkshire because it means the company is being paid to hold other people’s money. In the years when float has a positive cost for Berkshire resulting from underwriting losses, we believe it is useful to compare its cost of funds to the yield on long-term U.S. Treasuries. Berkshire’s float as of year end 2009 is $62 billion, up from $58 billion in 2008 and $46 billion in 2004 as a result of internal growth, acquisitions, and writing retroactive reinsurance contracts. About three-quarters of the company’s float is generated by GenRe and Berkshire Hathaway Reinsurance Group, with smaller contributions from GEICO (auto insurance is short-tail) and Berkshire Hathaway Primary Group. Berkshire’s float is largely responsible for generating $5.2 bn of pre-tax insurance investment income in 2009, up 5.6% from 2008, despite low interest rates. The growth in investment income in 2009 was largely due to increased investments in debt and convertible securities partially offset by low earnings on cash balances. These investments include Goldman Sachs, General Electric, Swiss Re, Wrigley, and Dow Chemical, which together generate $2.1 billion in annualized dividends and interest before potential gains from attached warrants. We anticipate investment income could decline as a result of reduced portfolio yields, and the Swiss Re convert investment likely being redeemed in 2011. (continued on next page)

2 Float is an approximation of the amount of net policyholder funds available for investment. That term denotes the sum of unpaid losses and loss adjustment expenses, unearned premiums and other policyholder liabilities, less the aggregate amount of premium balances receivable, losses recoverable from reinsurance ceded, deferred policy acquisition costs, deferred charges on reinsurance contracts and related deferred income taxes.

19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 0 20 9 10 20 E 11 E

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Figure 10. Berkshire Hathaway Insurance Float & Pre-tax Investment Income
Insurance Float
$62 billion at year-end 2009

Insurance Float By Segment, YE 2009

$70 $60 $50 in $ bil $40 $30 $20 $10 $0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Note: Average Insurance float is presented for 1990-1996. Ending Insurance float is presented for 1997 thru 2009.

Berkshire Hathaway Primary Insurance Group, 8%
Acquired General Re

Gen Re, 34%

GEICO, 16%

Berkshire Hathaway Reinsurance Group, 42% Total Float YE 2009 $62 billion

Cost of Float 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011E in $ billions

$6 $5 $4 $3 $2 $1 $0 2005 $3.5

Pre-tax Insurance Investment Income $5.2 $4.8 $4.3 $4.7 $4.9 $4.8

2006

2007

2008

2009

2010E

2011E

Note: General Re, which was acquired in December 1998, eliminated a one-quarter reporting lag reporting in 2000. Cost of float data for 2000 is adjusted to show 12 months. Source: Company data, Barclays Capital Research

BERKSHIRE’S SOURCES OF VALUE Berkshire Hathaway has two major sources of value—invested assets primarily in its insurance operations, and the value of earnings from sources other than investments and insurance. The company’s investments and cash in the insurance and other business are $146 bn as of YE09 and are expected to generate recurring income as well as unrealized gains or losses. Berkshire’s roughly 70 other businesses than insurance are mostly economically sensitive and suffered declining returns on equity over the past several years. Pre-tax earnings from the non-insurance businesses were $4 bn in 2009, down 35% vs 2008 excluding unusual items, reflecting the impact of the recession. Investments—A Key Source of Berkshire’s Value Berkshire’s investments mostly from Insurance operations are one of the company’s primary sources of value. Berkshire’s investments and cash at year-end 2009 were $146 bn, excluding investments in the finance and utility operations. About half of these investments are funded by Berkshire’s insurance float. The company made roughly $20 billion of new investments during the financial crisis beginning in 2008, which have paid off attractively so far. • Equities: As of YE09, Berkshire’s equity investments of $57 billion include large stakes in Coca-Cola, Wells Fargo, Procter & Gamble, American Express, and Kraft Foods (five largest investments account for about 60% of equities holdings). In early 2009, Berkshire suffered a $3 bn pre-tax loss from its equity stake in ConocoPhillips. In addition to owning General Re, Berkshire Hathaway is the largest shareholder of Munich Re with 8% ownership, and owns a 3% stake in Swiss Re. We view Berkshire’s stakes in two of GenRe’s major competitors as financial investments rather than potential paths to an outright acquisition. Fixed maturity investments: These total $33 billion as of YE09, with corporate bonds (both investment-grade and below investment-grade) and foreign government bonds accounting for the largest proportion. U.S. Treasuries, municipal bonds, and mortgage backed securities account for the remainder. Other investments: These total $29 billion as of YE09, and include investments made during the financial crisis in Goldman Sachs, General Electric, Wrigley, Dow Chemical, and Swiss Re. In total, these investments are expected to
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generate $2 bn of annual investment income, and provide evidence of Berkshire’s ability to deploy large amounts of cash quickly at attractive rates of return. In 2008, Berkshire purchased convertible preferred and warrant investments with 10% dividends in Goldman Sachs ($5 bn) and General Electric ($3 bn) at the height of the financial crisis, as well as $4.4 bn of Wrigley subordinated notes (11.45% coupon) due in 2018 and $2.1 bn of 5% preferred stock. The Goldman and GE warrants issued to Berkshire expire in 2013. The strike price for the Goldman warrants is $115 (versus a current share price of $179.50), and the strike price for the GE warrants is $22.24 (versus a current share price of $18.56). These deals provide evidence of Berkshire’s ability to deploy large amounts of cash quickly at attractive rates of return. In 2009, Berkshire invested CHF 3 bn ($2.7 bn) in a Swiss Re perpetual convertible preferred security carrying a 12% coupon to support Swiss Re’s financial condition. Swiss Re intends to redeem its convert issued to Berkshire now that Swiss Re’s financial condition has improved and to avoid dilution to its existing common shareholders. This convert can be redeemed by Swiss Re at 120% of face value beginning March 2011 (140% before then), meaning about $325 mn of annual investment income would be lost upon redemption. Warren Buffett’s investment in Swiss Re (CH:RUKN) was shrewd in hindsight since the conversion price is CHF 25—substantially below Swiss Re’s current share price of CHF 52.35. Berkshire also purchased a $3 bn investment in Dow Chemical convertible preferreds with a 8.5% coupon. • Cash: As of YE09, Berkshire’s cash balance was $31 billion (with $8 billion committed to finance the BNSF acquisition), down from $44 billion in 2006. Warren Buffett intends to hold at least $20 billion in cash, and the rating agencies expect Berkshire to maintain at least $10 bn of cash on hand.

Figure 11. Investments & Pre-tax Insurance Investment Income
Investments Investment Mix Fixed Income, 22.3%

Cash, 19.1% Investments in $ bil $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 1997 Investments 1999 2001 2003 2005 2007 per A share $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 2009 2011E Other, 19.9%

Equity, 38.7%

Total Investments at fair value: $146 billion as of YE09 Investments Per Class A Share

$6 Other, 28.7% AXP, 11.3% $5 $4 in $ billions $3 $2 $1 $0 2005 $3.5

Pre-tax Insurance Investment Income $5.2 $4.8 $4.7 $4.3

$4.9

$4.8

KO, 20.9%

COP, 3.5% WFC, 16.5% J , 3.4% NJ PG, 9.2% KFT, 6.5%

Total Equity Investments YE09 $57 billion

2006

2007

2008

2009

2010E

2011E

Note: Investments are in the Insurance & other business only, not including the finance and utility businesses. Source: Company data, Barclays Capital Research 12

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Non-Insurance Businesses Accounts for One-Half of Operating Earnings Berkshire’s roughly 70 non-insurance businesses account for about half of the company’s pre-tax segment earnings (inclusive of BNSF), generate roughly $7bn in annual pre-tax earnings, and enhance the company’s sensitivity to economic conditions: • The Utilities, Energy, and Railroads segment includes MidAmerican, and BNSF. Earnings are expected to grow through 2011 although these businesses require substantial capital investments. • The Manufacturing, Service, and Retail unit is Berkshire’s most economically sensitive segment and is expected to generate modest earnings growth by 2011 from a low base. The largest businesses in this unit include Marmon (a group of 130 manufacturing and service businesses), McLane (wholesale distribution and logistics services), and Shaw (carpet manufacturer). • The Finance and Financial Products unit is mostly Clayton Homes (manufactured housing). This business has been hurt by housing market weakness and we anticipate profits could recover slowly. In 2009, Berkshire’s non-insurance operating segment revenues (not including BNSF) declined 9% to $78 billion and pre-tax earnings fell 35% (excluding the one-time benefit from Constellation in 2008) to $4 billion because of weakness in the Manufacturing, Service, and Retail segment. Pre-tax earnings for the Non-Insurance businesses per Class B share were $1.71 ($2,566 per Class A share) in 2009, $3.09 ($4,629 per Class A share including a $705 per share benefit from Constellation) in 2008, and $2.75 ($4,123 per Class A share) in 2007. Including BNSF, we estimate Non-Insurance pre-tax earnings per B share could increase to roughly $2.93 ($4,400 per Class A share) in 2010 and $3.33 ($5,000 per Class A share) in 2011. Our outlook for Berkshire’s non-insurance businesses is for earnings to increase through 2011 from the addition of BNSF and a modest recovery in the other units. After suffering a sharp decline in earnings in 2009 due to the weak global economy, we anticipate a slow recovery in earnings (albeit from depressed levels) by 2011 for the Manufacturing Service & Retail segment as well as the Finance and Financial Products unit. The MidAmerican utility business is expected to generate modest normalized earnings growth driven by PacifiCorp’s rate cases, coupled with a drop in some expenses and continued investment in the platform. Figure 12. Non Insurance Business Metrics
Non Insurance Revenues $120,000 $100,000 $80,000 in $ mil $60,000 $40,000 $20,000 $0 2005 MidAmerican 2006 2007 2008 2009 2010E 2011E Manufacturing, Service, Retailing Burlington Northern Non Insurance Pre-tax Earnings $10,000 $8,000 $6,000 in $ mil $4,000 $2,000 $0 -$2,000 2005 MidAmerican Burlington Northern Finance & Financial Products 2006 2007 2008 2009 2010E 2011E $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 -$1,000 2005 Constellation (2008) Manufacturing, Service, Retailing Earnings attributable to noncontrolling interests MidAmerican Burlington Northern Finance & Financial Products 2006 2007 2008 2009 2010E 2011E MidAmerican Finance & Financial Products Burlington Northern Manufacturing, Service, Retailing Finance & Financial Products 30% 25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010E 2011E Pre-tax Operating Margin

Non Insurance Pre-tax Earnings Per Class A Share

Constellation (2008) Manufacturing, Service, Retailing Earnings attributable to noncontrolling interests

Source: Company data, Barclays Capital research

BERKSHIRE’S INSURANCE PROFITS EXPECTED TO DECLINE Insurance is the core of Berkshire Hathaway’s business, contributing about half of segment pre-tax proforma operating earnings in 2009. Warren Buffett extols the benefits of Berkshire’s insurance because it usually generates low or negative cost funds available for investment. Berkshire’s insurance ratings were recently cut to the AA level from AAA, but this change
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is not expected to have a meaningful impact on its business or borrowing costs. Berkshire’s major insurance operations include: • GEICO, the third largest automobile insurer in the U.S., • General Re, one of the world’s largest reinsurers, • Berkshire Hathaway Reinsurance Group, which uses Berkshire’s substantial capital position to write large and unusual risks such as property catastrophe or retroactive reinsurance , and • Berkshire Hathaway Primary Group is smaller than the other insurance units and consistently contributes float at negative cost. Berkshire is one of the largest writers of motor vehicle insurance in the U.S. and reinsurance globally. However, it has a less significant presence in U.S. primary commercial property-casualty insurance as the 13th largest writer. Other publicly-traded U.S. commercial P&C insurers with a similar or larger market share than Berkshire include Chartis (AIG), Travelers, Zurich, CNA, ACE, Chubb, The Hartford, and XL Capital. Figure 13. Insurance Segment Contribution - 2009
Revenues Insurance Revenue $33.1 billion Non-Insurance Pre-tax Income $7.0 billion Non-Insurance Revenue $91.7 billion Pre-tax Earnings

Insurance Pretax Income $6,7 billion

Note: Non-Insurance revenues and pre-tax earnings are proforma for BNSF acquisition. Source: Company Data, Barclays Capital Research

GEICO’s premiums and underwriting earnings profile tends to be smooth because auto insurance is a frequency-driven business. Meanwhile, GenRe’s and BH Reinsurance Group’s premium volume and underwriting results can be volatile because they specialize in high-severity exposures. In fact, Berkshire has said it is willing to lose $7 billion in a single insured event if properly paid for assuming the risk. Auto insurance rates are rising modestly, although policies-in-force (PIF) growth could slow due to the weak economy, and underwriting margins have compressed due to rising loss cost trends. Traditional reinsurance pricing is flat-to-down 10% reflecting stable demand and increased capacity now that the industry’s balance sheet has recovered from the financial crisis and catastrophe losses in 2009 were low.

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Figure 14. Berkshire’s Insurance Businesses Metrics
Premiums Earned in $ bil $35 $30 $25 $20 $15 $10 $5 $0 2005 2006 2007 GEICO in $ bil $70 $60 $50 $40 $30 $20 $10 $0 2005 2006 GEICO 2007 GenRe BHRG 2008 BHPG 2009 2008 BHRG 2009 BHPG 2010E 2011E in $ bil $5 $4 $3 $2 $1 $0 -$1 -$2 2005 2006 2007 GEICO in $ bil $6 $5 $4 $3 $2 $1 $0 2005 2006 2007 2008 2009 2010E 2011E 2008 GenRe BHRG 2009 BHPG 2010E 2011E Underwriting Profits

GenRe

Insurance Float

Pre-tax Investment Income

Source: Company Data, Barclays Capital Research

GEICO—Among Berkshire’s Strongest Operations GEICO is a pure-play motor vehicle insurer focused on the U.S. private passenger market. It is among Berkshire Hathaway’s most well-known businesses, providing a steady stream of underwriting profits as well as negative cost float for investments. GEICO’s market share gains reflect consumers’ increasing comfort with buying low-cost automobile insurance over the telephone and internet. However, reflecting industry trends, we expect GEICO’s growth to slow and underwriting margins to decline due to rising loss cost trends. GEICO’s results tend to be less volatile that Berkshire’s other insurance businesses because of its low catastrophe exposure and the outsourcing of homeowner’s insurance coverage. GEICO, based in Chevy Chase, Maryland, is the third largest private passenger motor vehicle insurer in the U.S. with $14 billion of annual premium volume (up from $3 bn when Berkshire acquired full ownership of the company in 1996), and accounts for roughly half of Berkshire’s Insurance premium volume. Once the economy recovers, GEICO’s modest commercial auto insurance business could contribute to growth. GEICO’s chairman, president and CEO is Tony Nicely, age 66, who joined the company in 1960 and assumed leadership in 1992. Since becoming CEO, Mr. Nicely aggressively expanded GEICO’s market share to 8.1% in 2009 up from 1.9% in 1993, a level the company had long maintained. GEICO’s performance is judged on 1) its percentage growth in policyholders, and 2) the earnings of its “seasoned” business, meaning policies that have been in-force for more than a year. GEICO keeps its operating expenses low compared to premium volume, which means the company has strong positive operating leverage. GEICO’s chief investment officer is Lou Simpson. He joined GEICO in 1979 and has been GEICO’s chief investment officer for over 20 years. His investment performance, which reflects in part a $6.6 billion allocation to equities, is often praised by Warren Buffett. GEICO consistently gains market share and reports best-in-class premium volume growth owing to its low-cost strategy and strong brand awareness. GEICO is the largest advertising spender in the auto insurance sector with an annual budget of $800 million, nearly double the advertising budget of the second largest auto insurance advertiser. GEICO contributes 16% ($9.6 billion) of Berkshire’s $62 billion float, reflecting the short-tail nature of this insurance business. GEICO’s statutory (accounting method used by state insurance regulators) operating income excluding after-tax net realized investment gains/losses was $790 million in 2009, down from $974 million in 2008.

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Figure 15. GEICO Metrics
Private Passenger Auto Insurance Market Share
9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 $2.0 $0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Insurance Float % chg 4.6% 4.7% 5.0% 5.5% In $ billions 6.2% 6.7% 7.1% 7.6% 8.1% $12.0 $10.0 $8.0 $6.0 $4.0

Insurance Float
16% 14% 12% 10% 8% 6% 4% 2% 0% % chg

Statutory Net Income
In $Millions $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2005 2006 2007 2008 2009 $205 $715 $1,238 $1,385 $1,429 In $Millions $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2005 $1,058

Statutory Operating Income

$1,259

$1,229 $974 $790

2006

2007

2008

2009

Note: Operating income excludes after-tax net realized investment gains and losses. Source: Company data, SNL Insurance, Barclays Capital research.

GEICO was founded in 1936 and initially sold auto insurance to U.S. government employees. The company is now the fastest growing major auto insurer in the United States. Berkshire Hathaway acquired GEICO in two stages. From 19761980, Berkshire bought about one-third of GEICO’s shares for $47 million. GEICO made large repurchases of its stock in subsequent years causing Berkshire’s ownership stake to grow to 50%. In 1996, Berkshire acquired the remaining 50% of GEICO it did not already own for $2.3 billion. GEICO’s statutory capital is currently $8.3 bn, meaning the company is probably now worth vastly more than when Berkshire acquired full control. GEICO’s Advantages. GEICO’s key competitive strengths are its low-cost operating model and strong brand awareness generated through aggressive marketing, which translates into profitable growth. GEICO sells its policies primarily through the direct response channel—a cost-efficient method where applications for insurance are submitted directly to the company via the Internet, telephone or mail. Approximately one-quarter of U.S. personal auto insurance is sold through the direct channel (including GEICO). Direct writers are gaining market share mostly from the exclusive agency channel, which still controls about 40% of the market (major writers include State Farm and Allstate). Consumers show increasing comfort with buying auto insurance without an agent and GEICO often offers coverage for lower prices than competitors. In the independent agency channel (agents who sell insurance on behalf of multiple insurers, such as TRV), market share has been mostly stable at roughly one-third. Importantly, we believe the direct channel’s capacity to gain market share is restricted at some point. This is because many customers prefer to purchase their auto, homeowner’s and umbrella insurance through the same insurer (such as State Farm or Allstate) rather than buy these policies through separate insurers, and multi-policy discounts can result in competitive pricing.

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Figure 16. Direct Insurers Gaining Market Share In Personal Auto
Direct, 5% 1989 Direct, 17% Direct, 24% Independent Agency, 32% Independent Agency, 36% Independent Agency, 35% Captive Agency, 47% Captive Agency, 41% 1997
Direct insurers gaining market share

2007

Captive Agency, 63%

Source: A.M. Best, Travelers, Barclays Capital research.

U.S. private passenger auto insurance market share is highly concentrated among the top ten insurers, with State Farm and Allstate having the first and second largest market share, respectively. GEICO’s market share increased to 8.1% in 2009 from 7.6% in 2008 and PGR’s market share (includes direct and agency) increased to 7.5% in 2009 from 7.1% in 2008, while Allstate’s market share fell slightly and State Farm’s increased modestly. As a point of reference, each 1 point gain in U.S. personal auto insurance market share is equivalent to approximately $1.6 bn of premiums. Figure 17. Private Passenger Auto Insurance Market Share
20% 18.6%

16%

12%

10.5% 8.2% 7.5% 6.4% 4.5% 4.4% 4.1% 2.1% 2.0%

8%

4%

0% State Farm Allstate GEICO Progressive Zurich/ Farmers Nationwide Liberty Mutual USAA Travelers American Family

Source: Company data, SNL Financial, Barclays Capital research.

GEICO Results & Outlook. We expect GEICO to continue to deliver industry leading premium and policies-in-force growth, albeit at a slowing pace. Warren Buffett expects GEICO’s growth to slow in 2010 due in part to reduced U.S. vehicle registrations, and high unemployment causing drivers to buy less coverage. We expect GEICO’s pre-tax underwriting income to decline in 2010 and 2011 reflecting an increased combined ratio. • Premiums written at GEICO increased 5% to $13.4 bn in 2009. We expect growth to slow to 3% in 2010 and 2% in 2011. • GEICO’s combined ratio rose over the past several years reflecting an increasingly competitive auto insurance market. We expect this result to deteriorate further from 95% in 2009 to 98% in 2010 and 100% in 2011 as loss cost inflation rises. • Pre-tax underwriting income at GEICO fell 29% to $649 mn in 2009 due to deteriorating underwriting margins. We expect pre-tax underwriting income to continue to fall to $340 mn in 2010 and $65 mn in 2011.

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Figure 18. GEICO Financial Projections, 2005-2011E
Premiums

Net Written Premiums

Growth Rate 14% 12% 10% 8% 6% 4% 2% 0% 2005 12.4%

Policies-In-Force Growth

$16 $14 $12 $10 $8 $6 $4 $2 $0

$10.3

$11.3

$11.9

$12.7

$13.4

$13.8

$14.1

14% 12% 10% 8% 6% 4% 2% 0%

10.7% 8.8% 8.2% 7.8%

In $ bn

2005

2006

2007

2008

2009 Growth Rate

2010E

2011E

2006

2007

2008

2009

Net Written Premiums

105% 100% 95% 90% 85% 80% 75% 2005 2006 91.3% 85.7%

Combined Ratio
96.0% 93.5% 93.6% In $ mn 98.2% 99.7% $1,400 $1,200 $1,000 $800 $600 $400 $200 2007 2008 2009 2010E 2011E $0 2005 $1,221

Pre-tax Underwriting Income
$1,314 $1,113 $916 $649 $340 $65 2006 2007 2008 2009 2010E 2011E

Source: Company data, Barclays Capital estimates.

General Re’s Results Are Strong General Re (GenRe) is one of the world’s largest reinsurers with $10 billion of U.S. statutory surplus, and contributes $21 bn of Berkshire’s $62 billion of total float. Berkshire acquired GenRe in 1998 for $22 billion in stock, and at the time was Berkshire’s largest acquisition. Subsequently, GenRe suffered reserve inadequacy and underwriting discipline issues in the years 1998-2002. The unit was referred to as a “problem child” in Mr. Buffett’s 2003 annual letter to shareholders. GenRe’s management successfully turned the company around and it has delivered strong underwriting results since 2003 (with the exception of 2005 due to hurricane losses). GenRe’s U.S. P&C statutory operating income, which excludes after-tax net realized investment gains/losses was $1.3 billion in 2009 reflecting few catastrophe losses, up from $406 million in 2008 in a year impacted by catastrophe losses. (continued on next page)

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Figure 19. GenRe Key Metrics
$35 $30 $25 in $ bil $20 $15 $10 $5 $0 SCOR Partner Re Everest Re RGA Re Swiss Re Mapfre Hannover Re Berkshire Hathaway Re Transatlantic Odyssey Re Munich Re London Re Korean Re XL Capital Lloyd's $5 $13 $11 $9 $8 $6 $5 $4 $4 $4 $3 $3 $3 $2 $10 $15 $15 $15 $29 $29 Gross Written Premiums, 2008 in $ bil $25 $22 $20 $16 $19 General Re Float $24 $23 $23 $23 $23 $21 $21

$0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

In $Millions $1,400

Statutory Net Income

In $Millions $1,400

Statutory Operating Income
$1,281

$1,200 $1,000 $763 $631 $600 $400 $200

$1,164

$1,200

$1,000

$800

$721

$800

$705 $594

$727

$600

$406 $300 $400

$200

$0 2005 2006 2007 2008 2009

$0 2005 2006 2007 2008 2009

Note: (1) Partner Re's 2008 premiums are presented proforma for the purchase of Paris Re in 4Q09; (2) Berkshire Hathaway Re includes General Reinsurance and Berkshire Hathaway Reinsurance Group; (3) Operating income excludes after-tax realized investment gains and losses; (4) Statutory net and operating income is U.S. P&C operations only. Source: A.M. Best, Company data, Barclays Capital Research

GenRe’s CEO is Tad Montross, who assumed leadership from Joe Brandon in 2007 after Mr. Brandon stepped down. Mr. Montross has done a good job in improving GenRe’s results in our view. GenRe’s management performance is judged solely on underwriting profitability without regard to premium volume trends. This factor is important because it emphasizes profitability over growth. GenRe’s Advantages. One of GenRe’s strengths is its strong ratings from the rating agencies (A++ rating from A.M. Best, and AA from the other key rating agencies). Although GenRe is no longer rated AAA, none of its competitors have AAA ratings either. Backed by Berkshire’s strong balance sheet, GenRe has the ability to write substantial amounts of business if capacity shortfalls emerge and market conditions become attractive. GenRe has the advantage of being able to write business that competitors might otherwise decline due to concerns of some reinsurance contracts causing increased earnings volatility or generating optically unattractive accounting results (even though the economic results could be quite favorable). GenRe’s major P&C reinsurance competitors include Munich Re, Swiss Re (the two largest reinsurers globally), Hannover Re, and Lloyd’s of London as well as Bermuda reinsurers including RenaissanceRe, PartnerRe, XL Capital, and ACE Limited. Competitive Reinsurance Market Conditions. P&C reinsurance pricing is weakening, driven by increased capacity and stable demand for coverage, we believe. In 2009, reinsurers benefited from a sharp recovery in capital positions due to recovering investment portfolio valuations, robust profits from light catastrophe losses (2009 was the lightest Atlantic hurricane season in 12 years without a single major hurricane), and favorable prior year loss reserve development. For the important January 2010 renewal season, property catastrophe reinsurance pricing was down 5%-10%, and casualty reinsurance pricing is down 0%-5%, according to market sources. Barring substantial losses, we anticipate rate erosion could continue at the current pace. The reinsurance industry is expected to incur most of the roughly $10 bn of insured losses associated with the 1Q10 Chilean earthquake, although most of Berkshire’s earthquake exposure is in California. GenRe’s Results & Outlook. GenRe’s reinsurance business mix is roughly evenly split between P&C and life/health.

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• •

GenRe’s largest P&C market is North America, where 56% of premiums are property reinsurance, 28% are casualty reinsurance, and 16% is specialty insurance (mostly liability and workers’ compensation coverage on an excess and surplus basis and excess insurance for self-insured programs). GenRe’s life/health reinsurance business is provided through a subsidiary of Cologne Re subsidiary (the world’s oldest reinsurer). In 2009, 42% of life/health net premiums were written in the United States, 29% in Western Europe, and 29% throughout the rest of the world.

Figure 20. GenRe Business Mix - 2009
Total Gen Re Business Mix

Life/ Health, 46% P&C, 54%

Total 2009 premiums: $5.7 billion

Life/ Health Business Mix Specialty Insurance 16% United States 42%

North America P&C Business Mix

All other 29%

Casualty Reinsurance 28%

Property Reinsurance 56%

Western Europe 29%

Source: Company Data, Barclays Capital Research

GenRe’s P&C results reflect declining premium volume and reduced underwriting profitability driven by an increasingly competitive reinsurance market. • P&C earned premiums increased 3% in 2009, fell 8% in 2008, and decreased 10% in 2007 (excluding one-time items and FX for all years) driven by continued underwriting discipline in an increasingly competitive environment. Growth in 2009 was due to increased volume in European treaty and Lloyd’s market property business, but premium volume in 2010 is expected to decline due to increased competition. • P&C underwriting profits in 2009 were $300 million (90.6% combined ratio), reflecting underwriting profits of $478 million from property business and losses of $178 million from casualty/workers’ compensation business. The underwriting profits in property business reflected low catastrophe losses and reserve releases. Underwriting losses from casualty/workers’ compensation business were primarily the result of establishing higher loss reserves for 2009 accident year occurrences to reflect higher loss trends as well as $118 million of workers’ compensation loss reserve discount accretion and deferred charge amortization, offset in part by reserve releases. GenRe’s life/health recent results reflect modest underlying growth due to increased international business. It offers life, health, long-term care, and disability reinsurance coverage on an individual and group basis. Primary life/health insurers use reinsurance to manage capital and mortality risk. Life reinsurance growth is driven largely by demand for underlying insurance products, and underwriting results depend largely on mortality (the rate at which people die). As Solvency II moves closer to adoption in Europe, demand for life reinsurance could increase due to rising capital requirements for primary insurers. • Life/health earned premiums excluding the effects of foreign currency increased 5% in 2009, and rose 2% in 2008. The increase in 2009 was primarily due to international business. • Underwriting results for the global life/health operations produced underwriting gains of $177 million in 2009, $179 million in 2008 and $80 million in 2007 driven by gains due primarily to favorable mortality experience in all three years.
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Figure 21. General Re Key Metrics
Gen Re Earned Premiums $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 1999 2001 2003 2005 2007 2009 2011E 30% 25% 20% 15% % chg 10% 5% 0% -5% -10% -15% 160% 140% 120% 100% 80% 60% 40% 20% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E2011E 100% Combined Ratio Gen Re P&C Combined Ratio

In $ bn

Premiums Earned

% Change in Premiums Earned

Gen Reinsurance Pre-tax Underwriting Gain (Loss) in $ mil $1,000 $500 $0 ($500) ($1,000) ($1,500) ($2,000) ($2,500) ($3,000) ($3,500) ($4,000) 1999 2001 2003 2005 2007 2009 2011E

in $ bil $25 $20 $15 $10 $5 $0 1998 1999 2000 2001

Gen Re Float

2002 2003

2004

2005

2006

2007

2008 2009

Source: Company Data, Barclays Capital Research

GenRe – Loss Reserves Analysis. Gen Re’s P&C gross loss reserves are $18 billion as of YE09. Reserves are roughly evenly split between reported case reserves (reserves established for reported claims), and incurred but not reported (IBNR) claims. The substantial level of IBNR reserves likely means GenRe is being conservative in accounting for ultimate claim liabilities. Analyzing GenRe’s loss reserves another way, 68% are for long-tail lines including workers’ compensation, professional liability, and asbestos/environmental. These reserves generate significant float for investment because claims may are not expected to be paid out for many years. However, setting long-tail loss reserves accurately is a challenging process with the potential for significant divergence versus the correct level of reserves especially over a long time frame. GenRe’s remaining 32% of reserves are for short-tail lines such as automobile insurance liability or property claims, which are typically quickly paid. Figure 22. GenRe’s Loss Reserves – 2009
Gen Re Gross Loss Reserves Gen Re Loss Reserves by Line of Business
Property, 14% Workers' compensation, 17%

IBNR reserves, 47%

Other general liability, 16% Reported case reserves, 53%

Professional Liability, 7% Mass tortasbestos/ enviro nmental, 10%

Other casualty, 17%

Auto liability, 17%

Total: $18 bn

Total: $18 bn

Note: Based on gross loss reserves. Source: Company Data, Barclays Capital Research

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Berkshire Hathaway Reinsurance Group Generates Significant Float Berkshire Hathaway Reinsurance Group (BHRG) is known for writing large and unusual risks. This business is based in Stamford, Connecticut and is led by Ajit Jain, who often receives praise from Warren Buffett as one of Berkshire’s most valued leaders. This unit’s front office is staffed by only 30 employees and is among the world’s largest writers of super-cat and retroactive reinsurance coverage. Also, BHRG is a major contributor to Berkshire Hathaway’s float as a result of writing longtail liability contracts. As of YE09, BHRG generated $26 billion of float out of a total of $62 billion. BHRG has written challenging retroactive reinsurance (past loss event) risks such as adverse loss reserve development coverage for ACE’s asbestos and environmental liability reserves, and Equitas (Lloyd’s of London’s legacy liability entity). In 2009, Berkshire entered into a life reinsurance deal that could generate $50 billion of premiums over the next roughly 50 years. BHRG’s lead insurance entity is National Indemnity Company (NICO), which is among Berkshire Hathaway’s largest insurance units with $38 bn of statutory capital. Figure 23. Berkshire Hathaway Reinsurance Group Float
$30 $26 $25 $20 in $ billions $15 $11 $10 $5 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $4 $4 $6 $8 $13 $14 $15 $16 $24 $24

$17

Source: Company Data, Barclays Capital Research

BH Reinsurance’s annual and quarterly premium volume as well as underwriting results can generate volatility because significant portions of premium volume can be driven by a small number of large risks. Catastrophe underwriting profits are expected to be robust in years with no large catastrophe losses, but are likely to show losses in years with heavy cat activity. Figure 24. Berkshire Hathaway Reinsurance Group Premiums & Underwriting Profits
in $ billions $14 $12 $10 $8 $6 $4 $2 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Other multi-line Catastrophe & individual risk Retroactive reinsurance Other multi-line BHRG Premiums Earned By Unit in $ millions $2,000 $1,500 $1,000 $500 $0 -$500 -$1,000 -$1,500 -$2,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E BHRG Underwriting Profit (Losses) By Unit

Catastrophe & individual risk

Retroactive reinsurance

Source: Company Data, Barclays Capital Research

BHRG has three reporting lines: Catastrophe and individual risk, retroactive reinsurance, and other multi-line. Premiums and underwriting results can be volatile in catastrophe and individual risk, as well as retroactive reinsurance. This situation reflects high-severity exposure in the catastrophe line, and attractive economic results from retroactive reinsurance contracts typically not being evident under GAAP accounting treatment. BHRG Catastrophe and Individual Risk. These contracts may provide exceptionally large limits of indemnification, often several hundred million dollars and occasionally in excess of $1 billion, and cover catastrophe risks (such as hurricanes,
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earthquakes or other natural disasters) or other property and liability risks (such as aviation and aerospace, commercial multiperil or terrorism). The timing and magnitude of losses can produce extraordinary volatility in interim or annual underwriting results. BHRG’s catastrophe and individual risk premiums written were $725 million in 2009, $1.1 billion in 2008, $1.2 billion in 2007. Keep in mind, Berkshire’s premium volume can expand significantly in periods of reinsurance market dislocation and contract when rates are unattractive. For example, catastrophe risk premium volume was $2.4 billion in 2006 in the year following Hurricanes Katrina, Wilma, and Rita. We expect catastrophe premium volume to decline for at least the first half of 2010 based on soft market conditions. In early 2009, Berkshire constrained the volume of catastrophe business written in response to the decline in shareholder’s equity that occurred in 1Q09. Berkshire’s net worth recovered significantly since then, but the volume of business written declined in light of the BNSF acquisition. Also, catastrophe rates were not attractive enough in 2009 to warrant increasing volume. Underwriting results over the past three years reflected no significant catastrophe losses in 2009 and moderate claims expenses in 2008 from Hurricanes Gustav and Ike. BHRG Retroactive Reinsurance. Retroactive reinsurance is a key differentiating factor for Ajit Jain’s BHRG operation because few companies are willing to reinsure these risks. From an accounting standpoint, retroactive insurance contacts are expected to produce underwriting losses, but the economics should be attractive over the life of the contract taking into account the benefit of investment income generated from the upfront cash (float). Retroactive reinsurance premiums earned declined from $7.7 billion in 2007 (reflecting the Equitas transaction) to $204 million in 2008, and rose to $2 billion in 2009 due to a transaction with Swiss Re. Underwriting losses, which are expected under GAAP accounting treatment for these contracts, were $375 mn in 2007, $414 mn in 2008, and $448 mn n 2009. In 2009, retroactive reinsurance premiums earned included 2 billion Swiss Francs (approximately $1.7 billion) from a contract with Swiss Re. This contract covers substantially all of Swiss Re’s non-life insurance losses for adverse development on loss events occurring prior to January 1, 2009. The Swiss Re reserve cover provides aggregate limits of indemnification of 5 billion CHF (about $4.7 bn) in excess of a retention of Swiss Re’s reported loss reserves at December 31, 2008 (59 billion CHF) less 2 billion CHF. The impact on underwriting results from this contract in 2009 was negligible because the premiums earned were offset by a corresponding amount of established loss reserves. In January 2010, Swiss Re separately reinsured a $1.5 billion book of closed block of U.S. life insurance business with Berkshire. BHRG Other Multi-Line. Other multi-line mostly reflects the results in BHRG other than property catastrophe and retroactive reinsurance. Other multi-line premiums earned in 2009 of $3.9 billion were relatively unchanged from 2008. Premiums earned in 2009 and 2008 included $2.8 billion and $1.8 billion, respectively, from a 20% quota-share contract with Swiss Re covering substantially all of Swiss Re’s property/casualty risks for five years from January 1, 2008 through December 31, 2012. Excluding the Swiss Re quota-share contract, which Swiss Re needed to support its balance sheet, other multi-line business premiums earned in 2009 declined $969 million (46%) compared to 2008, primarily due to significant reductions in aviation, property, workers’ compensation, and Lloyd’s market volume. Other multi-line premiums earned in 2008 increased $1.3 billion (50%) over 2007 reflecting premiums earned from the Swiss Re quota-share contract partially offset by lower premium volume from workers’ compensation programs. Other multi-line underwriting profits declined to $15 mn in 2009 from $962 million in 2008 largely due to FX. Excluding FX, other multi-line business produced a pre-tax underwriting gain of $295 million in 2009, $32 million in 2008 and $435 million in 2007. Pre-tax underwriting results in 2008 included approximately $435 million of estimated catastrophe losses from Hurricanes Gustav and Ike. There were no significant catastrophe losses in 2009 or 2007, which also benefited from low property loss ratios and favorable loss experience on workers’ compensation business. In late 2007, BHRG formed a monoline financial guaranty insurance company, Berkshire Hathaway Assurance Corp (BHAC). This business is small in the scope of Berkshire Hathaway, although it provides a good example of Berkshire addressing market dislocations where he believes reasonable risk-adjusted returns can be generated. BHAC targets the municipal bond market after the fallout from dislocation suffered by Ambac and MBIA resulting from the financial crisis. BHAC began writing business in 1Q08. In its first year of operation, BHAC produced $595 million of premiums. In 2009, as a result of rising risk and reduced prices, BHAC wrote about $40 million in premiums, most of which was in the first half of the year. The recent rating agency downgrades of Berkshire’s insurance operations to the AA level could impact demand for coverage, in our view.

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BH Reinsurance Group’s Loss Reserves Mix. BHRG’s gross loss reserves were $28 billion as of YE09. Of this amount, $18 billion were for retroactive (known) losses including $9 billion for asbestos, environmental, and other latent injury reserves. BHRG’s maximum payable losses under long-tail retroactive policies are $29 billion, although management believes it is unlikely current reserves would develop upward or downward by more than 15% of the $18 bn of established reserves. Importantly, Berkshire Hathaway is able to invest these funds for years before the claims will be paid. As a result, these retroactive contracts are likely to generate substantial returns on investment even after paying the claims. Long-tail loss reserves generate significant float for investing because claims may not be paid out for years to come. However, setting long-tail loss reserves accurately is a challenging process with the potential for the correct level of reserving to diverge from established reserves, especially as time goes on. The remaining reserves are for short-tail lines such as automobile insurance liability or property claims, which typically are paid quickly. Figure 25. Berkshire Hathaway Reinsurance Group’s Loss Reserves - 2009 (in $ millions)
Type Property Casualty Reported case reserves………………………… $1,524 $2,669 IBNR reserves…………………………………… 1,889 4,054 Retroactive……………………………………… 17,973 Gross reserves…………………………………… $3,413 $24,696 Deferred charges and ceded reserves……………… Net reserves…………………………………………………………..
Source: Company Data, Barclays Capital Research

Total $4,193 5,943 17,973 28,109 (4,964) $23,145

Berkshire Hathaway Primary Group Generates Lost-Cost Float Berkshire Hathaway Primary Group (BHPG) consists of independently managed insurance businesses generating $1.8 bn in annual premiums (a 9% decline vs. 2008) that mostly write liability coverages for commercial accounts. Other lines of coverage offered include healthcare malpractice and recreational watercraft. Overall, BHPG accounts for about 6% of the Insurance segment’s earned premiums and contributes negative cost float. BHPG’s year-end 2009 float is $5.1 billion and accounts for 8% of Berkshire’s overall float. BHPG’s underwriting results are deteriorating due to increased competition in most business lines. This segment’s largest business line is medical professional liability, which accounts for about one-third of BHPG annual premiums. Other P&C lines include commercial auto and general liability provided by National Indemnity Company’s (NICO) primary group, recreational watercraft, workers’ compensation, credit and income protection for credit and debit card holders, as well as professional liability and financial fidelity coverage for small and medium sized banks in the Midwest U.S. (continued on next page)

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Figure 26. Berkshire Hathaway Primary Group Key Metrics
BH Primary Group Premiums Earned BH Primary Group: Pre-tax Underwriting Gains/ Losses

$2,500 $2,000 in $ millions $1,500 $1,000 $500 $0 2005 2006 2007 2008 2009 2010E 2011E $1,498 $1,858 $1,999 $1,950 $1,773 $1,720 $1,750 in $ millions

$400 $350 $300 $250 $200 $150 $100 $50 $0 -$50

$340 $279 $235 $210 $84 $27 $(12)

2005

2006

2007

2008

2009

2010E

2011E

BH Primary Group: Float $6,000 $5,000 $4,029 in $ millions $4,000 $3,000 $2,000 $1,000 $0 2005 2006 2007 2008 2009 $3,442 $4,739 $4,229 $5,061

Source: Company Data, Barclays Capital Research

BURLINGTON NORTHERN SANTA FE—POSITIONED FOR GROWTH Burlington Northern Santa Fe (BNSF), based in Forth Worth, Texas, is one of the largest railroad systems in the US with a network spanning over 30,000 miles primarily west of the Mississippi River. The company, which is positioned for growth in our view, was acquired in February 2010 by Berkshire Hathaway in a transaction valued at $34 billion. Warren Buffett views BNSF as an attractive business with the prospect of significantly increasing earnings over time, although it requires substantial capital expenditures (currently $2.2 billion annually). Mr. Buffett believes BNSF benefits from a strong management team led by CEO Matthew Rose (age 50), and increases Berkshire’s exposure to the long-term economic growth of the United States. The acquisition of BNSF is expected to provide Warren Buffett with opportunities to redeploy cash at reasonable rates of return, similar to its MidAmerican utility business. Berkshire Hathaway completed the acquisition of the remaining 77.4% of BNSF it did not already own in February 2010, which is its largest deal to date, for $26 billion (60% in cash and 40% in Berkshire shares). BNSF has $10 billion of existing debt and the company is expected to issue additional debt as needed, which will not be guaranteed by Berkshire. The following analysis of Burlington Northern Santa Fe is provided by Gary Chase, who is Barclays Capital’s Airfreight & Ground Transportation senior equity analyst. Add title and date of note. Berkshire’s acquisition price for BNSF was not a bargain in the view of Warren Buffett. Berkshire’s purchase valued BNSF at roughly 7.5x EV/EBITDA and a P/E ratio of 15.7x, based on BarCap’s 2010 estimates at that time. Based on 2010 consensus estimates, the valuation appears closer to 8x EV/EBITDA and 18x P/E ratio. In terms of valuing the BNSF franchise going forward, the railroads (UNP, NSC, and CSX) are currently trading at approximately 7x EV/EBITDA & 13x-15x forward P/E.

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Figure 27. Railroad Operator Valuation Comparisons
CSX 2011E Credit Metrics Adjusted Debt / EBITDAR Debt / EBITDA Debt / Capitalization Adjusted Debt / Capitalization Valuation Ratios Adjusted EV / Revenue Adjusted EV / EBITDAR EV / EBITDA EV / EBIT P / E Ratio Price to Book Source: Barclays Capital estimates. 2.8x 7.1x 7.1x 9.5x 14.1x 1.9x 3.0x 7.1x 7.2x 9.4x 13.7x 1.8x 3.1x 7.3x 7.4x 9.9x 15.2x 1.9x 2.5x 2.0x 41.6% 49.4% 2.2x 1.7x 34.6% 42.4% 2.2x 1.3x 27.7% 44.2% NSC 2011E UNP 2011E

BNSF is expected to generate the strongest earnings growth of Berkshire Hathaway’s major businesses reflecting the potential for rising revenues due to an economic recovery, and positive operating leverage. BNSF performed well in the recent recession; the company maintained operating profitability of ~23% in 2009, similar to levels achieved in the prior five years despite revenues declining more than 20% as freight demand deteriorated and fuel surcharge revenue declined. We anticipate BNSF could deliver net income of approximately $2.1 billion in 2010 (up 21% year-over-year) and $2.4 billion in 2011 (up 15%), which would be consistent with average modeled earning increases for UNP (the most relevant comparable company for BNSF in our view), NSC, and CSX. BNSF transports a range of products and commodities derived from manufacturing, agricultural and natural resource industries in serving the Midwest, Pacific Northwest, and the Western, Southwestern and Southeastern regions and ports of the U.S. BNSF’s share of the western United States rail traffic in 2009 was approximately 49% according to the Association of American Railroads (AAR). Figure 28. BNSF Railway Operations

Source: BNSF.

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US Railroads, a Brief Introduction The US railroads provide transportation for a wide variety of commodities that touch nearly all economic segments from lowvalue basic materials to high-value finished consumer & capital goods. In 2009, the major US railroads (defined as BNSF, CSX, NSC & UNP) had consolidated revenue generation of $44bn. Roughly 44% of this revenue was tied to bulk commodities such as agricultural or coal shipments; industrial and auto shipments represented 35% of the revenue base; and 21% of revenue generation came from the intermodal segment, which comprises the multi-modal transport of shipping containers, the vast majority of which facilitate the movement of finished consumer goods (Figure 29). Intermodal transport comprises the movement of shipping containers via multi-modes (marine, rail, truck, etc.) facilitating the transport of many finished capital & consumer goods. Figure 29: In 2009, the Major US Railroads Generated ~$44bn in Revenue
2009 Major US Railroad Segm ent Revenue /1 Auto 5% Agricultural 18% Industrial 30%

Intermodal 21%

Coal 27%

Note: Major US railroads include BNSF, CSX, NSC & UNP; total revenue for these carriers totaled ~$44bn in 2009. Source: Company reports, Barclays Capital Research.

Railroad Volume Trends Encouraging The improvements in weekly railroad industry volumes from 4Q09 combined with easier comparisons should have rail volumes up near double-digit levels year-over-year in 2Q10. On a sequential basis, railroad volumes have shown significant strength, though admittedly off depressed levels. Figure 30. Weekly Railroad Volume Absolute Levels
Weekly Rail Volume 700 650 In thousands 600 550 500 450
W W W W W W W W W W W W W W W W k 1 k6 k1 k 1 k2 k2 k 3 k3 k4 k 4 k5 k4 k 9 k1 k1 k 2 - 0 - 0 1- 6- 1- 6- 1- 6- 1- 6- 1- - 1 - 1 4- 9- 49 9 09 09 09 09 09 09 09 09 09 0 0 10 10 10

North American Weekly Rail Volume (total units 000s /1) 700 650 In thousands 600 550 500 450 Wk11 Wk13 Wk15 Wk17 Wk19 Wk21 Wk23 Wk25 Wk1 Wk3 Wk5 Wk7 Wk9 1Q10 Forecast +6% 2Q10 Forecast +15%

2009

2010

Forecast

Source: American Association of Railroads, Barclays Capital estimates.

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Revenue per revenue ton-mile (a proxy for rail rates) is expected to increase 8% in 2010 and 4% in 2011, compared to a 13% decline in 2009. This improvement reflects rising fuel costs, increased demand, and potential inflation. Notably, rising fuel revenues are offset by increased fuel costs, which are passed along to customers. Figure 31. BNSF Revenue/RTM
$0.028 $0.026 $0.024 Rev/ RTM $0.022 $0.020 $0.018 $0.016 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Rev/ RTM % chg 25% 20% 15% 10% 5% 0% -5% -10% -15% % chg

Source: Company reports, Barclays Capital estimates.

Burlington Northern: Performing Through the Cycle BNSF operates a vast rail network in the Western US that generated over $14bn of revenue in 2009 and earnings before interest expense and taxes (EBIT) of $3.3bn (Figure 32). As the economy slowed dramatically in 2009, BNSF’s revenues declined over 20% as both freight demand deteriorated and lower fuel prices drove reduced fuel surcharge revenue. Despite the dramatic drop in revenue, BNSF was able to maintain operating profitability of ~23%, similar to levels achieved in the prior five years. BNSF is expected to generate about $1.5-$2 billion of annual free cash flow assuming annual after-tax operating earnings of $2.0-2.5 bn, capex of $2.2 bn, and depreciation expense of $1.7bn. Figure 32: Burlington Northern Generating Consistent Relative Profitability through Economic Cycle
BN Summary P&L 2005 Total Revenue Expense Labor Related Fuel D&A Rentals All Other Total Op Expense EBIT EBIT Margin EBITDA EBITDA Margin Interest Expense Other (Expense) Pre-Tax Income Income Taxes Net Income Net Margin 12,987 3,515 1,959 1,075 886 2,559 9,994 2,993 23.0% 4,068 31.3% 437 (37) 2,519 437 2,082 16.0% 2006 14,984 3,816 2,734 1,130 930 2,880 11,490 3,494 23.3% 4,624 30.9% 485 (40) 2,969 485 2,484 16.6% 2007 15,802 3,773 3,327 1,293 942 2,900 12,235 3,567 22.6% 4,860 30.8% 511 (18) 3,038 511 2,527 16.0% 2008 18,018 3,884 4,640 1,397 901 3,094 13,916 4,102 22.8% 5,499 30.5% 533 (11) 3,558 533 3,025 16.8% 2009 14,082 3,481 2,372 1,537 777 2,587 10,754 3,328 23.6% 4,865 34.5% 561 (8) 2,759 561 2,198 15.6% 2010E 15,374 3,501 2,807 1,696 788 2,663 11,456 3,918 25.5% 5,614 36.5% 588 (4) 3,326 1,254 2,072 13.5% 2011E 16,537 3,747 2,953 1,736 844 2,851 12,131 4,406 26.6% 6,142 37.1% 589 (6) 3,811 1,429 2,382 14.4%

Source: Company reports, Barclays Capital research. 28

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BNSF maintains a well diversified transportation network with end market exposure to numerous segments of the US economy. In 2009 the intermodal segment led revenue generation for BNSF representing 29% of revenue, coal was 27%, industrial 21%, agricultural 21% and autos were 5% (Figure 33). The intermodal segment comprises the movement of shipping containers via multi-modes (marine, rail, truck, etc.) facilitating the transport of many finished capital & consumer goods. Excluding intermodal, coal, and by extension the power generation segment, is the single largest market for BNSF. On a volume basis, intermodal maintains a larger share of traffic due to the relatively low weight and numerous container shipments compared to the denser bulk commodity & industrial shipments (Figure 34). Figure 33: BNSF Revenue Mix
Burlington Northern Revenue Mix ($bn) 20 18 16 14 12 10 8 6 4 2 0 1995 1997 1999 2001 2003 2005 2007 2009 CAGR 95-05 +4.5% 05-09 +2% 2009 Mix Auto 2% Ag 21% Industrial 21% Coal 27% Intermodal 29%

Figure 34: BNSF Volume Mix
Burlington Northern Volum e Mix (mm of carloadings / units) 12 11 10 9 8 7 6 5 4 3 2 1 0 CAGR 95-05 +3.5% 2009 Mix Auto 1% Ag 11% Industrial 14% 05-09 (4.3%) Coal 28% Intermodal 45%

1995 1997 1999 2001 2003 2005 2007 2009

Source: Company reports, Barclays Capital research

Source: Company reports, Barclays Capital research

Despite the significant decline in traffic & revenue in 2009, BNSF was able to produce consistent operating profitability owing to the carrier’s ability to quickly resize network capacity to commensurate volume levels (Figure 35). Intuitively, railroads are expected to have significantly high fixed costs (asset-heavy networks). Even so, the US railroads are able to quickly scale resources to meet demand levels due to a lack of material time-definite shipment agreements. Therefore, we view pricing to be the most critical earnings driver for the group outside of volume growth. BNSF achieved rate increases through the last cycle and it was able to improve operating profitability to near 24% from a low of ~17% in 2003. Figure 35: BNSF Profitability Intact Despite Recessionary Impact
Burlington Northern Profitability (EBIT margin) 30% 25% 20% 15% 10% 5% 0% 1995 1997 1999 2001 2003 2005 2007 2009
Source: Company reports, Barclays Capital research

MIDAMERICAN ENERGY IS A STEADY PERFORMER The following analysis of MidAmerican is provided by Daniel Ford, who is Barclays Capital’s Power & Utilities senior equity analyst.
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Berkshire Hathaway’s utility and energy business is anchored by MidAmerican Energy Holdings Company (MEHC), which owns the largest utility in Iowa and is strategically located in the middle of several major markets in the Midwest. Its PacifiCorp operation is a regulated utility based on Portland, Oregon serving 1.7 million customers in six Western states. MECH accounts for 9% of Berkshire’s revenues and 11% of pre-tax segment earnings. MEHC’s domestic regulated energy businesses have about 3 million retail customers and a 17,000 mile gas pipeline network with a capacity of 7 billion cubic feet (bcf) per day. We think MEHC’s businesses, particularly the PacifiCorp and MidAmerican operations (which comprise nearly 75% of MEHC’s revenues), are above average regulated utilities in above average jurisdictions, in our view, that should generate a stable earnings stream. MEHC could generate low single-digit normalized annual earnings growth over the next several years and free cash flow could improve as the effect of PacifiCorp’s rate cases (a regulatory proceeding to establish customer rates), coupled with a drop in some expenses and continued investment in the platform should continue to drive growth. Notably, our outlook does not reflect any material improvement in economic condition or sales, and we would expect a bias to the upside if economic conditions improve. David Sokol is MEHC’s Chairman, and Gregory Abel is its president and CEO. Mr. Sokol was CEO of the company from 1993-2008, and is now chairman and CEO of NetJets. Mr Abel has been with MEHC since 1992. He took over the role of CEO in 2008, and has been president since 1998. Both individuals are well regarded in the utilities industry and thought of as solid managers. The principal MEHC businesses are the PacifiCorp and MidAmerican Energy Company (MEC) utilities, which comprise close to 75% of revenues and 60% of EBIT for the segment. Figure 36. MidAmerican Energy Holdings Company Revenues & Earnings
MEHC Revenues
Real estate brokerage 9% U.K. utilities 7% Natural gas pipelines 9% Natural gas pipelines 25% Other 2% MidAmerican Energy Co 32% Real estate brokerage 2% U.K. utilities 13%

MEHC Pre-Tax Earnings

Other 1% MidAmerican Energy Co 15%

PacifiCorp 41% MEHC Total 2009 Revenues: $11.4 Billion

PacifiCorp 44% MEHC Total 2009 P/T Earnings: $1.5 Billion

Note: 2009 pre-tax earnings include $125 million of stock-based compensation expense. Source: Company data, Barclays Capital research.

Generating Capacity & Energy Production Driven By Coal and Natural Gas Combined, PacifiCorp and MidAmerican Energy Company own about 18,000 MW of electric generating capacity (the MW value on the nameplate of a plant), of which coal and natural gas account for 75%. Based on the higher capacity factors for coal assets in general, generation by fuel type (MW value of output for each asset) skews more heavily toward coal. MEHC’s large coal exposure bears monitoring due to the ongoing possibility of new environmental regulations from the EPA or Congress. The EPA appears poised to update its regulations on SOx (sulfur dioxide) and NOx (nitrogen oxide) emissions, and new standards could emerge as soon as 2Q10. Earlier in 2009, Congress appeared ready to pass carbon cap-and-trade legislation that would regulate carbon dioxide emissions. It remains unknown whether there will be time before the mid-term elections to deal with climate legislation, but it appears unlikely that there will be Congressional action before 2011. Regardless of the regulating entity – whether EPA or Congress – MEHC’s regulated businesses should see any increase in costs be passed along in its fuel costs and borne by its ratepayers. Direct economic impact should be limited, in our view, although the second-order effects of continuing to increase customer bills during a shaky economic environment raise legitimate concerns.
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Large Wind Generating Capacity MECH is a world leader in renewable energy, with approximately 24% of its generating capacity coming from renewable or noncarbon fuel sources. The company's worldwide renewable power sources are wind, geothermal, hydroelectric and biomass. By 2030, the DOE hopes to increase wind energy’s contribution to the U.S. electricity supply by 20%. MEHC’s wind generating capacity is 12% of the company’s total. This factor is notable because this is a high growth industry and generates significant tax credits. The company is the largest owner of wind-powered electric generation among rateregulated utilities and has more than 1,393 megawatts of wind generating facilities in operation, under construction, and under contract in Iowa. PacifiCorp added approximately 380 megawatts of new wind generation in 2008 and plans to have 2,000 megawatts of renewable resources in its portfolio by 2013. Figure 37. Generating Capacity & Energy Production, By Fuel Type

Generating Capacity, by Fuel Type
Hydro 7% Wind 12% Coal 54% Nuclear 2% Geothermal 1%

Energy Production, By Fuel Type
Hydroelectric 6% Other 5%

Natural Gas 14% Coal 75%

Natural Gas 24%

Source: Company filings, Barclays Capital estimates.

MEHC also owns two electricity distribution companies in the United Kingdom that serve 3.8 million customers. Additionally, MEHC owns a merchant generation subsidiary that owns about 1,000 MW domestically, and internationally in the Philippines. Its final energy segment is an interstate electric transmission company within which MEHC operates two joint ventures. MEHC also owns the second largest real estate brokerage firm in the US, known as HomeServices of America. Warren Buffett expects HomeServices to acquire other brokers and for this business to be much larger a decade from now. Berkshire acquired an initial majority equity interest (ultimately increased to 89.5%) in MidAmerican Energy in 2000 for $2 billion in cash. In 2006, Berkshire acquired PacifiCorp for $5 billion in cash. In early days, Berkshire avoided investments in capital intensive businesses, such as utilities. However, as the company generated excess cash it became more willing to enter capital-intensive businesses as long as those businesses earned decent returns on their incremental investments. Unlike most of Berkshire’s businesses, MidAmerican has never paid a dividend, but has instead used its earnings to improve and expand its properties. We view regulated utilities XEL, AEP, DUK, WEC, LNT as MidAmerican’s best comps. (continued on next page)

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Figure 38. Regulated Utility Valuation Comparisons
REGULATED COMP SHEET - RATED 2-NEUTRAL
Current Price 04/08/10 $33.63 $33.96 $16.24 $50.18 $21.49 Expected Indicated Annual Annual Dividend Current Earnings Per Share Dividend Growth Yield 2009E 2010E 2011E $1.58 $1.56 $0.94 $1.60 $0.98 5.0% 3.0% 3.0% 10.0% 3.0% 4.7% 4.6% 5.8% 3.2% 4.6% $1.96 $2.97 $1.23 $3.20 $1.50 $2.55 $3.03 $1.25 $3.80 $1.62 $2.85 $3.20 $1.30 $4.05 $1.72 5 Year Est. EPS Growth 4% 3% 2% 8% 6% 2009E Price/ Earnings 17.2x 11.4x 13.2x 15.7x 14.3x 14.4x 13.9x 20.5x 2010E Price/ Earnings 13.2x 11.2x 13.0x 13.2x 13.3x 12.8x 13.2x 16.3x 2011E Price/ Earnings 11.8x 10.6x 12.5x 12.4x 12.5x 12.0x 12.4x 14.1x

Investment Opinion 1-OW 1-OW 2-EW 1-OW 2-EW Average

Ticker LNT AEP DUK WEC XEL

Company Alliant Energy American Electric Power Duke Energy Corp Wisconsin Energy Corp Xcel Energy

UTILITIES (28) S&P 500 Index 1,186.4 $22.11

3.8%

4.7% 1.9% $57.98 $72.93 $84.33

3.4% 15.6%

Source: Company data, Barclays Capital research.

PacifiCorp PacifiCorp is a vertically integrated electric utility that owns generation plants, and the system for transmitting and distributing the electricity. It is headquartered in Portland, Oregon and operates in six states: Utah, Oregon, Wyoming, Washington, Idaho, and California. PacifiCorp has 1.7 million retail electric customers and sold 65 million Megawatt-hours (MMWh) in 2009 through its retail and wholesale channels. Its retail operations are fully regulated, and its wholesale operations are subject to some degree of market pricing for sales. PacifiCorp operates 74 generating plants across the West, including coal, hydroelectric, wind-powered and geothermal facilities. Combined, PacifiCorp’s generating plants have a net capacity of 10,188 megawatts. PacifiCorp has more than 61,000 miles of distribution line and approximately 15,800 miles of transmission line – more than any other single entity in the West. The company’s Energy Gateway initiative, which was announced in 2007, has been expanded to develop more than 2,000 new miles of high-voltage transmission lines at a cost of more than $6 billion. The plan includes projects that will address customer load growth, improve system reliability and deliver energy from new windpowered and other renewable generating resources. MidAmerican Energy (MEC) MEC is likewise a vertically integrated electric and gas utility that owns generation plants and the system for transmitting and distributing the electricity. It is headquartered in Des Moines, Iowa, and operates its electric business in three states: Iowa (its largest market), Illinois, and South Dakota, and operates its gas distribution business in those three states as well as Nebraska. MEC has about 700,000 retail electric and 700,000 retail gas customers, and sold 33 MMWh and 121 thousand decatherms (Dth) of natural gas in 2009. MEC’s service territory encompasses 10,600 square miles and has a total population of approximately 2 million people. In Iowa, which represents about 90% of MEC’s sales, the company has operated under an agreement with the Iowa Utilities Board under which MEC agrees not to seek a general increase in base rates effective prior to January 1, 2014 as long as its ROE for any 12-month period stays above 10%. This stable, long-term, risk-reducing relationship that covers the vast majority of MEC’s business is a positive for the company, in our view. Production costs at MEC’s coal-fueled generation stations are lower than regional and national averages. The company has majority ownership in five of the six jointly owned coal-fueled generating stations in Iowa. Interstate Gas Pipelines Northern Natural Gas and Kern River are MECH’s two pipeline companies, which carry about 8% of the natural gas consumed in the U.S. These pipelines represent about 17,000 miles of transmission, 3 underground natural gas storage facilities, and 2 liquefied natural gas (LNG) storage peaking units. The storage units have a capacity of 73 Bcf (billion cubic

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feet), with over 2 Bcf/day of delivery capacity. The pipelines businesses contribute about 25% of MEHC’s EBIT, and management continues to invest in this business and grow capacity and throughput. Northern Natural Gas is based in Omaha and operates a network of interstate natural gas pipelines extending from the Permian Basin in Texas to the upper Midwest. Northern Natural Gas provides transportation and storage services to approximately 77 utilities and numerous end-use customers in the upper Midwest. The Kern River pipeline system transports natural gas for delivery into Utah, Nevada and California. CE Electric CE Electric is MEHC’s UK electric distribution holdings company, and is the owner of Northern Electric and Yorkshire Electricity, which between them serve 3.8 million electric customers in Northeast England. CE Electric is the second largest electricity distribution business in the U.K. These are distribution businesses, and not vertically integrated utilities similar to PacifiCorp and MEC in the US. These businesses are regulated in the UK by the Office of Gas and Electricity Markets (Ofgem). CE Electric contributes about 12% of MEHC’s EBIT. CalEnergy CalEnergy is MEHC’s merchant generation platform, consisting of 927 MW of primarily natural gas and hydroelectric plants in the US, and 128 MW of hydroelectric assets in the Philippines. The majority of the U.S. plants use renewable geothermal energy to generate electricity. HomeServices HomeServices, based in Minneapolis, Minnesota, is the second largest full service real estate brokerage firm in the US, with over 17,000 agents operating in close to 400 branch offices in 19 states under 21 different brand names. HomeServices is also the largest brokerage-owned settlement services (mortgage, title, escrow and insurance) provider in the United States. HomeServices represents about 9-10% of MEHC’s revenues, but only 2-4% of EBIT. Warren Buffett anticipates that this operation is likely to be much larger a decade from now. Other Investments MEHC participates in 2 electric transmission joint ventures: Electric Transmission Texas (ETT) and Electric Transmission America (ETA). ETT invests in Texas transmission projects, while ETA participates in projects located outside of Texas. All of its projects are long-dated, with current allowed ROEs on its projects ranging from 9.96% to 12.3%. On balance, we believe this could become a multi-billion dollar investment platform over the next 10-20 years, but the near-term earnings impact (i.e. 2-3 years) should be minimal. MidAmerican Financial Results & Outlook MEHC recorded revenues of $11.4 billion and $1.5 billion of pre-tax earnings in 2009 including a one-time stock-based compensation expense of $125 million. Pre-tax earnings in 2009 declined 12% excluding the $1.1 billion Constellation gain in 2008 and stock-based compensation expense in 2009. We show MEHC running about $1 billion of free cash deficits in 2009, but expect that condition to moderate significantly in 2010 as CAPEX comes down from $3.4 to $2.6 billion, and the impacts of several rate cases in PacifiCorp’s jurisdictions are felt. Looking ahead, we think MEHC’s businesses – particularly the PacifiCorp and MidAmerican businesses – are above average regulated utilities in above average jurisdictions. The long-term deal that MidAmerican has in Iowa is attractive, as long as MidAmerican is able to restrain costs well enough to earn better than a 10% ROE. That said, because of the Iowa deal, we don’t expect any outsized earnings growth from MidAmerican (which has 90% of its sales from Iowa), although we believe investors often prefer stability and certainty over growth in their utility investments. At PacifiCorp, all of its jurisdictions are average or better, and recent treatment in late 2009 and early 2010 suggests that regulation around the industry average can be expected going forward. Utah, in particular, which represents about 45% of the regulated utility rate base, just recently allowed a 10.6% ROE in its case, which we find to be constructive. All in, we are expecting 2-5% normalized annual pre-tax earnings growth at MEHC over the next 2 years, as the effect of PacifiCorp’s rate cases, coupled with a drop in some expenses and continued investment in the platform should continue to
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drive growth. We are not modeling any material improvement in economic condition or sales, and would expect a bias to the upside if economic conditions improve. MEHC’s after-tax ROE could fall to 8% in 2010 and 2011 from 9% in 2009, which is below the allowed ROE as the company invests in the business. Free cash flow could improve to roughly break-even by 2011, which is better than peers, reflecting a reduction in capital expenditures and modest growth in after-tax earnings. Figure 39. MidAmerican Energy Holdings Corp Results & Outlook
MEHC Revenues
$16,000 $14,000 $12,000 In $ mn In $ mn $10,000 $8,000 $6,000 $4,000 $2,000 $0 2005 2006 2007 2008 2009 2010E 2011E $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 ($500) 2005 2006 2007 2008 2009 2010E 2011E

MEHC Pre-Tax Earnings Includes $1.1 bn gain from investment in Constellation Energy

MidAmerican Energy Co

PacifiCorp

Natural gas pipelines

U.K. utilities

Real estate brokerage

Other

MidAmerican Energy Co

PacifiCorp

Natural gas pipelines

U.K. utilities

Real estate brokerage

Other

Return On Equity
20.0% 16.6% 16.0% 12.7% In $ mn 12.0% 8.0% 4.0% 0.0% 2005 2006 2007 2008 2009 2010E 2011E 11.4% 9.0% 7.2% 8.4% 7.9% $1,000 $500 $0 -$500 -$1,000 -$1,500 -$2,000 -$2,500 -$3,000 2005 2006 ($558) $563

Free Cash Flow

$4 ($98)

($1,167) ($2,050)

($1,010)

2007

2008

2009

2010E

2011E

Source: Company data, Barclays Capital estimates.

MANUFACTURING, SERVICE, AND RETAIL UNIT—ECONOMICALLY SENSITIVE Berkshire Hathaway’s Manufacturing, Service and Retail segment generated $62 million of revenue and $2 billion of pre-tax income in 2009, representing 15% of Berkshire’s segment earnings. This group of businesses appears to be Berkshire Hathaway’s most economically sensitive operation. In 2009, this segment’s revenues declined 7%, and earnings fell by half due to the challenging economic environment. The segment’s return on tangible equity (a performance metric tracked by Warren Buffett) deteriorated from 18% in 2008 to 8% in 2009, and we expect it could remain at depressed levels through 2011. We anticipate revenues and earnings results stabilizing through 2011 assuming a modest economic recovery. The Manufacturing, Service, and Retail operation was severely impacted by the global recession in 2009 with about one-half of the segment (based on revenues) seeing sharp declines in operating results. Meanwhile, McLane (wholesale distributor of groceries and nonfood items) and Marmon (diversified manufacturing and service businesses) held up reasonably well. Despite contracting sales in 2009, several businesses were able to expand margins and grow profits, including: Benjamin Moore (paint), Borsheims (jewelry retailing), H.H. Brown (manufacturing and retailing of shoes), CTB (agricultural equipment), Dairy Queen (ice cream/food restaurant), Nebraska Furniture Mart (furniture retailing), Pampered Chef (direct sales of kitchen tools), See’s Candies (manufacturing and retailing of candy), and Star Furniture (furniture retailing). Total segment revenues fell 7% to $62 billion in 2009 (with McLane being the only unit to report increased revenues), compared to a 12% increase in 2008 due to the Marmon acquisition (revenues increased 2.5% in 2008 excluding Marmon).

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Figure 40. Manufacturing, Service, and Retail Segment Change in Revenue
Revenue Change, Revenue Change, Y-o-Y, 2008 Y-o-Y, 2009 Marmon NA -8% McLane 6% 5% Shaw -6% -21% Other Manufacturing -2% -16% Other Service 8% -22% Retailing -9% -8% Total Segment 12% -7% Note: Excluding Berkshire’s acquisition of Marmon in 2008, total segment growth would have been 2.5% instead of 12%. Source: Company data, Barclays Capital Research Reporting Line

This segment’s revenues could stabilize in 2010 as the lingering effects of the recession ease. Earnings could trough by midyear 2010 after declining by half in 2009 as a result of the recession. Revenues and earnings could recover modestly in 2011 as the business environment improves. Of note, this segment’s pre-tax operating margin fell nearly three hundred basis points reflecting significant deterioration in the Other Manufacturing, Other Service, and Shaw reporting lines. Meanwhile, pre-tax income dropped 49% to $2.1 billion in 2009 driven by businesses leveraged to residential and non-residential construction as well as highly discretionary spending such as NetJets. The McLane and the Other Manufacturing reporting line (includes a variety of commercial and consumer manufacturing companies) are the biggest contributors to this segment’s revenues, although McLane’s operating margin is structurally low at 1%. Other Manufacturing and Marmon are the two largest earnings drivers in this segment. Figure 41. Manufacturing, Service, and Retail Segment Results
Manufacturing, Service, and Retail Revenue Mix Retailing, 5% Marmon, 8% Manufacturing, Service, and Retail Earnings Mix Retailing, 7%

Other Service, 11%

Marmon, 32%

Other Manufacturing, 19% McLane, 51% Shaw, 7%

Other Manufacturing, 38%

McLane, 16% Shaw, 7% Total FY09 Pre-Tax Earnings: $2.1 billion

Total FY09 Revenue: $61.7 billion

Revenues in $ billions $70 $60 $50 $40 $30 $20 $10 $0 2005 2006 2007 2008 $47 $53 $66 $59

Purchase of Marmon

Pre-tax Income $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Pre-tax Income Pre-tax income, in $ millions 8.0% Operating Margin
Impact of Recession

$62

$63

$66

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

2009

2010E

2011E

2005 2006 2007 2008 2009 2010E2011E Operating Margin

Note: Earnings mix excludes $91 million pre-tax loss in Other Service. Source: Company data, Barclays Capital Research

The Manufacturing, Service, and Retail segment is composed of six reporting lines including McLane (food distribution), Marmon (a variety of industrial manufacturing and service companies), Shaw (flooring company), Other Manufacturing (manufacturers of building products and other commercial products, and consumer products including apparel), Other service (flight training, jet fractional ownership, media outlets), and Retailing (furniture, jewelry, candy).

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Manufacturing, Service, and Retail Financial Outlook: Modest Recovery Expected Berkshire’s Manufacturing, Service, and Retail segment is expected to suffer from the lingering effects of the global recession. This segment’s revenues could recover modestly in the back half of 2010 and improve in full-year 2011, although we suspect earnings could remain depressed for several years. • Total revenues for the Manufacturing, Service, and Retail segment fell 7% year-over-year in 2009 to $61.7 billion (vs. a 2.5% year-over-year increase in 2008 excluding the purchase of Marmon). We anticipate revenues could grow +1% year-over-year in 2010 (mostly due to growth in 2H10) reflecting McLane’s growth being mostly offset by declines in the other units. We expect segment revenues could grow 5% in 2011 as the economy recovers. This segment’s operating margin fell significantly in 2009 to 3.3% from 6.1% in 2008 largely due to reduced earnings in the Shaw, Other Manufacturing, and Other Service reporting lines. We forecast margins could remain mostly stable at 3-4% in both 2010 and 2011. As a point of reference, 1-point change in pre-tax margin equates to approximately $600 million annually. Pre-tax earnings in this segment could improve modestly to $2.1 billion (+4% year-over-year) and $2.3 billion (+6% year-over-year) in 2010 and 2011, respectively, reflecting our outlook for slight revenue growth and positive operating leverage. Pre-tax earnings fell 49% in 2009 reflecting a weak economic environment. The Manufacturing, Service, and Retail segment could achieve an 8% return on tangible equity in 2010 and 2011, consistent with 2009, and far below the 18% return on tangible equity achieved in 2008.

• •

Figure 42. Manufacturing, Service, and Retail - Return on Tangible Equity
30% 25.1% 25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010E 2011E 7.9% 22.2% 22.8% 17.9%

Purchase of Marmon Impact of recession
8.1% 7.9%

Source: Company data, Barclays Capital Research

FINANCE & FINANCIAL PRODUCTS UNIT TIED TO THE HOUSING MARKET Berkshire’s Finance & Financial Products segment is mainly comprised of Clayton Homes, which is the largest company in the manufactured housing industry and includes a financing business. This segment accounted for 4% of Berkshire’s revenues and 6% of pre-tax earnings in 2009. We expect Clayton’s revenues and earnings to stabilize in 2010 and 2011 after declining in 2009 reflecting housing market weakness. Barclays Capital’s U.S. Economist Michelle Meyer believes the sharp drop in home prices has ended, but prices are bouncing around the bottom with little upside expected over the next few years. Manufactured housing typically provides a low entry price point for consumers into the housing market. However, we anticipate soft demand for manufactured homes due to increased affordability of homes, and higher mortgage rates for manufactured home buyers versus agency-insured mortgages. Manufactured/modular homes represented 14% of new homes built in 2008, according to data from the Harvard Joint Center For Housing Studies. (continued on next page)

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Figure 43. Finance & Financial Products Revenues & Pre-tax Earnings
Revenues $6,000 $5,000 In $ Millions In $ Millions $4,000 $3,000 $2,000 $1,000 $0 2005 2006 2007 2008 2009 2010E 2011E Other 1,400 1,200 1,000 800 600 400 200 0 2005 2006 2007 2008 2009 2010E 2011E Other Pre-tax Earnings

Manufactured housing & finance

Furniture/ transportation equipment leasing

Manufactured housing & finance

Furniture/ transportation equipment leasing

Note: Other earnings include earnings associated with Clayton Homes’ installment lending activities. Interest income associated with Clayton Homes’ installment lending activities is included in Clayton revenues with a corresponding charge reflected in Clayton Homes’s earnings. Source: Company data, Barclays Capital estimates.

Clayton Homes—A Leader In Manufactured Housing Clayton Homes, headquartered near Knoxville, Tennessee, is the largest company in the manufactured home industry, delivering 27,499 units in 2008, which represents about 34% of the manufactured housing industry total. Clayton is a vertically integrated manufactured housing company. As of 2009, Clayton operates 36 manufacturing plants in 12 states. Clayton’s homes are sold in 48 states through a network of 1,503 retailers, including 385 company-owned sales centers. Clayton is also developing 24 housing subdivisions in eight states. Berkshire acquired Clayton in 2003 for $1.7 bn in cash. Clayton’s results have been hurt by housing market turmoil along with the rest of the industry. Manufactured housing demand has been declining for years, with output falling to 60,000 units in 2009 from 382,000 in 1999, reflecting in part reduced new home construction as well as higher mortgage rates for manufactured home buyers versus agency-insured mortgages for sitebuilt homes. While the cost of a manufactured home is usually less than site-built homes, mortgage rates for a manufactured home are currently higher versus agency-insured mortgages because very few manufactured homes qualify for agencyinsured mortgages. For example, the average rate for an agency-insured mortgage is significantly below the roughly 9% for a mortgage for a manufactured home. On a positive note, Clayton has not experienced dramatic increases in delinquencies and foreclosures during the housing crisis due to its disciplined lending practices, even though its customers tend to have credit scores below nationwide averages. As a result, we do not expect meaningful loan losses in this business. For example, the latest data available show delinquency rates at Clayton were 3.6% in 2008 (versus 7% for the residential housing industry), up from 2.9% in 2006 and 2.4% in 2004. Clayton’s foreclosure rate in 2008 was 3.0% (in line with the residential housing industry) compared to 3.8% in 2006 and 5.3% in 2004. Clayton Homes manufactures and sells both manufactured homes and modular homes. Manufactured homes (formerly known as mobile homes) are built in a factory and transported to the building site. Modular homes are typically built in sections at a factory and assembled at the site by local contractors. Both manufactured and modular homes are less expensive to purchase than site-built homes (also know as stick-built houses). The advantages of manufactured and modular homes include low construction costs, fast building times (manufactured homes can be constructed in 1-2 days vs 3-6 months for site-built homes), and they are built under controlled conditions in a factory. Finance & Financial Products Segment Earnings Likely To Remain Depressed Reduced demand for manufactured homes and lower rental income at the furniture and transportation equipment leasing business could depress Finance & Financial Product segment’s revenues and earnings through 2010. A modest improvement in results is expected in 2011 as the housing market and economy recover. • The Finance & Financial Products segment’s revenues fell 7% in 2009 to $4.6 bn due to a decline in home unit sales at Clayton and lower rental income at the furniture and transportation equipment leasing business. We expect revenues to decline 1% in 2010 to $4.6 bn, and rise 2% in 2011 to $4.7 bn as both the housing market and the economy recover. Pre-tax earnings for the total segment fell 1% in 2009 to $781 mn due to a $79 mn increase in loan loss provisions at Clayton, partially offset by cost reduction efforts. We expect pre-tax earnings to decline 1% in 2010 to $774 mn and rise 2% in 2011 to $795 mn driven by a modest increase in Clayton home sales as the housing market bottoms. The pre-tax margin for the total segment rose to 17.0% in 2009 from 15.9% due to reduced expenses and higher net investment income. We expect the pre-tax margin be stable at 17.0% in 2010 and 2011.
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BERKSHIRE’S BALANCE SHEET & LIQUIDITY REMAIN STRONG Berkshire Hathaway’s strong balance sheet and liquidity are among its most enduring competitive advantages, we believe, even though the company is no longer rated AAA by the rating agencies. These factors are important for Berkshire’s reinsurance customers, as well as partners for mergers or investments. During the financial crisis, Berkshire was able to quickly deploy $20 bn of capital in deals with attractive financial terms for Berkshire including convertible preferred stock investments with attached warrants in Goldman Sachs, GE, and Swiss Re. In addition, Berkshire’s reinsurance customers at GenRe and Berkshire Hathaway Reinsurance Group demand high financial security and the ability to pay multi-billion dollar claims quickly. Berkshire has not repurchased its stock or paid a shareholder dividend historically, and we do not expect this strategy to change. Instead, Berkshire deploys excess capital into investments or acquisitions. The rating agencies stripped Berkshire Hathaway of its coveted AAA ratings owing to the impact of the financial crisis and weak economic conditions on Berkshire’s investments and earnings (particularly from its non-insurance businesses). The most recent downgrade was in response to Berkshire’s acquisition of BNSF in early 2010, based on the rating agencies’ view of Berkshire’s lowered excess capital and liquidity positions. Even so, Berkshire’s cost on $8 bn of debt it issued to partially finance the BNSF deal was likely only several bps higher versus previous spreads when Berkshire was rated AAA. We note that Berkshire’s 5-year CDS is currently at 104 basis points, which is a lower level than when it was rated AAA during the global financial crisis. Also, we doubt Berkshire intends to regain the AAA due to the significant additional capital required. In terms of sensitivity to changes in interest rates and equity markets as of YE09, a 100 bps increase in interest rates would have an estimated impact of $1.9 billion on Berkshire’s investment valuations and shareholders’ equity. A 5% change in equity in the value of Berkshire’s equity securities would potentially have a $3 bn impact. Figure 44. Berkshire Hathaway 5-Year CDS Spread

500

400

300

200

100

0

NU G

G

E T TA G

: u s e r N

a m

e = n u &p o t N l l

a m

e = n u l

2006

2007

2008

2009

2010

Source: Barclays Capital Live

Despite the rating agency downgrades, we believe Berkshire remains among the best-capitalized and most liquid insurers globally, with U.S. and European customers focusing mostly on the ratings from A.M. Best and S&P, respectively. All of Berkshire’s major insurance subsidiaries are rated AA+ by S&P and nearly all are rated A++ by A.M. Best. As of year-end 2009, Berkshire Hathaway has $136 billion in shareholders’ equity, and $146 billion in cash and investments, of which $8 billion has been earmarked for the BNSF acquisition. Separately, the aggregate statutory surplus (important for rating agency needs) for Berkshire’s U.S. P&C insurance operations is approximately $64 bn as of YE09 and is the largest in the U.S.

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Figure 45. Berkshire Hathaway’s Ratings from the Rating Agencies
Long-term issuer Senior unsecured Insurer financial strength Short-term / Commercial paper Standard & Poor’s AA+ (stable) AA+ (stable) AA+ (stable) A-1+ Moody’s Aa2 (stable) Aa2 (stable) Aa1 (stable) P-1 (stable) Fitch AA- (stable) A+ (stable) AA+ (stable) F1 A.M. Best Aa+ (negative) -A++ (under review, negative implications) --

Source: S&P, Moody’s, Fitch, A.M. Best, Barclays Capital research.

Capitalization and Financial Leverage Both Rising Berkshire Hathaway balance sheet risk increased as a result of the BNSF acquisition, although it appears manageable barring another shock to the financial system. As of year-end 2009, Berkshire’s capital base not adjusted for the BNSF acquisition stood at $169 billion. Importantly, 78% of capitalization is from shareholders’ equity, of which the vast majority is retained earnings. As of YE09, Berkshire’s tangible equity is $97 billion excluding $34 billion goodwill generated from acquisitions, up from $75 billion at year-end 2008. Figure 46. Berkshire Hathaway Capital Structure
Berkshire Total Capital BNI Acquisition $200 $150 in $ bil $100 $50 $0 2005 2006 2007 2008 2009 2010E 2011E 2005 2006 2007 2008 2009 2010E 2011E Berkshire Total Debt Berkshire Total Equity Berkshire Total Debt Berkshire Tangible Equity Berkshire Tangible Capital

$200 $150 in $ bil $100 $50 $0

Source: Company data, Barclays Capital Research

Berkshire’s financial leverage increased over the past several years, with adjusted debt-to-total capital3 rising from 6% in 2005 to 18% in 2006, reflecting the acquisition of MidAmerican. Adjusted debt-to-total capital declined to 16% in 2009 driven by a recovery in investment marks. We anticipate financial leverage could rise to 22% in 2010 driven by the additional $18 bn of debt related to the BNSF acquisition. As of year-end 2009, total debt (excluding $12 bn from Berkshire Hathaway Finance Corp. used for operating leverage) was $26 billion, of which about $20 billion is from MidAmerican. Neither the MidAmerican debt nor the $10 billion of existing BNSF debt is guaranteed by Berkshire. Berkshire Hathaway completed the acquisition of the remaining 77.4% of BNSF it did not already own in February 2010, which is its largest deal to date. Berkshire paid $26 billion and assumed $10 billion of existing BNSF debt. Berkshire funded this $26 billion deal with $10.1 billion in newly issued stock and $15.9 billion in cash – the cash portion was funded with $8 billion of externally raised debt raised at low rates, and $8 billion of existing cash. As a result of the BNSF acquisition, Berkshire’s goodwill is expected to increase $16.5 bn. (continued on next page)

3 Adjusted debt-to-total capital includes all debt, except debt issued for Berkshire Hathaway Finance Corporation (BHFC). BHFC’s debt, which is guaranteed by Berkshire Hathaway Inc., is used as operating leverage for Clayton Homes. We include the debt of both MidAmerican and BNSF in our adjusted debt-to-total capital calculation, although their debt is not guaranteed by Berkshire Hathaway Inc.

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Figure 47. Berkshire Hathaway Adjusted Debt-to-Capital
25% 20% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010E 2011E 6% $18 billion of debt related to BNSF acquisition 18% 17% 19% 16% 22% 21%

Source: Company data, Barclays Capital Research

Berkshire generates strong liquidity from its operations, and maintains significant cash balances of $30.6 billion as of year-end 2009, down from $25.5 billion a year earlier. Including the use of existing cash for the BNSF acquisition, Berkshire’s cash is estimated to be down to about $22.6 billion currently, which would be the lowest level in many years and approaches Berkshire’s internal minimum requirement of $20 billion. Notably, Moody’s said in February 2010 that a decline in Berkshire’s cash approaching $10 bn or less could trigger another downgrade. Figure 48. Berkshire Cash and Cash Equivalents
Marmon Acquisition and investments in Goldman and others

$50 $40

$45

$44

$44 $31

BNSF Acquisition

in $ bil

$30 $20 $10 $0 2005 2006 2007

$26

$23

2008

2009

1Q10E

Note: Cash and Cash Equivalents for 2005 is presented proforma for the MidAmerican acquisition Source: Company data, Barclays Capital research.

Strong Free Cash Flow Berkshire’s free cash flow was robust at $11 billion in 2009, and we expect it to ease to approximately the $8 billion-range in both 2010 and 2011 driven by less cash flow from operations and increased capital expenditures. Berkshire intends to deploy a meaningful portion of future cash flow into capital intensive businesses, including MidAmerican and BNSF. Capital expenditures at MidAmerican are expected by Berkshire to be $2.6 bn in 2010, down from $3.4 bn in 2009. BNSF’s capital expenditures are expected by the company to be $2.4 bn in 2010.

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Figure 49. Berkshire Hathaway Free Cash Flow
$12 $10 $8 i n $ bil $6 $4 $2 $0 2 005 200 6 2 007 20 08 2009 201 0E 2 011E $7 .3 $5.6 $7 .2 $5.1 $7.9 $10.9 $ 8.5

Note: Free cash flow is net cash flow from operations, less purchases of property, plant, and equipment. Source: Company data, Barclays Capital research.

Clayton’s Lending Portfolio Appears Stable Clayton Homes, Berkshire’s manufactured housing operation, offers home mortgage originations. This operation risks losses from non-performing loans, although Clayton’s conservative lending practices should help keep these losses contained. For example, the average down payment for Clayton’s borrowers above the industry average and loans are all fixed rate and fixed term. The ability for Clayton to fund these loans, however, depends on access to the capital markets. As of early 2010, Clayton had about $11.5 billion of notes issued by BHFC for the funding of Clayton’s loans. Loan loss provisions were $380 million in 2009 up from $305 million in 2008, and loan charge-offs were $335 million in 2009 up from $215 million in 2008. Clayton’s allowance for loan loss reserves was $348 million 2009, up from $298 million in 2008. Insurance Reserves Showing No Problems Currently Berkshire Hathaway’s property-casualty loss reserves have generated favorable development over the past few years although the benefit is slowing, consistent with industry trends. The company’s incurred loss development trends appear benign currently, and we anticipate this trend should continue over the next few years. Although no problems appear to be on the horizon, we closely monitor the reserve development trends of Berkshire Hathaway Reinsurance Group (BHRG) and GenRe. This is because these operations contain the largest concentration of the company’s long-tail liability exposures and have the potential to generate the most volatility in reserving over the course of a cycle. Berkshire Hathaway Reinsurance Group (BHRG) and GenRe account for the majority of net unpaid loss reserves, which generate float. Although GenRe has not suffered reserving problems for more than five years, this risk still exists because tort cost and general economic inflation could increase from currently low levels. Figure 50. Net Insurance Unpaid Loss Reserves
Berkshire Hathaway Primary Group, 9%

GEICO, 16%

BHRG, 44%

General Re, 31%

Total Net Unpaid Losses $52 billion at YE09

Note: Unpaid losses are net of reinsurance recoverable and deferred charges on reinsurance assumed and before foreign currency translation effects. Source: Company data, Barclays Capital Research 41

Equity Research

Berkshire’s P&C operations have released reserves over the past several years, which boosted pre-tax earnings by $905 million in 2009, $1.1 billion in 2008, and $1.5 billion in 2007. We expect this benefit to slow in 2010 and 2011 because pricing has eroded and loss cost inflation could increase. Figure 51. Total P&C Prior Year Loss Reserve Development
$0 ($200) ($400) ($600) in $ mil ($800) ($1,000) ($1,200) ($1,400) ($1,600) 2005 2006 ($1,478) 2007 2008 2009 2010E 2011E ($1,140) -5% -6% ($775) ($905) -4% ($357) ($612) -3% ($225) 0% -1% -2% Combined Ratio Points

Prior Year Development

Prior Year Development Combined Ratio Impact

Source: Company data, Barclays Capital Research

DERIVATIVES EXPOSURE REQUIRES MONITORING Berkshire Hathaway attracted unwanted attention in 2008 and early 2009 due to its growing derivatives exposure. The company increased its exposure to fluctuating investment valuations by selling long-dated put options on equity indexes and high yield indexes as well as credit default protection for states/municipalities and individual corporations with a total notional value of $63 bn. On a positive note, these contracts provided Berkshire with $6 bn of float for investment, the contracts cannot be settled prior to expiration, and the marks reversed to positive territory after 1Q09. Economic risk from Berkshire’s derivatives appears manageable, in our view. This is because the equity put options are European style (only exercisable just prior to expiration), and require payment by Berkshire in about 11.5 years if the index price is lower than the level when the contract was written. Notably, in 2009 Berkshire reduced the strike prices and shortened the maturities of about 10% of its equity put options. That being said, Berkshire’s derivative contracts enhance its exposure to equity markets as well as to the debt service capabilities of states and municipalities in a challenging fiscal environment. Berkshire’s derivatives contracts produce meaningful accounting swings in net income due to marking these securities to market each quarter. As a point of reference, Berkshire estimates a 30% increase in equity markets could result in about a $2 bn accounting gain in its equity put options, and a 30% decrease could result in about a $3 bn accounting loss (1.5% of shareholder’s equity). Figure 52. Notional Value of Berkshire Hathaway Derivative Contracts, YE09
Individual corporate, $3.6 bn Credit default obligationsStates/ municipali ties, $16.0 bn Credit default obligations- High yield indexes, $5.5 bn

Equity index put options, $38.0 bn

Total Notional Value=$63.1 Bn

Source: Company data, Barclays Capital research. 42

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Berkshire’s Derivatives Risk Appears Manageable Berkshire’s derivatives exposure present low liquidity risk, in our view, because only a small number of Berkshire’s contracts require posting of collateral. This means Berkshire is unlikely to suffer a liquidity squeeze even if contracts are substantially out of the money prior to expiration. Berkshire posted collateral of roughly $35 million related to its equity put options as of year end 2009. Berkshire’s peak collateral requirement was $1.7 bn in early 2009 during the heart of the financial crisis. Berkshire’s derivative exposures appear to present reasonable economic risk over the life of the contract, in our view. Twothirds of Berkshire’s derivatives are equity puts written on the S&P 500 and 3 foreign equity indices, and all of the contracts are European-style options with an average life of about 11.5 years. We view the probability of economic losses on these contracts occurring as low, because it would mean equity market indexes decline over 11.5 years compared to the index values at the inception of the contract. In a pessimistic scenario, a 25% decline in equity markets at expiration (11.5 years on average) could cause Berkshire a $9.5 bn loss (25% of $38 bn notional value). Importantly, this modeled potential loss should be viewed in light of the float generated by $4.9 bn in upfront premiums. Figure 53. Potential Payout Of Berkshire’s Equity Puts
$10 Potential Payout, in $ bn $0 ($10) ($20) ($30) ($40) -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% % chg equities over 15-20 yrs

$4.9 bn premium

Note: Does not include expected benefit of investment income over 11.5 years from about $4.9 bn in premium. Source: Barclays Capital estimates.

Berkshire is exposed to economic risk from derivative contracts on credit losses from states/municipalities, high yield indices, and individual corporate bonds. The total notional value of these contracts is $25 bn. Warren Buffett “feels good” about its exposure to states/municipalities, which represents $16 bn of notional exposure. Berkshire’s high yield credit derivatives ($5.5 bn of notional exposure) could experience losses due to significant bankruptcy activity in 2008. The potential maximum loss on these contracts is $5.5 billion (fair value for Berkshire at 3Q09 is a loss of $781 mn), although potential losses should be considered in light of premiums received at inception of $3.4 bn as of year end 2008 and investment income generated on these premiums over the 5 year life of the contract. Importantly, Warren Buffett expects its derivatives contracts in aggregate to deliver a profit over their lifetime, even excluding investment income earned on the $6 billion of float. Furthermore, Berkshire’s derivatives have low counterparty risk, in our view, because the company requires cash payments at initiation of the derivatives contracts. This means Berkshire always holds the money and assumes no meaningful counterparty risk. These payments to Berkshire amounted to $6 bn at year end 2009, and represents Berkshire’s derivatives float. Derivative Accounting Swings Can Be Meaningful We view Berkshire’s economic risk from derivatives as manageable. However, accounting swings in Berkshire’s income statement from derivatives can be meaningful because the company is required to mark-to-market its derivatives exposure. This GAAP accounting treatment led Berkshire to recognize a $6.8 bn of loss in 2008 when equity and credit markets
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plunged. In 2009, Berkshire recognized an accounting gain of $3.6 bn due to a recovery in financial markets. A sensitivity analysis of Berkshire’s equity puts and potential impact to net income and shareholder’s equity from a 30% increase or decrease in equity markets is shown below. Berkshire uses Black-Scholes to mark its equity put portfolio, although we cannot accurately replicate this sensitivity analysis because the strike prices are not disclosed. Figure 54. Equity Put Sensitivity Analysis
Est. Fair Value Equity Put Options (Balance Sheet liability)
$3,000 $0 In $ millions In $ millions ($2,000) ($4,000) ($6,000) ($8,000) ($10,000) ($12,000) Fair Value, 3Q09 Optimistic Scenario: 30% increase equities ($10,428) Pessimistic Secnario: 30% decrease equities ($7,309) ($5,291) $2,000 $1,000 $0 ($1,000) ($2,000) ($3,000) ($4,000) Optimistic Scenario: 30% increase equities ($3,119) Pessimistic Secnario: 30% decrease equities

Est. Income Stmt Accounting Gain/ Loss
$2,018

1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0%

Est. Accounting Gain/ Loss As A Pct Of Shareholder's Equity Under Stressed Scenarios
1.0%

-1.5% Optimistic Scenario: 30% increase equities Pessimistic Secnario: 30% decrease equities

Source: Company data, Barclays Capital research.

Berkshire’s Derivatives Contracts Background Berkshire Hathaway is party to approximately 250 derivative contracts with a total notional value (the nominal exposure to a derivative’s underlying securities) of $63 billion at YE09 and an average contract life of 11.5 years (details provided in Figure 55). These contracts generate substantial float for Berkshire of $6.3 billion as of year end 2009 since Berkshire collects premiums at the inception of the contract. Similar to insurance float, if Berkshire breaks even on the underlying contract, it has enjoyed the use of free money for years (although the company expects to perform better than breakeven). Warren Buffett considers himself the chief risk officer at Berkshire and is in charge of monitoring derivatives positions. (continued on next page)

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Figure 55. Berkshire Hathaway’s Derivative Exposures, As of YE09
Derivative Notional Value, YE ‘09, in $ millions $37,990 Fair Value, YE ‘09, in $ millions $(7,309) Weighted Average Duration Maturity Premium as of YE ‘08 Reference Index Explanation

Equity Put Portfolio

11.5 yrs

20182028

$4.9 bn upfront

S&P 500, FTSE 100 in the U.K., Euro Stoxx 50, Nikkei 225 in Japan Over 500 states & municipalities Contracts typically cover 100 high yield issuers 42 individual corporations

Credit Default Obligation, state/ municipalities Credit Default Obligation, high yield indices

$16,042

$(853)

11 yrs

20192054 20102013

NA

$5,533

$(781)

2 yrs

$3.4 bn upfront

Credit Default Swaps on individual companies

$3,565

$81

5 yrs

2013

$93 mn received annually

Berkshire pays its counterparty at maturity if the reference index is below what it was at inception. Options are European-style and neither party can settle early. In 2009, Berkshire shortened the maturities and reduced the strike prices on about 10% of its equity put contracts. Berkshire pays when credit losses occur at covered states and municipalities. Warren Buffett said he “feels good” about these exposures. No counterparty risk exists. Berkshire pays when credit losses occur at companies that are included in various highyield indices. Warren Buffett said the possibility of a loss on these contracts is high due to the recession and significant bankruptcy activity. No counterparty risk exists. Credit insurance covering individual corporate issuers. Berkshire receives premium annually, therefore, these are the only derivative contracts written by Berkshire with counterparty risk- that is, risk the counterparty will not pay the quarterly premium over the 5 year life of the contract. Notably, Berkshire is unlikely to expand this business because most buyers now insist the seller post collateral, which Berkshire will not agree to.

Source: Company data, Barclays Capital research.

VALUATION – BERKSHIRE SHARES APPEAR FULLY VALUED Estimating the fair value of Berkshire Hathaway’s shares is a challenging exercise because the company is a conglomerate of insurance, railroads, utilities, manufacturing, finance, service, and homebuilding businesses, meaning it has no directly comparable peers. Instead, we valued the stock using three approaches: Price-to-book (our favored metric because book value is a conservative starting point in our view), sum-of-the-parts, and intrinsic value. We are using a price target of $88 per Class B share ($132,000 per Class A share) based on a multiple of 1.30x (below the average historical multiple of 1.59x since 2000) our YE11 book value estimate of $68 per Class B share ($101,500 per A share). We also estimate Berkshire’s fair value using sum-of-the-parts and intrinsic value methods, which generate an outlook of approximately $87 per Class B share ($130,000 per Class A share) and $73 per Class B share ($110,000 per Class A share), respectively. As a point of reference, Class B shares are valued at 1/1,500th of Class A shares. (continued on next page)

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Figure 56. Berkshire Hathaway Valuation Methods
Valuation Method Approximate estimated fair value per share Strengths of this method • • Price-to-stated book $88 per Class B share $132,000 per Class A share Easy to calculate. Historical basis for valuation. • Sum-of-the-parts $87 per Class B share $130,000 per Class A share Applies separate valuation for each business. • • • • Valuation based on comprehensive income (incl. est. investment gains). Determining the right valuation for each segment can be a challenge. • Intrinsic value $73 per Class B share $110,000 per Class A share Warren Buffett uses a modified version. Separately values investments and operating units. Many estimated inputs, including WACC and terminal value of future earnings.

Drawbacks of this method

• •

Book value is believed to be lower than intrinsic value. BNSF is newly acquired, so historical valuation is not highly relevant.

Source: Barclays Capital research.

Price-To-Book Valuation We tend to give our price-to-book valuation method the most emphasis because book value per share is a critical valuation metric for the company, although it likely understates the economic value of many acquired businesses. Also, the comparability of Berkshire’s historical price/book valuation to current levels is somewhat limited since historical valuation data does not include the recently completed acquisition of BNSF. We apply a 1.30 price-to-book multiple on our year-end 2011 book value per Class B share estimate of $68 ($101,500 per Class A share) to develop our price target of $88 per Class B share ($132,000 per Class A share). Berkshire currently trades at 1.41x stated YE09 book value per Class B share of $56. Since 2000, the stock has traded at an average of 1.59x, a high of 1.99x, a low of 1.11x, and one standard deviation from the mean equal to 0.19x. Berkshire currently trades at 1.91x tangible YE09 book value per Class B share of $42 ($62,594 per Class A share). Since 2000, the price-to-tangible book multiple average is 2.26x, with a high of 3.17x, a low of 1.58x, and one standard deviation from the mean equal to 0.36x. Our $88 price target per Class B share implies a price-to-tangible book multiple of 1.86x on our year-end 2011 tangible book value per Class B share estimate of $47. We believe it is reasonable to expect that in 12-18 months BRK shares could be trading at a lower stated price-to-book valuation than currently because we anticipate weakness in the Insurance segment, a modest improvement in Non-Insurance earnings except BNSF, slowing book value per share growth, and declining ROE. In addition, Berkshire’s current valuation likely already takes into account the benefit of improving economic conditions. Figure 57. Berkshire Hathaway Price-To-Book & Price-to-Tangible Book
2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 Trailing Price-to- Stated Book Multiple 3.3 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 Trailing Price-to- Tangible Book Multiple

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Source: FactSet, Barclays Capital research.

Sum-Of-The-Parts- $87 Per Class B Share Our sum-of-the-parts valuation analysis is a useful check for our price-to-book methodology, and estimates Berkshire’s fair value to be approximately $87 per Class B share ($130,000 per Class A share). We assume an ongoing annualized unrealized equities return of 8%. As a point of reference, each 2-percentage point change in annual equity returns could
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adjust our estimate of Berkshire’s book value per share by roughly $0.30 per Class B share ($450 per Class A share, 0.5% of book value per share). Step 1: Estimate the value of the Insurance business Our starting point for valuing the Insurance operation is Berkshire Hathaway’s $65 billion of U.S. P&C statutory capital as of YE09. We are using statutory capital, which we normally view as a conservative measure of tangible equity, because GAAP equity for the entire Insurance business is not readily available and it includes substantial goodwill. We apply a multiple of 1.3x to current statutory capital to develop a rough estimate of about $85 bn of the value of the Insurance business. The multiple we are using is above the P&C sector average of 0.90x reflecting the strong franchise value of GEICO, GenRe, and National Indemnity. GEICO’s closest peer is probably PGR, which trades at 2.1 times book value, although PGR has much higher ROEs than GEICO because of its elevated operating and financial leverage. Most of the publicly-traded reinsurers trade at or below 1x book value, although we view National Indemnity as having few peers. Figure 58. Berkshire’s Insurance Unit Valuation (in $bn)
N atonalI i ndem niy Co. t C ol bi I ur um a ns ance Co. G ener Re al G EI CO Tot al M uli e appled tpl i I nsur ance val i uaton Source: SNL, Barclays Capital research. YE09 St ut y at or Capial t $38 8 10 8 65 1. 31 x 85 Es i at tm ed Val i uaton 1. 25 1. 25 1. 20 1. 75 1. 31 Est . Val ue $48 11 12 15 85

Step 2: Estimate the value of the Non-Insurance businesses: The contributions from the Non-Insurance businesses include BNSF, the Manufacturing, Service & Retail segment, MidAmerican, the Finance and Financial Products unit, and unrealized investment gains. In total, we value these operations at about $129 bn based on an implied P/E of 14x-15x estimated 2011 earnings. Figure 59. Berkshire’s Non-Insurance Operations Valuation (In $bn)
BN SF M anuf uri s vi & r ai act ng, er ce et l M i m ercan dA i Fi nance and fnanci pr i al oduct s Tot al U nr i ealzed appreci i ofi aton nvest ent m s Gr and t al ot
(a) Assumes 34% effective tax rate. Source: Barclays Capital research.

Pr t earni e- ax ngs 2011E 3. 8 2. 3 1. 8 0. 8 8. 6 5. 0 13. 6

Pct 2011E . Ear ngs ni 28% 17% 13% 6% 37% 100%

P/E 15. 0 15. 0 12. 0 15. 0 15. 0 14. 6

A fer t t - ax val i ( uaton, a) 37 22 14 8 81 49 129

Our weighted average estimated fair value 2011 P/E of 14x-15x for the Non-Insurance businesses and unrealized investments operations is based on applying a: • P/E of 15x for BNSF, which was acquired by Berkshire Hathaway for 16x 2010 est. EPS. Peer railroad operator stocks are UNP, CSX, and NSC, which are currently trading at 14x-15x 2011 estimated EPS, according to Gary Chase, Barclays Capital’s senior airfreight & ground transportation equity research analyst. • 15x for Manufacturing, service, and retail, as well as Finance and Financial Products based on a expected earnings recovery over the next several years. • 12x for MidAmerican. The best comparable stocks are XEL, EAP, DUK, WEC, and LNT (regulated utilities currently trade at an average of 12x 2011 estimated EPS) according to Daniel Ford, Barclays Capital’s senior Utilities equity research analyst. • 15x for unrealized investment gains, which reflects the value added by Warren Buffett’s management. The most relevant asset manager comparables are BEN (currently trading at 16x estimated 2011 EPS), BLK (16x), TROW
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(19x), and LM (20x), according to Barclays Capital’s Senior Broker and Asset Manager equity research analyst Roger Freeman. Step 3: Add the valuations of the Insurance and Non-Insurance businesses. We add the estimated value of the Insurance business of $85 bn to the value of the Non-Insurance businesses (including unrealized investment gains) of $129 billion to develop our sum-of- the-parts valuation for Berkshire Hathaway of $214 billion, or about $87 per Class B share ($130,000 per Class A share). Intrinsic Value- $73 Per Class B Share The intrinsic value method estimates Berkshire’s fair value to be approximately $73 per Class B share ($110,000 per Class A share). This method is the most complex of the three since we need to make various assumptions including the company’s long-term earnings power, and its weighted average cost of capital (WACC). Similar to our other valuation estimates, the intrinsic value method assumes Berkshire does not acquire any companies in the future that would add to earnings power and is likely an overly conservative stance. Our method of estimating Berkshire’s intrinsic value differs slightly from Warren Buffett’s approach—Mr. Buffett’s methodology is to sum the 1) per-share value of cash and investments of the insurance business, and 2) the present value of pre-tax future earnings from businesses other than insurance and investments. We take a slightly different, and perhaps more conservative, approach by taking the sum of 1) the value of cash and investments of the insurance business, and 2) the present value of expected after-tax earnings of the non-insurance businesses to value the company. We then take the additional step of subtracting the value of all Berkshire’s debt to estimate the value of the equity. Our approach adjusts for the impact of taxes as well as focusing on the value of the company from an equity holder’s perspective. Our major assumptions and results of our intrinsic value analysis: • Value of investments and cash of the insurance and other business: $138 bn based on $146 bn (actual amount as of 4Q09), less $8bn of internal cash for the BNSF acquisition. • Present value of future non-insurance after-tax income: estimated at $99 bn, based on our assumptions of earnings growth of 2.5% from 2013-2020 and a perpetual earnings growth rate of 1.5%. Our estimates are for WACC of 7.2% and a discounted terminal value multiple of 18 times. • Adding these two components provides an estimate of intrinsic value of $237 billion. We then subtract the value of all debt (including assumed debt from BNSF and operating debt in the finance operations) of $56 billion to estimate an intrinsic value of the equity of $181 billion, or approximately $73 per Class B share ($110,000 per Class A share). Following is our scenario analysis summary for our intrinsic value estimates per Class B share using different assumptions for Berkshire’s weighted average cost of capital, and the company’s perpetual growth rate. Figure 60. Intrinsic Value Scenario Analysis Summary –Per Class B share Val i Scenaro Anal s ( Cl B Shar uaton i ysi Per ass e)
W t avg.cos ofcapial d. t t 7% 8% $65 $61 $67 $63 $69 $65 $73 $67 $77 $70

Per ual pet Gr t ow h Rat ( e g)

2% 1% 0% 1% 2%

6% $70 $73 $76 $81 $89

9% $59 $59 $61 $63 $65

10% $56 $57 $58 $59 $61

Source: Barclays Capital research.

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Figure 61. Berkshire Hathaway Intrinsic Value Analysis
(n $m ilons exceptper s e) I li , har Val i Sum m ar uaton y (n $m n exceptper s e) I har Val ofi ue nvesm ent & cas ( t s h a) PV ofnon-ns ance A/T i i ur ncom e Com pany val ue L s debt( es : b) Val ofs ehol s equiy ue har der ' t Cl s A and equi ents es out( as val har .c) Val ofequiy per Cl s A equi s e ue t as v. har Val ofequiy per Cl s B equi s e ue t as v. har W ei ed avg.costofcapial( ACC) ght t W M ktval ofequiy ue t 201, 896 Debt 55, 909 257, 805 Tot al $137, 982 99, 179 237, 161 ( 909) 55, 181, 252 1. 65 $109, 850 $73 Bet a 10 Yr US Tr ur yi d eas y el Ri k pr i s em um M ar r ur ket et n Cos ofequiy t t Cos ofdebt pr t t , e-ax 1Tax r e at Cos ofdebt afer t t , t -ax W ACC Per ualgr t r e ( pet ow h at g) 0. 89 3. 9% 5. 0% 8. 9% 8. 4% 4. 7% 0. 66 3. 1% 7. 2% 1. 5% 78% 22% 100%

2010E N on-nsur I ance i ncom e Buri on N orher Sant Fe lngt t n a Utltes & Ener ( i iii gy M dAm ercan) i M anuf urng,Ser ce & Ret l act i vi ai Fi nance & Fi nanci Pr al oduct s L s M i iy i er t es : nort nt es Tot Segm entpr t i al e-ax ncom e Efectve t r e f i ax at Tot Segm entafer t i al t -ax ncom e Di countperod s i PV afer t i t -ax ncom e + t m i val er nal ue W A CC 2, 949 1, 746 2, 138 773 ( 400) 7, 206 34% 4, 756 1 4, 436 7. 2%

2011E 3, 811 1, 785 2, 260 783 ( 400) 8, 239 34% 5, 438 2 4, 731

2012E 4, 002 1, 874 2, 373 822 ( 420) 8, 651 34% 5, 710 3 4, 633

2013E 4, 102 1, 921 2, 432 843 ( 431) 8, 867 34% 5, 852 4 4, 430

2014E 4, 204 1, 969 2, 493 864 ( 441) 9, 089 34% 5, 999 5 4, 235

2015E 4, 309 2, 018 2, 555 885 ( 452) 9, 316 34% 6, 149 6 4, 049

2016E 4, 417 2, 069 2, 619 907 ( 464) 9, 549 34% 6, 302 7 3, 871

2017E 4, 527 2, 121 2, 685 930 ( 475) 9, 788 34% 6, 460 8 3, 701

2018E 4, 641 2, 174 2, 752 953 ( 487) 10, 032 34% 6, 621 9 3, 538

2019E 4, 757 2, 228 2, 821 977 ( 499) 10, 283 34% 6, 787 10 3, 383

2020E 4, 876 2, 284 2, 891 1, 002 ( 512) 10, 540 34% 6, 957 11 3, 234

Ter i m nal Val ue 4, 997 2, 341 2, 964 1, 027 ( 525) 10, 804 34% 7, 131 12 54, 940

Ter i m ul. m nal t 17. 8 ( 1+g) W ACC/( g)

(a) As of YE09, adjusted for $8bn earmarked for BNSF acquisition. (b) Includes $18 bn of debt related to BNSF acquisition. (c) Includes shares issued for BNSF acquisition. Source: Barclays Capital research.

Berkshire Hathaway Share Price Performance Berkshire Hathaway shares significantly outperformed the S&P 500 Index including dividends year-to-date in 2010, as well as over the trailing 3, 5, and 10 year periods driven by Warren Buffett’s success in generating strong book value growth, earnings, and investment returns. However, the stock underperformed the S&P 500 over the past 12 months reflecting the company’s increased volatility in both earnings and book value growth. The 21% advance in BRK shares so far in 2010 versus a 7% increase in the S&P 500 Index (including dividends) has been driven in part by the stock being added to the S&P 500 Index, we believe. Going forward, we expect BRK shares to perform mostly in line with the S&P 500 driven by book value per share growth although operating earnings appear stalled through 2011. Figure 62. Berkshire Stock Performance Vs. S&P 500
140% 120% 100% 80% 60% 40% 20% 0% -20% Year-to-date Past 1 Yr BRK.B -12% Past 3 Yrs -6% Past 5 Yrs past 10 Yrs 21% 7% 36% 49% 10% 37% 11% 116%

S&P 500 incl dividends

Source: SNL Insurance, Barclays Capital research.
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BERKSHIRE HATHAWAY RISKS There are several risks that could impede the achievement of our price target for Berkshire Hathaway. • • • Executive Management Risk. Warren Buffett, age 79, in consultation with Charles Munger, age 86, is responsible for all major capital allocation decisions for Berkshire Hathaway. It is not known currently when Mr. Buffett plans to retire, although the board of directors has a succession plan in place. Large and concentrated stock investments. Berkshire Hathaway has large ownership stakes in equities substantially concentrated in seven companies. If the value of these stocks decline, it could result in reduced shareholders’ equity. Derivatives losses. Berkshire has exposure to losses from its credit default and equity index put option contracts although it has received significant compensation for assuming risks. The equity index put option contracts ($38 bn notional value) do not expire before 2019, and it would appear to require massive declines in the equity indexes as of expiration for Berkshire to suffer economic losses. There is no cash settlement before expiration, although mark-tomarket effects will be reflected in Berkshire’s income statement on an ongoing basis. Volatile earnings. Berkshire Hathaway’s quarterly and annual earnings can be more volatile than many other large publicly traded companies, reflecting a focus on long-term economic returns, as well as exposures to shock insurance losses, derivatives, utility and energy markets, railroads, and economically sensitive manufacturing and services businesses. Insurance Risks. These include natural and man-made catastrophe losses including hurricanes and terrorism, large individual underwriting transactions, potential loss reserve inadequacies, and further deterioration in reinsurance market conditions. Berkshire estimates it could incur a probable maximum loss of roughly $7 bn from a single catastrophe loss event, although it believes it is being paid properly to assume this risk. Berkshire has $59 billion in loss reserves for insurance operations, which means if adverse loss reserve development occurred it could have a material impact on reported earnings. Credit Ratings. Berkshire Hathaway’s counterparty credit and insurer financial strength ratings have been reduced by S&P, Moody’s, and Fitch to the AA level from AAA after the close of the BNSF acquisition. Moody’s cited potential additional downgrade thresholds such as losses from insurance underwriting, investments and/or derivatives causing a 20% decline in shareholders’ equity in a given year, or a decline in cash balances to levels approaching $10 billion (cash as of year-end 2009 is $23 billion, adjusted for $8 bn earmarked for the BNSF acquisition ). Berkshire’s utilities and manufactured housing finance operations depend on access to borrowed funds through the capital markets. Mergers and acquisitions. Berkshire Hathaway has completed significant acquisitions over time to enhance and diversify its earnings, which presents both execution and, sometimes, financing risk. It’s most recent acquisition of railroad operation Burlington Northern Santa Fe for $26 billion is Berkshire’s largest ever. Regulatory Risk. If the U.S. federal government decided to nationalize catastrophic insurance risk from hurricanes, which we believe is highly unlikely to occur, it could lead to reduced demand for property reinsurance coverage offered by Berkshire. Berkshire’s utility, energy, and railroad operations are also in highly regulated industries.

• •

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Figure 63. Berkshire Hathaway Annual Summary Financial Model
(In $millions, except per share) 2005 Insurance: Total P& C insurance net premiums earned Lif e/healt h net premiums earned Total insurance premiums earned P&C incurred losses & claims expense Loss reserve change Paid claims P&C pre-tax underw rit ing gain/(loss) Lif e/healt h pre-t ax underw riting gain/(loss) Total Insurance underw riting income Insurance Invest ment Income Insurance pre-tax income Utilities, Energy, & Railroad: MidAmerican pre-tax income Burlingt on Northern Sant a Fe pre-tax income Utilities, Energy & Railroad pre-tax income Manufacturing Service & Retail pre-tax income Finance & Financial Products pre-tax income Total segment pre-tax income Investment gains/losses Other-than-t emporary losses on invest ment s Derivative gains/losses Int erest expense, ex. int erest allocat ed t o op businesses Eliminat ions & other Earnings before taxes & equity method Income t ax expense Earnings f rom equity met hod investment s Net earnings Less earnings att ributable to non-cont rolling int erests Net earnings attributable To Berkshire Hathaway Investment & derivative gains/(losses) Operating income, A/T Net earnings at t ribut able To Berkshire Hathaw ay Net chg in unrealized appreciation of invest ment s Applicable income t axes Foreign currency translat ion & other Applicable income t axes Other comprehensive income, net Comprehensive income attributable to Berkshire Per share Operating earnings per Class A equivalent share Operating earnings per Class B share Net income per Class A equivalent share Comprehensive earnings per Class A equivalent share Class A shares outstanding Class B shares out st anding Class B shrs on equivalent class A basis Class A equivalent shrs outst anding Avg. Class A equivalent shrs out st anding Book value per Class A equivalent share Book value per Class B equivalent share Linked-qtr grow t h Book value per share, ex AOCI per A share Tangible book value per Class A share Tangible book value per Class B share Operating return on equity Operat ing ROE, ex. AOCI Ret urn on tangible equit y Comprehensive ROE Comprehensive tangible ROE Cash dividends per share P&C Insurance combined ratio Pret ax catast rophe losses Cat astrophe comb. rat io impact Prior year reserve development Prior year development comb. rat io impact P&C Insurance combined ratio ex cats P&C Insurance CR ex cats & PY devel. Year-over-year percentage change Insurance: P&C net premiums earned Invest ment income Operating income MidAmerican pre-t ax income BNSF pre-t ax income Tot al Utilit ies & Energy pre-tax income Manuf act uring Service & Ret ail pre-t ax income Finance & Financial Products pre-t ax income Tot al pre-tax segment income Operat ing EPS Book value per share Ef f ect ive t ax rate Adjust ed t ot al debt /capital Tot al insurance f loat Avg Insurance invest ment s (excl cash, f ixed income at cost ) Average Insurance pre-t ax yield Insurance invest ed asset s (at f air value) per A share Non Insurance pre-t ax earnings Non-Insurance earnings per A share Free cash flow $19,702 2,295 21,997 19,760 6,453 13,307 (58) 111 53 3,480 3,533 2,623 822 6,978 6,310 (114) (702) 72 (132) 12,268 4,159 523 8,632 104 8,528 3,530 4,998 8,528 2,081 728 (6,631) (2,203) (3,075) 5,453 $3,244 $2.16 $5,535 $3,539 1.26 419.70 0.28 1.54 1.54 $59,377 $39.58 NM $48,110 $44,031 $29.35 5.6% 7.2% 7.6% 6.1% 8.3% $0.00 100.3% 3,312 16.8% (357) -1.8% 83.5% 85.3% 2006 $21,600 2,364 23,964 17,915 3,060 14,855 3,685 153 3,838 4,316 8,154 1,476 1,476 3,526 1,157 14,313 1,953 (142) 824 76 (94) 16,778 5,505 11,273 258 11,015 1,709 9,306 11,015 9,278 3,246 (493) (381) 5,920 16,935 $6,036 $4.02 $7,145 $10,985 1.12 637.62 0.43 1.54 1.54 $70,281 $46.85 NM $55,387 $49,383 $32.92 9.3% 11.7% 12.9% 16.9% 23.5% $0.00 82.9% 254 1.2% (612) -2.8% 81.8% 84.6% 2007 $29,321 2,462 31,783 28,409 12,950 15,459 3,294 80 3,374 4,758 8,132 1,774 1,774 3,947 1,006 14,859 5,599 (1) (89) 52 (155) 20,161 6,594 13,567 354 13,213 3,579 9,634 13,213 2,523 872 (4,803) (1,795) (1,357) 11,856 $6,232 $4.16 $8,548 $7,670 1.08 700.00 0.47 1.55 1.55 $78,008 $52.01 NM $64,039 $56,775 $37.85 8.4% 10.4% 11.7% 10.3% 14.5% $0.00 88.8% 226 0.8% (1,478) -5.0% 88.0% 93.0% 2008 $22,945 2,580 25,525 22,733 7,342 15,391 2,613 179 2,792 4,722 7,514 2,963 2,963 4,023 787 15,287 918 (1,558) (6,821) 35 (217) 7,574 1,978 5,596 602 4,994 (4,645) 9,639 4,994 (23,342) (8,257) (2,376) (194) (17,267) (12,273) $6,223 $4.15 $3,224 ($7,924) 1.06 735.35 0.49 1.55 1.55 $70,530 $47.02 NM $67,977 $48,725 $32.48 8.4% 9.4% 11.8% -10.7% -15.0% $0.00 88.6% 1,022 4.5% (1,140) -5.0% 84.2% 89.1% 2009 $25,258 2,626 27,884 26,325 10,803 15,522 1,382 177 1,559 5,173 6,732 1,528 1,528 2,058 781 11,099 387 (3,224) 3,624 42 (292) 11,552 3,538 427 8,441 386 8,055 486 7,569 8,055 17,607 6,263 3,372 987 13,729 21,784 $4,879 $3.25 $5,192 $14,041 1.06 744.70 0.50 1.55 1.55 $84,487 $56.32 NM $73,020 $62,594 $41.73 6.3% 6.9% 8.8% 18.1% 25.2% $0.00 94.5% 131 0.5% (905) -3.6% 94.0% 97.6% 2010E $25,850 2,684 28,534 27,603 12,103 15,500 742 189 931 4,850 5,781 1,746 2,949 4,695 2,138 773 13,387 1,100 149 (320) 14,018 4,747 60 9,330 400 8,930 732 8,199 8,930 5,919 2,072 3,847 12,778 $5,015 $3.34 $5,463 $7,816 1.14 765.70 0.51 1.65 1.63 $94,147 $62.76 NM $81,005 $63,607 $42.40 5.7% 6.6% 8.1% 8.9% 12.7% $0.00 97.1% 542 2.1% (775) -3.0% 95.0% 98.0% 2011E $26,620 2,745 29,365 26,192 10,692 15,500 428 245 673 4,752 5,425 1,785 3,811 5,597 2,260 783 14,064 559 164 (320) 14,139 4,807 9,332 400 8,932 369 8,563 8,932 4,998 1,749 3,249 12,181 $5,200 $3.47 $5,424 $7,397 1.14 765.70 0.51 1.65 1.65 $101,544 $67.70 NM $86,429 $71,005 $47.34 5.3% 6.2% 7.7% 7.6% 11.0% $0.00 98.4% 317 1.2% (225) -0.8% 97.2% 98.0%

9.6% 24.0% 130.8% NM NM NM 34.4% 40.8% 105.1% 86.1% 18.4% 33.9% 5.8% $49,287 $67,069 5.2% $74,129 $3,341 $2,168 $7,251 32.8% 18.0% $50,887 $79,855 5.4% $80,636 $5,901 $3,828 $5,624

35.7% 10.2% -0.3% 20.2% NM 20.2% 11.9% -13.1% 3.8% 3.3% 11.0% 32.7% 17.1% $58,698 $94,183 5.1% $90,343 $6,373 $4,123 $7,177

-21.7% -0.8% -7.6% 67.0% NM 67.0% 1.9% -21.8% 2.9% -0.2% -9.6% 26.1% 19.3% $58,488 $98,046 4.8% $77,793 $7,171 $4,630 $5,114

10.1% 9.6% -10.4% -48.4% NM -48.4% -48.8% -0.8% -27.4% -21.6% 19.8% 30.6% 16.5% $61,911 $102,386 5.1% $96,409 $3,981 $2,566 $10,909

2.3% -6.2% -14.1% 14.3% NM 207.3% 3.9% -1.0% 20.6% 2.8% 11.4% 33.9% 22.2% $118,373 4.1% $91,177 $7,206 $4,408 $7,885

3.0% -2.0% -6.2% 2.2% 29.3% 19.2% 5.7% 1.2% 5.1% 3.7% 7.9% 34.0% 20.9% $132,724 3.6% $99,756 $8,239 $5,004 $8,529

Source: Company data, Barclays Capital estimates.

51

Equity Research

Figure 64. Berkshire Hathaway Quarterly Summary Financial Model
(In $millions, except per share) 1Q Insurance: Tot al P&C insurance net premiums earned Lif e/healt h net premiums earned Tot al insurance premiums earned P& C incurred losses & claims expense Loss reserve change Paid claims P& C pre-t ax underw riting gain/(loss) Lif e/healt h pre-tax underw rit ing gain/(loss) Tot al Insurance underw riting income Insurance Investment Income Insurance pre-tax income Utilities, Energy, & Railroad: MidAmerican pre-t ax income Burlingt on Northern Sant a Fe pre-tax income Utilities, Energy & Railroad pre-tax income Manufacturing Service & Retail pre-tax income Finance & Financial Products pre-tax income Total segment pre-tax income Invest ment gains/losses Ot her-t han-t emporary losses on invest ment s Derivat ive gains/losses Interest expense, ex. int erest allocated t o op businesses Eliminations & ot her Earnings before taxes & equity method Income t ax expense Earnings from equit y met hod invest ment s Net earnings Less earnings att ribut able to non-controlling int erests Net earnings attributable To Berkshire Hathaway Invest ment & derivat ive gains/(losses) Operating income, A/T Net earnings at tribut able To Berkshire Hathaw ay Net chg in unrealized appreciat ion of invest ments Applicable income taxes Foreign currency translation & ot her Applicable income taxes Ot her comprehensive income, net Comprehensive income attributable to Berkshire Per share Operating earnings per Class A equivalent share Operating earnings per Class B share Net income per Class A equivalent share Comprehensive earnings per Class A equivalent share Class A shares outst anding Class B shares out standing Class B shrs on equivalent class A basis Class A equivalent shrs out st anding Avg. Class A equivalent shrs outstanding Book value per Class A equivalent share Book value per Class B equivalent share Linked-qt r grow t h Book value per share, ex AOCI per A share Tangible book value per Class A share Tangible book value per Class B share Operating return on equity Operating ROE, ex. AOCI Ret urn on t angible equity Comprehensive ROE Comprehensive t angible ROE Cash dividends per share P&C Insurance combined ratio Pret ax cat astrophe losses Cat astrophe comb. ratio impact Prior year reserve development Prior year development comb. ratio impact P&C Insurance combined ratio ex cats P&C Insurance CR ex cats & PY devel. Year-over-year percentage change Insurance: P& C net premiums earned Invest ment income Operat ing income MidAmerican pre-t ax income BNSF pre-tax income Tot al Ut ilities & Energy pre-t ax income Manufacturing Service & Ret ail pre-tax income Finance & Financial Product s pre-tax income Tot al pre-tax segment income Operating EPS Book value per share Eff ect ive tax rate Adjust ed total debt/capit al Tot al insurance float Avg Insurance invest ments (excl cash, f ixed income at cost) Average Insurance pre-tax yield Insurance invested asset s (at fair value) per A share Non Insurance pre-tax earnings Non-Insurance earnings per A share Free cash f low $5,543 666 6209 5288 NA NA 255 27 282 1,089 1,371 516 2008 2Q $5,564 667 6231 5051 NA NA 513 47 560 1,204 1,764 329 3Q $5,826 639 6465 5767 NA NA 59 67 126 1,074 1,200 526 4Q $6,012 608 6620 4226 NA NA 1786 38 1,824 1,355 3,179 1,592 1Q $7,567 616 8,183 7,235 NA NA 332 7 339 1,298 1,637 303 303 511 127 2,578 (370) (3,096) (1,517) 8 (130) (2,543) (1,014) 83 (1,446) 88 (1,534) (3,239) 1,705 (1,534) (7,034) (2,460) (506) (87) (4,993) (6,527) $1,100 $0.73 -$989 -$4,210 1.06 741.32 0.49 1.55 1.55 $66,248 $44.17 -6.1% $66,847 $44,479 $29.65 6.1% 6.7% 8.8% -23.5% -33.7% $0.00 95.6% 71 0.9% 2009 2Q $5,873 612 6,485 5,810 NA NA 63 62 125 1,422 1,547 402 402 437 135 2,521 3 (30) 2,357 15 (45) 4,791 1,520 113 3,384 89 3,295 1,515 1,780 3,295 11,594 4,062 909 6 8,435 11,730 $1,147 $0.76 $2,123 $7,559 1.06 741.62 0.49 1.55 1.55 $73,806 $49.20 11.4% $68,970 $51,945 $34.63 6.1% 6.8% 8.6% 40.4% 56.8% $0.00 98.9% 11 0.2% 3Q $5,939 656 6,595 5,458 NA NA 481 79 560 1,348 1,908 441 441 608 142 3,099 110 (25) 1,732 11 (66) 4,839 1,601 111 3,349 111 3,238 1,183 2,055 3,238 12,723 4,534 221 99 8,311 11,549 $1,324 $0.88 $2,087 $7,443 1.06 742.02 0.49 1.55 1.55 $81,247 $54.16 10.1% $71,054 $59,353 $39.57 6.7% 7.7% 9.2% 37.5% 51.7% $0.00 91.9% 153 2.6% 4Q $5,879 742 6621 5373 NA NA 506 29 535 1,105 1,640 382 1Q $6,900 628 7,528 6,763 NA NA 137 8 145 1,205 1,350 405 378 783 474 121 2,728 1,100 26 (80) 3,722 1,247 60 2,535 100 2,435 732 1,704 2,435 2,315 810 1,505 3,940 $1,065 $0.71 $1,523 $2,464 1.14 765.70 0.51 1.65 1.60 $88,780 $59.19 5.1% $77,061 $58,241 $38.83 5.5% 5.9% 8.3% 12.7% 19.1% $0.00 98.0% 225 3.3% 2010E 2Q $6,243 624 6,867 5,943 NA NA 300 69 369 1,210 1,579 344 819 1,163 490 134 3,366 41 (80) 3,245 1,103 2,142 100 2,042 2,042 2,042 1,178 412 765 2,807 $1,240 $0.83 $1,240 $1,705 1.14 765.70 0.51 1.65 1.65 $90,485 $60.32 1.9% $78,301 $59,945 $39.96 6.2% 6.9% 9.1% 8.5% 12.5% $0.00 95.2% 40 0.6% 3Q $6,403 672 7,075 6,266 NA NA 137 77 214 1,215 1,429 490 901 1,391 606 139 3,565 41 (80) 3,444 1,171 2,273 100 2,173 2,173 2,173 1,201 420 781 2,954 $1,320 $0.88 $1,320 $1,794 1.14 765.70 0.51 1.65 1.65 $92,279 $61.52 2.0% $79,620 $61,739 $41.16 6.3% 7.2% 9.0% 8.5% 12.2% $0.00 97.9% 202 3.2% 4Q $6,303 760 7,063 6,136 NA NA 167 35 202 1,220 1,422 507 851 1,358 568 379 3,727 41 (80) 3,606 1,226 2,380 100 2,280 2,280 2,280 1,225 429 796 3,076 $1,385 $0.92 $1,385 $1,868 1.14 765.70 0.51 1.65 1.65 $94,147 $62.76 2.0% $81,005 $63,607 $42.40 6.4% 7.4% 9.0% 8.6% 12.2% $0.00 97.3% 75 1.2%

516 845 241 2,973 115 0 (1,641) 8 14 1,453 408 0 1,045 105 940 (991) 1,931 940 (3,998) (1,408) 103 (38) (2,449) (1,509) $1,247 $0.83 $607 -$975 1.08 702.11 0.47 1.55 1.55 $77,072 $51.38 -1.2% $64,695 $55,415 $36.94

329 1,285 254 3,632 675 (429) 689 9 (87) 4,471 1,443 0 3,028 148 2,880 610 2,270 2,880 (6,690) (2,331) 72 3 (4,290) (1,410) $1,465 $0.98 $1,859 -$910 1.07 714.30 0.48 1.55 1.55 $76,163 $50.78 -1.2% $66,558 $54,524 $36.35

526 1,113 163 3,002 (46) (250) (1,261) 9 66 1,502 294 0 1,208 151 1,057 (1,012) 2,069 1,057 3,184 1,113 (1,039) (71) 1,103 2,160 $1,336 $0.89 $682 $1,394 1.07 724.79 0.48 1.55 1.55 $77,558 $51.71 1.8% $67,241 $55,914 $37.28

1,592 780 129 5,680 174 (879) (4,608) 9 (210) 148 (167) 0 315 198 117 (3,252) 3,369 117 (15,838) (5,631) (1,512) (88) (11,631) (11,514) $2,175 $1.45 $76 -$7,432 1.06 735.35 0.49 1.55 1.55 $70,530 $47.02 -9.1% $67,977 $48,725 $32.48

382 502 377 2,901 644 (73) 1,052 8 (51) 4,465 1,431 120 3,154 98 3,056 1,027 2,029 3,056 324 127 2,748 969 1,976 5,032 $1,308 $0.87 $1,969 $3,243 1.06 744.70 0.50 1.55 1.55 $84,487 $56.32 4.0% $73,020 $62,594 $41.73 6.8% 7.4% 9.4% 16.7% 23.3% $0.00 91.4% -104 -1.8%

$0.00 95.4% 32 0.6%

$0.00 90.8% 78 1.4%

$0.00 99.0% 1,049 18.0%

$0.00 70.3% -137 -2.3%

94.8%

89.4%

81.0%

72.6%

94.7%

98.7%

89.3%

93.2%

94.8%

94.5%

94.7%

96.2%

-57.1% 1.0% -31.6% 0.6% NA 0.6% 8.2% -0.4% -16.0% -13.0% 8.2% 28.1% 18.2% $102,494 4.3% $87,441 $1,497 $967 $2,643

4.4% -2.6% -20.2% -11.6% NA -11.6% 18.2% -8.3% -8.0% -9.8% 2.2% 32.3% 17.7% $102,021 4.7% $83,978 $1,720 $1,110 $748

7.6% -11.8% -39.1% 9.4% NA 9.4% 4.0% -40.3% -20.9% -19.3% 0.1% 19.6% 17.6% $103,386 4.2% $86,188 $1,651 $1,066 $2,337

6.0% 10.4% 63.2% 290.2% NA 290.2% -22.7% -39.7% 58.7% 43.2% -9.6% NM 19.3% $99,774 5.4% $74,337 $2,303 $1,487 $1,588

36.5% 19.2% 19.4% -41.3% NM -41.3% -39.5% -47.3% -13.3% -11.8% -14.0% 39.9% 20.7% $60,000 $92,319 5.6% $73,997 $853 $550 $3,830

5.6% 18.1% -12.3% 22.2% NM 22.2% -66.0% -46.9% -30.6% -21.7% -3.1% 31.7% 18.9% $61,000 $97,086 5.9% $83,530 $885 $570 $1,967

1.9% 25.5% 59.0% -16.2% NM -16.2% -45.4% -12.9% 3.2% -0.8% 4.8% 33.1% 17.1% $62,000 $107,666 5.0% $92,437 $1,080 $696 $3,629

-2.2% -18.5% -48.4% -76.0% NM -76.0% -35.6% 192.2% -48.9% -39.9% 19.8% 32.0% 16.5% $61,911 $111,325 4.0% $96,409 $1,163 $749 $3,007

-8.8% -7.2% -17.5% 33.8% NM 158.4% -7.3% -4.7% 5.8% -3.1% 34.0% 33.5% 23.2% $113,178 4.3% $85,374 $1,278 $799 $1,971

6.3% -14.9% 2.1% -14.3% NM 189.3% 12.1% -0.7% 33.5% 8.1% 22.6% 34.0% 22.9% $117,276 4.1% $87,294 $1,687 $1,024 $1,971

7.8% -9.9% -25.1% 11.1% NM 215.4% -0.3% -2.1% 15.0% -0.3% 13.6% 34.0% 22.5% $120,740 4.0% $89,228 $2,036 $1,236 $1,971

7.2% 10.4% -13.3% 32.6% NM 255.5% 13.1% 0.5% 28.5% 5.9% 11.4% 34.0% 22.2% $124,203 3.9% $91,177 $2,205 $1,339 $1,971

Source: Company data, Barclays Capital estimates.

52

Equity Research

Figure 65. Berkshire Hathaway Insurance Segment Model
(In $ Mil) 2005 Total Insurance P&C gross w ritten premiums Ceded premiums Ret ention rat io P&C net w ritt en premiums P&C insurance net premiums earned Lif e/health net premiums earned Tot al insurance premiums earned P&C Incurred losses & claims expense P&C reserve change P&C paid claims P&C pre-tax underw rit ing gain/(loss) Lif e/health pre-t ax underw riting gain/loss Tot al pre-tax underw riting gain/loss Pre-tax investment income Total pre-tax operating income Income taxes and noncontrolling interests Net underw riting gain Net income Total P&C Combined Ratio Cat astrophe losses Cat . losses C/R pt s. Prior year development PY development C/R pt s. Total P&C Combined Ratio ex cats and prior year developm Year-Over-Year Percentage Change P&C gross w ritten premiums P&C net w ritt en premiums P&C net earned premiums Lif e net earned premiums Net investment income Tot al pre-tax income Tot al insurance float GEICO Premiums w rit ten Premiums earned Loss & LAE expenses Underw riting expenses Tot al losses & expenses Pre-tax underw riting gain Underwriting Ratios: Loss & LAE ratio Expense ratio Combined Ratio Cat astrophe losses Cat . losses C/R pt s. Prior year development PY development C/R pt s. Combined Ratio ex cats and prior year development Year-over-year increase in NWP Year-over-year increase in NPE Policies-in-f orce grow th New business sales grow t h (year-to-date) Insurance float General Re P&C premiums w rit ten P&C premiums earned Lif e/health premiums earned Tot al premiums earned P&C incurred losses & claims expense Lif e operating cost s & expense P&C pre-tax underw rit ing gain/(loss) Lif e/health pre-t ax underw riting gain/(loss) Tot al pre-tax underw riting gain/(loss) Underwriting Ratios: P&C combined ratio Cat astrophe losses Cat . Losses C/R pts. P&C combined ratio ex cats Life/Health underwriting margin Year-over-year increase in P&C NPW Year-over-year increase in P&C NPE Year-over-year increase in Lif e NPE Insurance float Berkshire Hathway Reinsurance Group Cat astrophe & individual risk premiums earned Ret roactive reinsurance premiums earned Ot her multi-line premiums earned Tot al premiums earned Incurred losses & claims expense Cat & individual risk incurred losses & claims expense Ret roactive reins. incurred losses & claims expense Ot her multi-line incurred losses & claims expense Pre-tax underwriting gain/(loss): Cat astrophe & individual risk P/T underw riting gain/(loss) Ret roactive reinsurance P/T underw riting gain/(loss) Ot her multi-line P/T underw riting gain/(loss) Tot al pre-tax underw riting gain/(loss) Underwriting ratios: Catastrophe & individual risk combined ratio Retroactive reinsurance combined ratio Other multi-line combined ratio Combined ratio Cat astrophe losses Cat . Losses C/R pts. Combined ratio ex cats Year-over-year pct change: Y-o-y increase in cat astrophe & individual risk NPE Y-o-y increase in retroact ive reinsurance NPE Y-o-y increase in other multi-line NPE Year-over-year increase in NPE Insurance float Berkshire Hathway Primary Insurance Group Premiums earned Incurred losses & claims expense Pre-tax underw riting gain/(loss) Combined ratio Year-over-year increase in P&C NPE Insurance float $20,370 739 96.4% 19,631 19,702 2,295 21,997 19,760 6,453 13,307 (58) 111 53 3,480 3,533 26 27 3,507 100.3% 3,312 16.8% (357) -1.6% 85.1% 2006 $22,953 544 97.6% 22,409 21,600 2,364 23,964 17,915 3,060 14,855 3,685 153 3,838 4,316 8,154 1,353 2,485 6,801 82.9% 254 1.2% (612) -2.6% 84.3% 12.7% 14.2% 9.6% 3.0% NA 130.8% $50,887 2007 $29,372 554 98.1% 28,818 29,321 2,462 31,783 26,027 10,568 15,459 3,294 80 3,374 4,758 8,132 1,190 2,184 6,942 88.8% 226 0.8% (1,478) -4.7% 92.6% 28.0% 28.6% 35.7% 4.1% 10.2% -0.3% $58,698 2008 $24,913 704 97.2% 24,209 22,945 2,580 25,525 20,332 4,941 15,391 2,613 179 2,792 4,722 7,514 987 1,805 6,527 88.6% 1,022 4.5% (1,140) -4.5% 88.6% -15.2% -16.0% -21.7% 4.8% -0.8% -7.6% $58,488 2009 $25,805 552 97.9% 25,253 25,258 2,626 27,884 23,876 8,354 15,522 1,382 177 1,559 5,173 6,732 546 1,013 6,186 94.5% 131 0.5% (905) -3.2% 97.3% 3.6% 4.3% 10.1% 1.8% 9.6% -10.4% $61,911 2010E 2011E 1Q 2009 2Q 3Q 4Q 1Q 2010E 2Q 3Q 4Q

25,850 2,684 28,534 25,108 9,608 15,500 742 189 931 4,850 5,781 931 5,781 97.1% 542 2.1% (775) -2.7% 97.7%

26,620 2,745 29,365 26,192 10,692 15,500 428 245 673 4,752 5,425 673 5,425 98.4% 317 1.2% (225) -0.8% 98.0%

7,567 616 8,183 7,235 NA NA 332 7 339 1,298 1,637 120 219 1,517 95.6% 71 0.9%

5,873 612 6,485 5,810 NA NA 63 62 125 1,422 1,547 42 83 1,505 98.9% 11 0.2%

5,939 656 6,595 5,458 NA NA 481 79 560 1,348 1,908 197 363 1,711 91.9% 153 2.6%

5,879 742 6,621 5,373 NA NA 506 29 535 1,105 1,640 187 348 1,453 91.4% (104) -1.8%

6,900 628 7,528 6,763 NA NA 137 8 145 1,205 1,350

6,243 624 6,867 5,943 NA NA 300 69 369 1,210 1,579

6,403 672 7,075 6,266 NA NA 137 77 214 1,215 1,429

6,303 760 7,063 6,136 NA NA 167 35 202 1,220 1,422

98.0% 225 3.3%

95.2% 40 0.6%

97.9% 202 3.2%

97.3% 75 1.2%

94.7%

98.7%

89.3%

93.2%

94.8%

94.5%

94.7%

96.2%

2.3% 2.2% -6.2% -14.1%

3.0% 2.3% -2.0% -6.2%

$49,287

36.5% -7.5% 19.2% 19.4% $60,000

5.6% -8.2% 18.1% -12.3% $61,000

1.9% 2.7% 25.5% 59.0% $62,000

-2.2% 22.0% -18.5% -48.4% $61,911

-8.8% 1.9% -7.2% -17.5%

6.3% 2.0% -14.9% 2.1%

7.8% 2.4% -9.9% -25.1%

7.2% 2.4% 10.4% -13.3%

$10,285 10,101 7,128 1,752 8,880 1,221 70.6% 17.3% 87.9% 227 2.2%

$11,303 11,055 7,749 1,992 9,741 1,314 70.1% 18.0% 88.1% 54 0.5% (410) -3.7% 91.3% 9.9% 9.4% 10.7% 8.8% $7,171

$11,931 11,806 8,523 2,170 10,693 1,113 72.2% 18.4% 90.6% 34 0.3% (375) -3.2% 93.5% 5.6% 6.8% 8.8% 5.0% $7,768

$12,741 12,479 9,332 2,231 11,563 916 74.8% 17.9% 92.7% 87 0.7% (205) -1.6% 93.6% 6.8% 5.7% 8.2% 2.0% $8,454

$13,378 13,576 10,457 2,470 12,927 649 77.0% 18.2% 95.2% 83 0.6% (194) -1.4% 96.0% 5.0% 8.8% 7.8% 9.0% $9,613

$13,780 14,450 11,490 2,620 14,110 340 79.5% 18.1% 97.6% 25 0.2% (100) -0.7% 98.2% 3.0% 6.4% 7.5%

$14,055 15,100 12,285 2,750 15,035 65 81.4% 18.2% 99.6% 25 0.2% (50) -0.3% 99.7% 2.0% 4.5% 7.0%

3,261 2,514 599 3,113 148 77.1% 18.4% 95.5% 0.0%

3,394 2,648 635 3,283 111 78.0% 18.7% 96.7% 0.0%

3,448 2,636 612 3,248 200 76.5% 17.7% 94.2% 73 2.1%

3,473 2,659 624 3,283 190 76.6% 18.0% 94.5% 10 0.3%

3,500 2,765 645 3,410 90 79.0% 18.4% 97.4% 0.0%

3,600 2,863 675 3,538 62 79.5% 18.8% 98.3% 0.0%

3,650 2,906 650 3,556 94 79.6% 17.8% 97.4% 25 0.7%

3,700 2,956 650 3,606 94 79.9% 17.6% 97.5% 0.0%

11.6% NA 12.4% 14.0% $6,692

95.5% NA 7.6% 10.3% 32.0%

96.7% NA 10.0% 10.8% 25.6%

92.1% NA 9.5% 10.1% 18.2%

94.2% NA 8.2% 7.8% 9.0%

97.4% NA 7.3%

98.3% NA 6.1%

96.7% NA 5.9%

97.5% NA 6.5%

$3,852 4,140 2,295 6,435 6,769 (445) 111 (334) 110.7% 685 16.5% 94.2% 4.8% NA NA NA $22,920

$3,581 3,711 2,364 6,075 5,549 373 153 526 89.9% 0 0.0% 89.9% 6.5% -7.0% -10.4% 3.0% $22,827

$3,478 3,614 2,462 6,076 3,139 2,382 475 80 555 86.9% 192 5.3% 81.5% 3.2% -2.9% -2.6% 4.1% $23,009

$3,383 3,434 2,580 6,014 3,271 2,401 163 179 342 95.3% 230 6.7% 88.6% 6.9% -2.7% -5.0% 4.8% $21,074

$3,091 3,203 2,626 5,829 2,903 2,449 300 177 477 90.6% 48 1.5% 89.1% 6.7% -8.6% -6.7% 1.8% $21,014

3,055 2,684 5,739 2,915 2,495 140 189 329 95.4% 152 5.0% 90.4% 7.0% NA -4.6% 2.2%

3,075 2,745 5,820 3,000 2,500 75 245 320 97.6% 155 5.0% 92.5% 8.9% NA 0.7% 2.3%

763 616 1,379 786 609 (23) 7 (16) 103.0% 71 9.3% 93.7% 1.1% NA -26.5% -7.5%

814 612 1,426 600 550 214 62 276 73.7% 11 1.4% 72.4% 10.1% NA -0.9% -8.2%

820 656 1,476 713 577 107 79 186 87.0% 80 9.8% 77.2% 12.0% NA 0.1% 2.7%

806 742 1,548 804 713 2 29 31 99.8% (114) -14.1% 113.9% 3.9% NA 6.6% 22.0%

725 628 1,353 725 620 0 8 8 100.0% 50 6.9% 93.1% 1.3% NA -5.0% 1.9%

770 624 1,394 650 555 120 69 189 84.4% 15 1.9% 82.5% 11.1% NA -5.4% 2.0%

780 672 1,452 725 595 55 77 132 92.9% 62 7.9% 85.0% 11.5% NA -4.9% 2.4%

780 760 1,540 815 725 (35) 35 0 104.5% 25 3.2% 101.3% 4.6% NA -3.2% 2.4%

$1,663 10 2,290 3,963 5,032 2,841 224 1,967 (1,178) (214) 323 (1,069) 170.8% NM 85.9% 127.0% 2,400 144.3% -17.3%

$2,196 146 2,634 4,976 3,318 608 319 2,391 1,588 (173) 243 1,658 27.7% 218.5% 90.8% 66.7% 200 4.0% 62.7% 32.1% NM 15.0% 25.6% $16,860

$1,577 7,708 2,617 11,902 10,475 100 8,083 2,292 1,477 (375) 325 1,427 6.3% 104.9% 87.6% 88.0% 0 0.0% 88.0% -28.2% NM -0.6% 139.2% $23,692

$955 204 3,923 5,082 3,758 179 618 2,961 776 (414) 962 1,324 18.7% 302.9% 75.5% 73.9% 705 13.9% 60.1% -39.4% -97.4% 49.9% -57.3% $24,221

$823 1,989 3,894 6,706 6,357 41 2,437 3,879 782 (448) 15 349 5.0% 122.5% 99.6% 94.8% 0 0.0% 94.8% -13.8% NM -0.7% 32.0% $26,223

$725 2,000 3,900 6,625 6,390 440 2,550 3,400 285 (550) 500 235 60.7% 127.5% 87.2% 96.5% 365 5.5% 90.9% -11.9% 0.6% 0.2% -1.2%

$735 2,000 3,960 6,695 6,395 235 2,600 3,560 500 (600) 400 300 32.0% 130.0% 89.9% 95.5% 270 4.0% 91.5% 1.4% 0.0% 1.5% 1.1%

$254 1,809 1,024 3,087 2,884 101 1,916 867 153 (107) 157 203 39.8% 105.9% 84.7% 93.4% 0 0.0% 93.4% 17.1% NM 33.5% 213.7%

$241 77 892 1,210 1,501 72 172 1,257 169 (95) (365) (291) 29.9% 223.4% 140.9% 124.0% 0 0.0% 124.0% 8.6% NM -4.2% 4.7%

$197 0 1,032 1,229 1,062 (74) 137 999 271 (137) 33 167 NM NM 96.8% 86.4% 0 0.0% 86.4% -32.5% NM -5.4% -11.1%

$131 103 946 1,180 910 (58) 212 756 189 (109) 190 270 NM 205.8% 79.9% 77.1% 0 0.0% 77.1% -41.5% 51.2% -16.6% -24.3%

$220 1,000 1,025 2,245 2,200 300 1,000 900 (80) 0 125 45 136.4% 100.0% 87.8% 98.0% 175 7.8% 90.2% -13.4% 55.3% 0.1% -27.3%

$210 333 895 1,438 1,340 45 525 770 165 (192) 125 98 21.4% 157.5% 86.0% 93.2% 25 1.7% 91.4% -12.9% NM 0.3% 18.9%

$175 333 1,030 1,538 1,545 75 565 905 100 (232) 125 (7) 42.9% 169.5% 87.9% 100.4% 115 7.5% 93.0% -11.2% NM -0.2% 25.2%

$120 333 950 1,403 1,305 20 460 825 100 (127) 125 98 16.7% 138.0% 86.8% 93.0% 50 3.6% 89.4% -8.4% NM 0.4% 18.9%

$16,233

$1,498 1,263 235 84.3% NA 3,442

$1,858 1,518 340 81.7% 24.0% 4,029

$1,999 1,720 279 86.0% 7.6% 4,229

$1,950 1,740 210 89.2% -2.5% 4,739

$1,773 1,689 84 95.3% -9.1% 5,061

$1,720 1,693 27 98.4% -3.0%

$1,750 1,762 (12) 100.7% 1.7%

$456 452 4 99.1% -6.7%

$455 426 29 93.6% -9.2%

$442 435 7 98.4% -6.8%

$420 376 44 89.5% -13.6%

$430 428 2 99.5% -5.7%

$435 415 20 95.4% -4.4%

$435 440 (5) 101.1% -1.6%

$420 410 10 97.6% 0.0%

Source: Company data, Barclays Capital estimates.

53

Equity Research

Figure 66. Berkshire Hathaway Burlington Northern Santa Fe Model
(In $ Mil) 2005 Freight revenue Fuel surcharge revenue (memo only) Other Total operating revenues Compensation & benefits Purchased services Depreciation & amortization Equipment rents Fuel Materials & other One time charges (memo only) Total Operating Expenses Pre-tax operating Income Interest expense Other expense, net Income before income taxes Income tax expense Net income One time items Net income as reported EBITDA EBITDAR Revenues, YoY change Freight revenue Fuel surcharge component (memo only) Other % chg. revenue Operating expense, YoY change Compensation & benefits Purchased services Depreciation & amortization Equipment rents Fuel Materials & other % chg in total operating expenses Margins Operating margin EBITDA EBITDAR Pre-tax income Net income $12,606 1,103 381 12,987 3,515 1,713 1,111 886 1,959 876 10,060 2,927 437 37 2,453 919 1,534 1,534 4,038 4,924 2006 $14,545 1,697 440 14,985 3,816 1,906 1,176 930 2,856 780 11,464 3,521 485 40 2,996 1107 1,889 1,889 4,697 5,627 2007 $15,349 1,851 453 15,802 3,773 2,023 1,293 942 3,327 877 12,235 3,567 511 18 3,038 1,158 1,880 (51) 1,829 4,860 5,802 2008 $17,503 3,241 515 18,018 3,884 2,136 1,397 901 4,640 958 13,916 4,102 533 11 3,558 1,325 2,233 (118) 2,115 5,499 6,400 2009 $13,654 1,202 428 14,082 3,481 1,874 1,537 777 2,372 713 10,754 3,328 561 8 2,759 1,050 1,709 12 1,721 4,865 5,642 2010E $14,924 1,675 450 15,374 3,501 1,925 1,696 788 2,807 739 11,456 3,918 588 4 3,326 1,254 2,072 2,072 5,614 6,402 2011E $16,082 1,839 455 16,537 3,747 2,060 1,736 844 2,953 791 12,131 4,406 589 6 3,811 1,429 2,382 2,382 6,142 6,986 1Q $3,408 316 112 3,520 868 478 370 201 614 224 2,755 765 146 3 616 230 386 (93) 293 1,135 1,336 2009 2Q $3,217 216 99 3,316 824 466 379 196 509 145 2,519 797 137 1 659 255 404 404 1,176 1,372 3Q $3,459 309 106 3,565 872 453 386 194 606 183 2,694 871 127 1 743 274 469 19 488 1,257 1,451 4Q $3,570 362 111 3,681 917 477 402 186 643 161 2,786 895 151 3 741 291 450 86 536 1,297 1,483 1Q $3,583 384 110 3,693 862 469 422 189 672 176 2,790 904 147 1 756 285 471 471 1,326 1,514 2010E 2Q $3,689 404 115 3,804 861 476 424 195 700 182 2,838 967 147 1 819 309 510 510 1,391 1,586 3Q 4Q $3,824 442 110 3,934 893 494 426 201 730 190 2,935 999 147 1 851 321 530 530 1,425 1,626 $3,828 444 115 3,943 885 486 424 203 706 190 2,894 1,049 147 1 901 340 561 561 1,473 1,676

15.4% 53.9% 15.5% 15.4%

5.5% 9.1% 3.0% 5.5%

14.0% 75.1% 13.7% 14.0%

-22.0% -62.9% -16.9% -21.8%

9.3% NM 5.1% 9.2%

7.8% NM 1.1% 7.6%

-17.7% -50.7% -5.1% -17.4%

-26.0% -73.6% -23.3% -25.9%

-27.4% -70.1% -24.3% -27.3%

-15.9% -51.8% -13.3% -15.8%

5.1% NM -1.8% 4.9%

14.7% NM 16.2% 14.7%

10.7% NM 8.5% 10.6%

7.1% NM -0.9% 6.9%

8.6% 11.3% 5.9% 5.0% 45.8% -11.0% 14.0%

-1.1% 6.1% 9.9% 1.3% 16.5% 12.4% 6.7%

2.9% 5.6% 8.0% -4.4% 39.5% 9.2% 13.7%

-10.4% -12.3% 10.0% -13.8% -48.9% -25.6% -22.7%

0.6% 2.7% 10.3% 1.4% 18.4% 3.6% 6.5%

7.0% 7.0% 2.4% 7.0% 5.2% 7.0% 5.9%

-11.7% -9.0% 8.5% -12.6% -41.2% -14.5% -18.6%

-13.4% -13.7% 8.6% -12.1% -60.6% -34.1% -29.5%

-13.9% -15.6% 10.6% -15.7% -55.1% -17.2% -27.2%

-2.1% -10.7% 12.3% -14.7% -32.7% -36.9% -14.5%

-0.7% -2.0% 14.1% -6.1% 9.5% -21.3% 1.3%

4.5% 2.1% 11.9% -0.5% 37.5% 25.6% 12.7%

1.5% 7.3% 9.8% 4.8% 16.4% 3.9% 7.4%

-2.6% 3.6% 6.0% 8.1% 13.5% 18.1% 5.3%

22.5% 31.1% 37.9% 18.9% 11.8%

23.5% 31.3% 37.6% 20.0% 12.6%

22.6% 30.8% 36.7% 19.2% 11.9%

22.8% 30.5% 35.5% 19.7% 12.4%

23.6% 34.5% 40.1% 19.6% 12.1%

25.5% 36.5% 41.6% 21.6% 13.5%

26.6% 37.1% 42.2% 23.0% 14.4%

21.7% 32.2% 38.0% 17.5% 11.0%

24.0% 35.5% 41.4% 19.9% 12.2%

24.4% 35.3% 40.7% 20.8% 13.2%

24.3% 35.2% 40.3% 20.1% 12.2%

24.5% 35.9% 41.0% 20.5% 12.7%

25.4% 36.5% 41.7% 21.5% 13.4%

26.6% 37.4% 42.5% 22.9% 14.2%

25.4% 36.2% 41.3% 21.6% 13.5%

Source: Company data, Barclays Capital estimates.

54

Equity Research

Figure 67. Berkshire Hathaway Annual MidAmerican Segment Model
(In $ Mil) 2005 Revenues: MidAmerican Energy Co PacifiCorp Natural gas pipelines U.K. ut ilities Real est ate brokerage Ot her Total revenues Expenses: MidAmerican Energy Co PacifiCorp Natural gas pipelines U.K. ut ilities Real est ate brokerage Ot her Total expenses Pre-tax earnings: MidAmerican Energy Co PacifiCorp Natural gas pipelines U.K. ut ilities Real est ate brokerage Ot her Tot al Interest , ot her than to Berkshire Total pre-tax income Const ellat ion Total pre-tax income ex unusual items Interest on Berkshire junior debt Income taxes and noncont rolling int erests Net earnings Earnings attributable t o Berkshire (a) $3,200 909 921 1,894 356 7,280 2006 $3,519 2,971 972 961 1,724 497 10,644 2007 $4,325 4,319 1,088 1,114 1,511 271 12,628 2008 $4,742 4,558 1,221 1,001 1,147 1,302 13,971 2009 $3,711 4,543 1,073 829 1,071 216 11,443 2010E $3,731 4,681 1,116 850 1,103 216 11,697 2011E $3,751 4,732 1,161 871 1,136 216 11,866 1Q $1,138 1,131 340 193 178 (31) 2,949 2009 2Q $768 1,041 220 199 290 137 2,655 3Q $818 1,171 210 216 323 74 2,812 4Q $987 1,200 303 221 280 36 3,027 1Q $1,114 1,151 334 222 209 (13) 3,017 2010E 2Q $816 1,085 226 206 316 72 2,721 3Q $850 1,250 237 216 327 42 2,922 4Q $951 1,194 319 207 250 115 3,037

2,912 0 600 613 1,746 232 6,103

3,171 2,615 596 623 1,650 252 8,907

3,913 3,627 615 777 1,469 141 10,542

4,317 3,855 626 662 1,192 24 10,676

3,426 3,755 616 581 1,028 191 9,597

3,460 3,811 641 596 1,059 66 9,633

3,495 3,868 666 610 1,091 66 9,797

1,030 947 148 125 191 125 2,566

728 881 142 137 264 22 2,174

737 940 143 144 294 34 2,292

931 987 183 175 279 10 2,565

1,019 945 155 140 216 59 2,533

779 897 152 147 283 38 2,297

771 1,001 145 155 297 (18) 2,352

891 969 188 154 263 (13) 2,451

288 0 309 308 148 124 1,177 200 977 977 157 257 563 523

348 356 376 338 74 245 1,737 261 1,476 1,476 134 426 916 885

412 692 473 337 42 130 2,086 312 1,774 1,774 108 477 1,189 1,114

425 703 595 339 (45) 1,278 3,295 332 2,963 1,092 1,871 111 1,002 758 1,704

285 788 457 248 43 25 1,846 318 1,528 1,528 58 313 1,157 1,071

Capital expendit ures % Chg. Revenue MidAmerican Energy Co PacifiCorp Natural gas pipelines U.K. ut ilities Real est ate brokerage Ot her Total Operating Margin MidAmerican Energy Co PacifiCorp Natural gas pipelines U.K. ut ilities Real est ate brokerage Ot her Total operating margin

-

2,423

3,513

3,936

3,413

271 869 475 254 44 150 2,064 318 1,746 1,746 58 506 1,182 1,099 30% 93% 2,600

256 863 494 261 46 150 2,069 284 1,785 1,785 58 518 1,209 1,125 30% 93% 2,600

108 184 192 68 (13) (156) 383 80 303 303 18 68 217 203

40 160 78 62 26 115 481 79 402 402 16 115 271 253

81 231 67 72 29 40 520 79 441 441 13 52 376 346

56 213 120 46 1 26 462 80 382 382 11 78 293 269

96 206 179 81 (6) (72) 485 80 405 405 15 117 274 254

37 188 74 58 33 33 424 80 344 344 15 99 231 215

79 249 91 61 30 60 569 80 490 490 15 143 333 309

60 226 131 54 (12) 128 586 80 507 507 15 148 345 320

812

888

900

813

776

569

592

663

NA NA NA NA NA NA NA

10.0% NM 6.9% 4.3% -9.0% 39.6% 46.2%

22.9% 45.4% 11.9% 15.9% -12.4% -45.5% 18.6%

9.6% 5.5% 12.2% -10.1% -24.1% 380.4% 10.6%

-21.7% -0.3% -12.1% -17.2% -6.6% -83.4% -18.1%

0.5% 3.0% 4.0% 2.5% 3.0% 0.0% 2.2%

0.5% 1.1% 4.0% 2.5% 3.0% 0.0% 1.4%

-17.4% 2.2% -1.2% -33.2% -27.3% NM -13.1%

-29.7% -2.6% -9.8% -18.4% -16.4% NM -12.5%

-26.6% -7.1% -24.7% -12.6% -3.3% 17.5% -14.7%

-14.6% 7.0% -14.4% 0.0% 26.7% -96.9% -28.7%

-2.1% 1.8% -1.8% 14.8% 17.7% NM 2.3%

6.3% 4.2% 2.7% 3.3% 9.0% NM 2.5%

3.9% 6.8% 12.7% -0.2% 1.2% -42.9% 3.9%

-3.6% -0.5% 5.4% -6.3% -10.5% 219.6% 0.3%

9.0% NA 34.0% 33.4% 7.8% 34.8% 16.2%

9.9% 12.0% 38.7% 35.2% 4.3% 49.3% 16.3%

9.5% 16.0% 43.5% 30.3% 2.8% 48.0% 16.5%

9.0% 15.4% 48.7% 33.9% -3.9% 98.2% 23.6%

7.7% 17.3% 42.6% 29.9% 4.0% 11.6% 16.1%

7.3% 18.6% 42.6% 29.9% 4.0% 69.4% 17.6%

6.8% 18.2% 42.6% 29.9% 4.0% 69.4% 17.4%

9.5% 16.3% 56.5% 35.2% -7.3% NM 13.0%

5.2% 15.4% 35.5% 31.2% 9.0% 83.9% 18.1%

9.9% 19.7% 31.9% 33.3% 9.0% 54.1% 18.5%

5.7% 17.8% 39.6% 20.8% 0.4% 72.2% 15.3%

8.6% 17.9% 53.7% 36.8% -2.9% NM 16.1%

4.6% 17.3% 32.7% 28.4% 10.4% 46.7% 15.6%

9.2% 19.9% 38.5% 28.2% 9.1% 141.4% 19.5%

6.3% 18.9% 41.0% 25.8% -4.9% 111.6% 19.3%

% Chg. Operating Income MidAmerican Energy Co NA 20.8% 18.4% 3.2% -32.9% PacifiCorp NA NM 94.4% 1.6% 12.1% Natural gas pipelines NA 21.7% 25.8% 25.8% -23.2% U.K. ut ilities NA 9.7% -0.3% 0.6% -26.8% Real est ate brokerage NA -50.0% -43.2% -207.1% -195.6% Ot her NA 97.6% -46.9% 883.1% -98.0% Total NA 47.6% 20.1% 58.0% -44.0% (a) Net of noncontrolling interest and includes interest earned by Berkshire (net of relat ed income taxes).

-4.9% 10.3% 4.0% 2.5% 3.0% 500.0% 11.8%

-5.7% -0.7% 4.0% 2.5% 3.0% 0.0% 0.2%

-19.4% 9.5% 0.0% -43.3% -31.6% NM -36.1%

-40.3% 0.6% -14.3% -15.1% 73.3% NM 15.1%

-31.9% 15.5% -52.1% 7.5% NM -50.0% -15.0%

-46.7% 21.0% -30.2% -41.8% NM -97.8% -72.3%

-11.5% 12.1% -6.6% 19.8% -52.8% NM 26.6%

-6.7% 17.6% -5.4% -5.8% 26.1% NM -11.9%

-3.0% 7.9% 36.1% -15.6% NM 49.3% 9.5%

6.5% 6.0% 9.2% 16.3% NM 394.0% 26.9%

Source: Company data, Barclays Capital estimates.

55

Equity Research

Figure 68. Berkshire Hathaway Manufacturing, Service & Retail Segment Model
(In $ Mil) 2005 Revenues: Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total revenues Expenses: Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total expenses Pre-tax earnings: Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total Pre-tax income Income tax and minorit y int erest s Net Income $ 24,074 5,723 9,260 4,728 3,111 $46,896 $ 2006 25,693 5,834 11,988 5,811 3,334 $52,660 $ 2007 28,079 5,373 14,459 7,792 3,397 $59,100 2008 $5,529 29,852 5,052 14,127 8,435 3,104 $66,099 2009 $5,067 31,207 4,011 11,926 6,585 2,869 $61,665 2010E $4,805 32,660 3,795 11,815 6,525 2,900 $62,500 2011E $4,805 34,600 3,800 12,420 6,850 3,075 $65,550 1Q $1,254 6,993 1,003 2,632 1,506 657 $14,045 2009 2Q $1,286 7,864 1,029 2,975 1,572 657 $15,383 3Q 4Q $1,221 8,180 923 3,075 1,969 914 $16,282 1Q $1,125 7,310 915 2,550 1,460 660 $14,020 2010E 2Q $1,200 8,220 965 2,890 1,550 660 $15,485 3Q 4Q $1,220 8,570 905 3,075 1,975 930 $16,675 $1,306 8,170 1,056 3,244 1,538 641 $15,955 $1,260 8,560 1,010 3,300 1,540 650 $16,320

23,857 5,238 7,925 4,399 2,854 44,273

25,464 5,240 10,232 5,153 3,045 49,134

27,847 4,937 12,422 6,824 3,123 55,153

4,796 29,576 4,847 12,452 7,464 2,941 62,076

4,381 30,863 3,867 11,112 6,676 2,708 59,607

4,135 32,316 3,659 11,010 6,515 2,727 60,362

4,120 34,235 3,660 11,565 6,830 2,880 63,290

1,092 6,850 948 2,511 1,492 641 13,534

1,116 7,798 999 2,749 1,648 636 14,946

1,112 8,106 1,005 2,951 1,543 630 15,347

1,061 8,109 915 2,901 1,993 801 15,780

973 7,170 866 2,435 1,460 642 13,546

1,038 8,152 937 2,680 1,550 638 14,995

1,082 8,492 963 3,005 1,535 637 15,714

1,042 8,502 893 2,890 1,970 810 16,107

217 485 1,335 329 257 2,623 977 1,646

229 594 1,756 658 289 3,526 1,395 2,131

232 436 2,037 968 274 3,947 1,594 2,353

733 276 205 1,675 971 163 4,023 1,740 2,283

686 344 144 814 (91) 161 2,058 945 1,113

670 344 136 805 10 173 2,138 962 1,176

685 365 140 855 20 195 2,260 1,017 1,243

162 143 55 121 14 16 511 253 258

170 66 30 226 (76) 21 437 198 239

194 64 51 293 (5) 11 608 272 336

160 71 8 174 (24) 113 502 222 280

152 140 49 115 0 18 474 213 261

162 68 28 210 0 22 490 221 270

178 68 47 295 5 13 606 273 333

178 68 12 185 5 120 568 256 312

% Chg. Revenue Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total Pre-tax Margin Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total operating margin % Chg. Pre-tax Earnings Marmon McLane Shaw Ot her Manuf acturing Ot her Service Ret ailing Total

6.7% 1.9% 29.5% 22.9% 7.2% 12.3%

9.3% -7.9% 20.6% 34.1% 1.9% 12.2%

6.3% -6.0% -2.3% 8.3% -8.6% 11.8%

-8.4% 4.5% -20.6% -15.6% -21.9% -7.6% -6.7%

-5.2% 4.7% -5.4% -0.9% -0.9% 1.1% 1.4%

0.0% 5.9% 0.1% 5.1% 5.0% 6.0% 4.9%

373.2% 0.1% -18.1% -24.9% -29.2% -13.8% -5.5%

-32.4% 8.2% -23.0% -25.1% -30.9% -11.0% -12.1%

-30.5% 7.0% -22.2% -12.9% -26.6% -8.9% -8.3%

-17.8% 2.8% -18.6% 5.0% 1.5% 1.6% -0.4%

-10.3% 4.5% -8.8% -3.1% -3.1% 0.5% -0.2%

-6.7% 4.5% -6.2% -2.9% -1.4% 0.5% 0.7%

-3.5% 4.8% -4.4% 1.7% 0.1% 1.4% 2.3%

-0.1% 4.8% -2.0% 0.0% 0.3% 1.8% 2.4%

0.9% 8.5% 14.4% 7.0% 8.3% 5.6%

0.9% 10.2% 14.6% 11.3% 8.7% 6.7%

0.8% 8.1% 14.1% 12.4% 8.1% 6.7%

13.3% 0.9% 4.1% 11.9% 11.5% 5.3% 6.1%

13.5% 1.1% 3.6% 6.8% -1.4% 5.6% 3.3%

13.9% 1.1% 3.6% 6.8% 0.2% 6.0% 3.4%

14.3% 1.1% 3.7% 6.9% 0.3% 6.3% 3.4%

12.9% 2.0% 5.5% 4.6% 0.9% 2.4% 3.6%

13.2% 0.8% 2.9% 7.6% -4.8% 3.2% 2.8%

14.9% 0.8% 4.8% 9.0% -0.3% 1.7% 3.8%

13.1% 0.9% 0.9% 5.7% -1.2% 12.4% 3.1%

13.5% 1.9% 5.4% 4.5% 0.0% 2.7% 3.4%

13.5% 0.8% 2.9% 7.3% 0.0% 3.3% 3.2%

14.1% 0.8% 4.7% 8.9% 0.3% 2.0% 3.7%

14.6% 0.8% 1.3% 6.0% 0.3% 12.9% 3.4%

5.5% 22.5% 31.5% 100.0% 12.5% 34.4%

1.3% -26.6% 16.0% 47.1% -5.2% 11.9%

19.0% -53.0% -17.8% 0.3% -40.5% 1.9%

-6.4% 24.6% -29.8% -51.4% NM -1.2% -48.8%

-2.3% 0.0% -5.6% -1.1% NM 7.5% 3.9%

2.2% 6.1% 2.9% 6.2% NM 12.7% 5.7%

478.6% 95.9% 7.8% -73.2% NM -50.0% -39.5%

-34.9% -2.9% -63.4% -57.2% NM -27.6% -66.0%

-21.5% -5.9% 4.1% -38.7% NM 0.0% -45.4%

NM 6.0% -65.2% -19.8% NM 24.2% -35.6%

-6.2% -2.1% -10.9% -5.0% NM 12.5% -7.3%

-4.7% 3.0% -6.7% -7.1% NM 4.8% 12.1%

-8.2% 6.3% -7.8% 0.7% NM 18.2% -0.3%

11.3% -4.2% 50.0% 6.3% NM 6.2% 13.1%

Source: Company data, Barclays Capital estimates.

56

Equity Research

Figure 69. Berkshire Hathaway Finance & Financial Products Segment Model
(In $ Mil) 2005 Revenues: Manufactured housing & finance Furniture/transportation equipment leasing Other Total revenues Expenses: Manufactured housing & finance Furniture/transportation equipment leasing Other Total expenses Pre-tax earnings: Manufactured housing & finance Furniture/transportation equipment leasing Other Total pre-tax income Income taxes and minority interest Net income % chg. revenue Manufactured housing & finance Furniture/transportation equipment leasing Other Total Pre-tax margin Manufactured housing & finance Furniture/transportation equipment leasing Other Total operating margin % chg. pre-tax earnings Manufactured housing & finance Furniture/transportation equipment leasing Other Total $3,175 856 528 4,559 2006 $3,570 880 674 5,124 2007 $3,665 810 644 5,119 2008 $3,560 773 614 4,947 2009 $3,257 661 669 4,587 2010E $3,160 595 680 4,435 2011E $3,160 565 690 4,415 1Q 727 173 109 1009 2009 2Q 821 167 111 1099 3Q $872 164 107 1,143 4Q $837 157 342 1,336 1Q $705 150 111 966 2010E 2Q $795 150 113 1,058 3Q $845 150 109 1,104 4Q $815 145 347 1,307

2,759 683 295 3,737

3,057 698 212 3,967

3,139 699 275 4,113

3,354 686 120 4,160

3,070 647 89 3,806

2,980 582 100 3,662

2,980 553 100 3,633

685 170 27 882

774 165 25 964

819 159 23 1,001

792 153 14 959

665 147 33 845

750 147 27 924

795 147 23 965

770 141 17 928

416 173 233 822 308 514

513 182 462 1,157 425 732

526 111 369 1,006 374 632

206 87 494 787 308 479

187 14 580 781 287 494

180 13 580 773 271 502

180 13 590 783 274 509

42 3 82 127 49 78

47 2 86 135 53 82

53 5 84 142 50 92

45 4 328 377 135 242

40 3 78 121 42 79

45 3 86 134 47 87

50 3 86 139 49 90

45 4 330 379 133 246

12.4% 2.8% 27.7% 12.4%

2.7% -8.0% -4.5% -0.1%

-2.9% -4.6% -4.7% -3.4%

-8.5% -14.5% 9.0% -7.3%

-3.0% -10.0% 1.6% -3.3%

0.0% -5.0% 1.5% -0.5%

-11.0% -8.9% -27.8% -12.9%

-12.4% -14.8% -34.7% -15.7%

-3.5% -17.2% -31.4% -9.1%

-7.2% -16.9% 149.6% 8.8%

-3.0% -13.3% 1.8% -4.3%

-3.2% -10.2% 1.8% -3.7%

-3.1% -8.5% 1.9% -3.4%

-2.6% -7.6% 1.5% -2.2%

13.1% 20.2% 44.1% 18.0%

14.4% 20.7% 68.5% 22.6%

14.4% 13.7% 57.3% 19.7%

5.8% 11.3% 80.5% 15.9%

5.7% 2.1% 86.7% 17.0%

5.7% 2.2% 85.3% 17.4%

5.7% 2.2% 85.5% 17.7%

5.8% 1.7% 75.2% 12.6%

5.7% 1.2% 77.5% 12.3%

6.1% 3.0% 78.5% 12.4%

5.4% 2.5% 95.9% 28.2%

5.7% 2.0% 70.3% 12.5%

5.7% 2.0% 76.1% 12.7%

5.9% 2.0% 78.9% 12.6%

5.5% 2.8% 95.1% 29.0%

23.3% 5.2% 98.3% 40.8%

2.5% -39.0% -20.1% -13.1%

-60.8% -21.6% 33.9% -21.8%

-9.2% -83.9% 17.4% -0.8%

-3.7% -7.1% 0.0% -1.0%

0.0% -3.8% 1.7% 1.2%

-63.5% -83.3% -24.1% -47.3%

-45.3% -90.9% -41.1% -46.9%

NM -80.0% -35.9% -12.9%

-2350.0% -81.8% 200.9% 192.2%

-4.8% 0.0% -4.9% -4.7%

-4.3% 50.0% 0.0% -0.7%

-5.7% -40.0% 2.4% -2.1%

0.0% 0.0% 0.6% 0.5%

Source: Company data, Barclays Capital estimates.

57

Equity Research

Figure 70. Berkshire Hathaway Consolidated Balance Sheet
In $ millions ASSETS Insurance & Other: Cash & cash equivalents Investments: Fixed Maturity Securities Equity Securities Other Receivables Inventories Property, plant & equipment Goodwill Other Utilities & Energy: Cash & cash equivalents Property, plant & equipment Goodwill Other Finance & Financial Products: Cash & cash equivalents Investments in fixed maturity securities Other investments Loans & finance receivables Goodwill Other Total Assets LIABILITIES & SHAREHOLDERS' EQUITY Insurance & Other: Losses & loss adjustment expenses Unearned premiums Life & health insurance benefits Accounts payable, accruals & other liabilities Notes payable and other borrowings Utilities & Energy Accounts payable, accruals & other liabilities Notes payable & other borrowings Finance & Financial Products Accounts payable, accruals & other liabilities Derivative contract liabilities Notes payable & other borrowings Income taxes, principally deferred Total Liabilities Shareholders' Equity: Common stock Capital in excess of par value Accumulated other comprehensive income Retained earnings Berkshire Hathaway shareholders' equity Noncontrolling interests Total Shareholders' Equity
Source: Company data, Barclays Capital estimates.

December 31, 2009 2008 $27,917 $24,302 32,523 56,562 28,980 14,792 6,147 15,720 27,614 13,070 223,325 429 30,936 5,334 8,072 44,771 2,212 4,608 3,620 13,989 1,024 3,570 29,023 297,119 27,115 49,073 18,419 14,925 7,500 16,703 27,477 13,257 198,771 280 28,454 5,280 7,556 41,570 957 4,517 3,116 13,942 1,024 3,502 27,058 267,399

59,416 7,925 3,802 15,379 3,719 90,241 5,895 19,579 25,474 2,514 9,269 14,611 26,394 19,225 161,334

56,620 7,861 3,619 14,987 4,349 87,436 6,175 19,145 25,320 2,656 14,612 13,388 30,656 10,280 153,692

8 27,074 17,793 86,227 131,102 4,683 135,785 297,119

8 27,133 3,954 78,172 109,267 4,440 113,707 267,399

58

Equity Research

Figure 71. Berkshire Hathaway Consolidated Statements of Earnings
In $ millions Revenues: Insurance & Other: Insurance earned premiums Sales and service revenues Interest, dividend and other income Investment gains/losses Other-than-temporary impairment losses on investments Utilities & Energy: Operating revenues Other Finance & Financial Products: Interest, dividend and other investment income Investment gains/losses Derivative gains/losses Other December 31, 2009 2008

$27,884 62,555 5,245 251 (3,155) 92,780 11,204 239 11,443 1,886 67 3,624 2,693 8,270 112,493

$25,525 65,854 4,966 1,166 (1,813) 95,698 12,668 1,303 13,971 1,790 7 (6,821) 3,141 (1,883) 107,786

Costs & Expenses Insurance & Other: Insurance losses and loss adjustment expenses Life & health insurance benefits Insurance underwriting expenses Cost of sales and services Selling, general and administrative expenses Interest expense Utilities & Energy: Cost of sales & operating expenses Interest expense Finance & Financial Products: Interest expense Other

18,251 1,838 6,236 52,647 8,117 130 87,219 8,739 1,176 9,915

16,259 1,840 4,634 54,103 8,052 156 85,044 9,840 1,168 11,008

Earnings before income taxes and equity method earnings Income tax expense Earnings from equity method investments Net Earnings Less; Earnings attributable to noncontrolling interests Net earnings attributable to Berkshire Hathaway Average common shares outstanding Net earnings per share attributable to Berkshire Hathaway shareholders
Source: Company data, Barclays Capital estimates.

686 639 3,121 3,521 3,807 4,160 100,941 100,212 11,552 7,574 3,538 1,978 427 0 8,441 5,596 386 602 8,055 4,994 1,551,174 1,548,960 $5,193 $3,224

59

Equity Research

Figure 72. Non-Life Insurance Universe
NON-LIFE INSURANCE SECTOR RATING: 2-NEUTRAL
Price 4/8/2010 52-Wk Price Range Mkt
Cap

Company

Ticker

Rating

(Bil)

09A

Operating EPS 11E 10E

% Change EPS 10/09 11/10

Consensus EPS 10E 11E

Div Yield

Price/ Tang BV 4Q09

Price/Stated BV 09A 10E 11E

09E

P/E 10E

11E

ROE 10E 11E

Commercial Lines & Reinsurance
Travelers ACE Limited Arch Capital Group Partner Re Everest Re Berkshire Hathaway Chubb OneBeacon Allied World Assurance Aspen Holdings XL Capital Montpelier Re Flagstone Re RenaissanceRe TRV ACE ACGL PRE RE BRK.B CB OB AWH AHL XL MRH FSR RNR 1-Overweight 1-Overweight 1-Overweight 1-Overweight 1-Overweight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight 2-Equal Weight $52.26 53.30 74.68 80.51 81.51 79.68 51.67 16.58 44.53 28.67 19.31 16.75 11.12 57.01 55 - 37 56 - 40 77 - 53 82 - 61 93 - 65 84 - 55 54 - 38 18 - 10 50 - 35 29 - 20 20 - 6 18 - 12 12 - 8 58 - 43 $30.6 18.0 3.9 6.5 4.8 196.8 17.0 1.6 2.7 2.3 6.6 1.2 0.9 3.4 $6.29 8.17 10.53 14.59 12.51 3.25 6.14 1.90 10.34 5.16 2.69 3.13 2.30 12.25 $6.25 7.25 9.00 6.70 7.75 3.34 4.70 1.40 7.45 2.80 2.05 1.25 1.25 5.80 $6.00 7.00 8.50 8.00 10.50 3.47 5.00 1.00 7.50 3.50 2.25 2.00 1.55 7.25 -1% -11% -14% -54% -38% 3% -24% -26% -28% -46% -24% -60% -46% -53% -4% -4% -6% 19% 4% 4% 6% -29% 1% 25% 10% 60% 24% 25% $5.75 7.10 7.87 6.82 8.16 3.64 5.06 1.50 7.07 3.21 2.21 1.43 1.52 6.95 $5.80 7.41 8.91 10.01 11.20 3.86 5.51 1.34 7.49 3.59 2.49 2.30 1.76 8.24 2.5% 2.3% 0.0% 2.3% 2.4% 0.0% 2.7% 5.1% 1.8% 2.1% 2.1% 2.1% 1.4% 1.7% 1.16 1.14 1.02 1.02 0.79 1.91 1.13 1.10 0.83 0.84 0.87 0.79 0.83 1.15 0.99 0.91 1.02 0.95 0.79 1.41 1.10 1.10 0.75 0.84 0.78 0.79 0.80 1.10 0.89 0.83 0.89 0.89 0.75 1.27 1.03 1.06 0.67 0.76 0.73 0.74 0.74 1.00 0.81 0.76 0.78 0.83 0.69 1.18 0.96 1.06 0.61 0.69 0.68 0.67 0.68 0.90 8.3 6.5 7.1 5.5 6.5 24.5 8.4 8.7 4.3 5.6 7.2 5.3 4.8 4.7 8.4 7.3 8.3 12.0 10.5 23.8 11.0 11.8 6.0 10.2 9.4 13.4 8.9 9.8 8.7 7.6 8.8 10.1 7.8 23.0 10.3 16.6 5.9 8.2 8.6 8.4 7.2 7.9 11% 12% 12% 8% 7% 6% 10% 9% 11% 8% 8% 5% 8% 11% 10% 10% 10% 9% 5% 5% 10% 6% 10% 9% 8% 8% 10% 13%

Median Insurance Brokers
Aon Corp. Marsh & McLennan Willis Group Arthur J. Gallagher Brown & Brown AON MMC WSH AJG BRO 2-Equal Weight 3-Underweight 3-Underweight 3-Underweight 3-Underweight 43.18 24.21 31.92 24.58 18.10 43 25 32 26 20 35 18 22 17 16 11.5 13.1 5.4 2.5 2.6 3.11 1.58 2.67 1.32 1.08 3.25 1.50 2.65 1.40 1.10 3.60 1.75 3.00 1.50 1.20

-27%
4% -5% -1% 6% 2%

5%
11% 17% 13% 7% 9% 3.31 1.73 2.66 1.49 1.09 3.67 1.96 3.00 1.68 1.19

2.1%
1.4% 3.3% 3.3% 5.2% 1.7%

1.02
NM NM NM NM NM

0.93
2.13 2.18 2.46 2.83 1.88

0.86
1.99 2.06 2.20 2.89 1.74

0.77
1.86 1.91 1.98 2.92 1.62

6.5
13.9 15.3 11.9 18.6 16.8

10.0
13.3 16.2 12.1 17.5 16.4

8.5
12.0 13.8 10.6 16.4 15.1

9%
17% 13% 19% 16% 11%

9%
17% 15% 20% 18% 11%

Median Personal Lines
The Hanover Group Progressive Allstate Corp. THG PGR ALL 1-Overweight 2-Equal Weight 2-Equal Weight 43.51 19.36 33.10 45 - 29 20 - 14 33 - 21 2.1 13.0 17.8 3.09 1.55 3.48 3.75 1.40 3.75 4.00 1.40 3.50

0%
21% -10% 8%

14%
7% 0% -7% 3.89 1.45 3.91 4.44 1.55 4.26

2.3%
1.7% 0.0% 2.4% 0.94 2.26 1.13

2.16
0.87 2.26 1.07

2.02
0.82 2.00 0.98

1.89
0.77 1.84 0.91

14.6
14.1 12.5 9.5

14.7
11.6 13.9 8.8

12.9
10.9 13.9 9.5

15%
7% 15% 12%

16%
7% 14% 10%

Median Multiline (a)
The Hartford HIG 2-Equal Weight 28.55 30 - 9 12.5 1.85 3.82 3.90

8%
NA

0%
2% 3.03 3.90

1.7%
0.7%

1.13
1.13

1.07
0.73

0.98
0.68

0.91
0.63

12.5
15.4

11.6
7.5

10.9
7.3

12%
8%

10%
8%

Median S&P 500 10 Yr Treasury
SPX US10YR 1,186.44 3.86 1192 - 815 3.99 - 2.76 $63.21 $60.18 $77.64

NA
-4.8%

2%
29.0% $60.18 $77.64

0.7%
0.0%

1.13

0.73

0.68

0.63

15.4
18.8

7.5
19.7

7.3
15.3

8%
NM

8%
NM

Note: S&P 500 EPS estimates are a bottom-up calculation of consensus earnings forecasts. (a) Eric Berg is the lead analyst on HIG. The Life Insurance sector rating is 2-Neutral.

Source: Factset, Barclays Capital estimates.

Analyst Certification: We, Jay Gelb, CFA, Daniel Ford, CFA and Gary Chase, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

Other Team Members: Schaul, Erica (BCI, New York) DeWitt, Sarah (BCI, New York) 1.212.526.8190 1.212.526.9947 erica.schaul@barcap.com sarah.dewitt@barcap.com

Company Description:

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Equity Research
On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investment management businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc.

Important Disclosures: Berkshire Hathaway Inc. (BRK.B)
Rating and Price Target Chart:
CHART IS NOT APPLICABLE

US$ 80.49 (09-Apr-2010)

2-Equal Weight / 2-Neutral

Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of Berkshire Hathaway Inc. in the previous 12 months. Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Berkshire Hathaway Inc. or one of its affiliates. Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Berkshire Hathaway Inc. in the past 12 months. Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from Berkshire Hathaway Inc. within the next 3 months. Barclays Bank PLC and/or an affiliate trades regularly in the shares of Berkshire Hathaway Inc.. Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Berkshire Hathaway Inc. within the past 12 months. Berkshire Hathaway Inc. is or during the past 12 months has been an investment banking client of Barclays Bank PLC and/or an affiliate. Berkshire Hathaway Inc. is or during the last 12 months has been a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. Barclays Bank PLC is associated with specialist firm Barclays Capital Market Makers, which makes a market in Berkshire Hathaway Inc. stock. At any given time, the associated specialist may have "long" or "short" inventory position in the stock; and the associated specialist may be on the opposite side of orders executed on the Floor of the Exchange in the stock. Valuation Methodology: We determine our price target for Berkshire Hathaway of $88 primarily by applying a price-to-book multiple of 1.30x (versus a historical average since 2000 of 1.59x) to our YE 2011 book value estimate of around $68. As a point of reference, our price target valuation implies a price-to-tangible book multiple of 1.86x, versus a historical average since 2000 of 2.30x. Risks Which May Impede the Achievement of the Price Target: There are several risks that could impede the achievement of our price target for Berkshire Hathaway including managment succession, large and concentrated stock investments, derivative losses, earnings volatility, catastrophe losses, M&A risk and regulatory risk.

61

Equity Research FOR CURRENT IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS RESEARCH REPORT, PLEASE SEND A WRITTEN REQUEST TO: BARCLAYS CAPITAL RESEARCH COMPLIANCE 745 SEVENTH AVENUE, 17TH FLOOR, NEW YORK, NY 10019 OR REFER TO publicresearch.barcap.com or call 1-212-526-1072 Important Disclosures Continued: The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities.

Company Name Berkshire Hathaway Inc.

Ticker BRK.B

Price US$ 80.49

Price Date 09-Apr-2010

Stock / Sector Rating 2-Equal Weight / 2-Neutral

Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise. Guide to the Barclays Capital Fundamental Equity Research Rating System: Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the “sector coverage universe”). Below is the list of companies that constitute the sector coverage universe: ACE Limited (ACE) Allstate Corp. (ALL) Arch Capital Group Ltd. (ACGL) Aspen Insurance Holdings (AHL) Chubb Corp. (CB) Flagstone Reinsurance Holdings Ltd. (FSR) Montpelier Re Holdings (MRH) PartnerRe Ltd. (PRE) RenaissanceRe Holdings (RNR) The Travelers Companies, Inc. (TRV) XL Capital Ltd. (XL) Allied World Assurance Co. (AWH) Aon Corporation (AOC) Arthur J. Gallagher & Co. (AJG) Brown & Brown, Inc. (BRO) Everest Re Group (RE) Marsh & McLennan Cos. (MMC) OneBeacon Insurance Group (OB) Progressive Corp. (PGR) The Hanover Insurance Group (THG) Willis Group Holdings Ltd. (WSH)

In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone. Stock Rating 1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12- month investment horizon. 3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12- month investment horizon. RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is acting in an advisory capacity in a merger or strategic transaction involving the company.

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Equity Research Sector View 1-Positive - sector coverage universe fundamentals/valuations are improving. 2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating. 3-Negative - sector coverage universe fundamentals/valuations are deteriorating. Distribution of Ratings: Barclays Capital Equity Research has 1453 companies under coverage. 42% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 47% of companies with this rating are investment banking clients of the Firm. 44% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 43% of companies with this rating are investment banking clients of the Firm. 12% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 33% of companies with this rating are investment banking clients of the Firm. Barclays Capital offices involved in the production of Equity Research: London Barclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London) New York Barclays Capital Inc. (BCI, New York) Tokyo Barclays Capital Japan Limited (BCJL, Tokyo) São Paulo Banco Barclays S.A. (BBSA, São Paulo) Hong Kong Barclays Bank PLC, Hong Kong branch (BB, Hong Kong) Toronto Barclays Capital Canada Inc. (BCC, Toronto)

This publication has been prepared by Barclays Capital; the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates as provided below. This publication is provided to you for information purposes only. Prices shown in this publication are indicative and Barclays Capital is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Other than disclosures relating to Barclays Capital, the information contained in this publication has been obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent or warrant that it is accurate or complete. The views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to update its opinions or the information in this publication. Barclays Capital and its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation or issuance of this document, may from time to time act as manager, co-manager or underwriter of a public offering or otherwise, in the capacity of principal or agent, deal in, hold or act as market-makers or advisors, brokers or commercial and/or investment bankers in relation to the securities or related derivatives which are the subject of this publication. The analyst recommendations in this report reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any other interests, including those of Barclays Capital and/or its affiliates. Neither Barclays Capital, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. The securities discussed in this publication may not be suitable for all investors. Barclays Capital recommends that investors independently evaluate each issuer, security or instrument discussed in this publication and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information in this publication is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This communication is being made available in the UK and Europe to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Capital is authorized and regulated by the Financial Services Authority (‘FSA’) and member of the London Stock Exchange. Barclays Capital Inc., US registered broker/dealer and member of FINRA (www.finra.org), is distributing this material in the United States and, in connection therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019. Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking Division of Absa Bank Limited, an authorised financial services provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa Bank Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Absa Capital in South Africa, 15 Alice Lane, Sandton, Johannesburg, Gauteng, 2196. Absa Capital is an affiliate of Barclays Capital. Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations permit otherwise. In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to institutional investors in Japan by Barclays Capital Japan Limited. Barclays Capital Japan Limited is a joint-stock company incorporated in Japan with 63

Equity Research
registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143. Barclays Bank PLC Frankfurt Branch is distributing this material in Germany under the supervision of Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd. IRS Circular 230 Prepared Materials Disclaimer: Barclays Capital and its affiliates do not provide tax advice and nothing contained herein should be construed to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor. © Copyright Barclays Bank PLC (2010). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission of Barclays Capital or any of its affiliates. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional information regarding this publication will be furnished upon request.

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