Berkshire Hathaway 1999 Annual Report Download - page 33

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32
Notes to Consolidated Financial Statements (Continued)
(7) Finance and financial products businesses
Assets and liabilities of Berkshire's finance and financial products businesses are summarized below (in millions).
Dec. 31, Dec. 31,
1999 1998
Assets
Cash and cash equivalents .................................................... $ 623 $ 907
Investments in securities with fixed maturities:
Held to maturity, at cost (fair value $2,223 in 1999; $1,366 in 1998) ..................... 2,293 1,227
Trading, at fair value (cost $11,330 in 1999; $5,279 in 1998) .......................... 11,277 5,219
Available for sale, at fair value (cost $997 in 1999; $745 in 1998) ....................... 999 743
Trading account assets ....................................................... 5,881 6,234
Securities purchased under agreements to resell ..................................... 1,171 1,083
Other ................................................................... 1,985 1,576
$24,229 $16,989
Liabilities
Annuity reserves and policyholder liabilities ....................................... $ 843 $ 816
Securities sold under agreements to repurchase ..................................... 10,216 4,065
Securities sold but not yet purchased ............................................. 1,174 1,181
Trading account liabilities .................................................... 5,930 5,834
Notes payable and other borrowings* ............................................ 1,998 1,503
Other ................................................................... 2,062 2,126
$22,223 $15,525
*Payments of principal amounts of notes payable and other borrowings during the next five years are as follows (in millions):
2000 2001 2002 2003 2004
$49 $120 $260 $707 $475
Berkshire’ s finance and financial products businesses consist primarily of the financial products businesses of
General Re, the consumer finance business of Scott Fetzer Financial Group, the real estate finance business of Berkshire
Hathaway Credit Corporation, the financial instrument trading business of BH Finance and a life insurance subsidiary in
the business of selling annuities. General Re’s financial products businesses consist of General Re Financial Product s
(“GRFP”) group and a collection of other businesses that provide investment, insurance, reinsurance and real estate
management and brokerage services. Significant accounting policies and disclosures for these businesses are discussed below.
Investment securities (principally fixed maturity and equity investments) that are acquired for purposes of selling them
in the near term are classified as trading securities. Such assets are carried at fair value. Realized and unrealized gains and
losses from trading activities are included in income from finance and financial products businesses. Trading account assets
and liabilities are marked-to-market on a daily basis and represent the estimated fair values of derivatives in net gain
positions (assets) and in net loss positions (liabilities). The net gains and losses reflect reductions permitted under master
netting agreements with counterparties.
Securities purchased under agreements to resell (assets) and securities sold under agreements to repurchase (liabilities)
are accounted for as collateralized investments and borrowings and are recorded at the contractual resale or repurchase
amounts plus accrued interest. Other investment securities owned and liabilities associated with investment securities sold
but not yet purchased are carried at fair value.
GRFP is engaged as a dealer in various types of derivative instruments, including interest rate, currency and equity
swaps and options, as well as structured finance products. These instruments are carried at their current estimates of fair
value, which is a function of underlying interest rates, currency rates, security values, volatilities and the creditworthiness
of counterparties. Future changes in these factors or a combination thereof may affect the fair value of these instruments
with any resulting adjustment to be included currently in the Consolidated Statement of Earnings.