Berkshire Hathaway 2002 Annual Report Download - page 44

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(10) Unpaid losses and loss adjustment expenses (Continued)
Estimates of unpaid losses resulting from the September 11th terrorist attack were $1.9 billion as of December 31,
2002 and $2.4 billion as of December 31, 2001. Berkshires management believes it will take many years to resolve
complicated coverage issues, which could produce a material change in the ultimate loss amount.
As previously indicated, Berkshires insurance subsidiaries are exposed to environmental, asbestos and other latent
injury claims arising from insurance and reinsurance contracts. Loss reserve estimates for environmental and asbestos
exposures include case basis reserves, which also reflect reserves for legal and other loss adjustment expenses and IBNR
reserves. IBNR reserves are determined based upon Berkshires historic general liability exposure base and policy
language, previous environmental and loss experience and the assessment of current trends of environmental law,
environmental cleanup costs, asbestos liability law and judgmental settlements of asbestos liabilities.
The liabilities for environmental, asbestos, and latent injury claims and claims expenses net of reinsurance
recoverables were approximately $6.6 billion at December 31, 2002 and $6.3 billion at December 31, 2001.
Approximately, $5.2 billion of year end 2002 reserves were assumed under retroactive reinsurance contracts written by
the Berkshire Hathaway Reinsurance Group. Claim liabilities arising from these contracts are subject to aggregate
policy limits. Thus, Berkshires exposure to environmental and latent injury claims under these contracts are, likewise,
limited. Claims paid or reserved under these policies were approximately 85% of aggregate policy limits as of the end
of 2002.
Berkshire monitors evolving case law and its effect on environmental and latent injury claims. Changing
government regulations, newly identified toxins, newly reported claims, new theories of liability, new contract
interpretations and other factors could result in significant increases in these liabilities. Such development could be
material to Berkshires results of operations. It is not possible to estimate reliably the amount of additional net loss, or
the range of net loss, that is reasonably possible.
(11) Notes payable and other borrowings
Notes payable and other borrowings of Berkshire and its subsidiaries as of December 31, 2002 and 2001 are
summarized below. Amounts are in millions.
2002 2001
Insurance and other:
Commercial paper and other short-term borrowings .................................. $2,205 $1,777
Borrowings under investment agreements.................................................. 770 478
SQUARZ notes payable due 2007.............................................................. 400 
Other debt due 2003-2032 .......................................................................... 1,432 1,230
$4,807 $3,485
Finance and financial products:
Commercial paper and other short-term borrowings ................................. $ 204 $2,073
Borrowings of Berkadia LLC due 2006...................................................... 2,175 4,900
Notes payable ............................................................................................. 1,454 1,650
Other ........................................................................................................... 648 396
$4,481 $9,019
Commercial paper and other short-term borrowings are obligations of certain businesses that utilize short-term
borrowings as part of their day-to-day operations. Berkshire affiliates have approximately $3.6 billion available unused
lines of credit to support their short-term borrowing programs and, otherwise, provide additional liquidity.
Borrowings under investment agreements are made pursuant to contracts calling for interest payable, normally
semiannually, at fixed rates ranging from 2.5% to 8.6% per annum. Contractual maturities of borrowings under
investment agreements generally range from 3 months to 30 years. Under certain conditions, these borrowings may be
redeemable without premium prior to the contractual maturity dates.
On May 28, 2002, Berkshire issued 40,000 SQUARZ securities for net proceeds of $398 million. Each SQUARZ
security consists of a $10,000 par amount senior note due in November 2007 together with a warrant, which expires in
May 2007, to purchase either 0.1116 shares of Class A common stock or 3.3480 shares of Class B common stock for
$10,000. A warrant premium is payable to Berkshire at an annual rate of 3.75% and interest is payable to note holders at
a rate of 3.00% per annum. All debt and warrants issued in conjunction with SQUARZ securities were outstanding at
December 31, 2002.