Berkshire Hathaway 2005 Annual Report Download - page 68

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Contractual Obligations (Continued)
obligations, it is assumed that no principal prepayments will occur for purposes of this disclosure. Further, while short-term
borrowings and repurchase agreements are currently expected to be renewed as they mature, such amounts are not assumed to
renew for purposes of this disclosure.
Berkshire and subsidiaries are also parties to long-term contracts to acquire goods or services in the future, which are
not currently reflected in the financial statements. Such obligations, including future minimum rentals under operating leases,
will be reflected in future periods as the goods are delivered or services provided. Amounts due as of the balance sheet date for
purchases where the goods and services have been received and a liability incurred are not included to the extent that such
amounts are due within one year of the balance sheet date.
Contractual obligations for unpaid losses and loss adjustment expenses arising under property and casualty insurance
contracts are estimates. The timing and amount of such payments are contingent upon the ultimate outcome of claim settlements
that will occur over many years. The amounts presented in the following table have been estimated based upon past claim
settlement activities. The timing and amount of such payments are subject to significant estimation error. The factors affecting
the ultimate amount of claims are discussed in the following section regarding Berkshire’ s critical accounting policies.
Accordingly, the actual timing and amount of payments may differ materially from the amounts shown in the table.
A summary of long-term contractual obligations as of December 31, 2005 follows. Amounts represent estimates of
gross undiscounted amounts payable over time. In addition, certain losses and loss adjustment expenses for property and
casualty loss reserves are ceded to others under reinsurance contracts and therefore are recoverable. Such potential recoverables
are not reflected in the table. Amounts are in millions.
Estimated payments due by period
Total 2006 2007-2008 2009-2010 After 2010
Notes payable and other borrowings (1) .......... $ 18,700 $ 2,441 $ 5,666 $ 3,155 $ 7,438
Securities sold under agreements to
repurchase
(1) .............................................. 1,162 1,162 — — —
Operating leases ............................................. 1,632 357 532 323 420
Purchase obligations (2) .................................. 12,651 3,897 3,370 2,369 3,015
Unpaid losses and loss expenses .................... 50,832 12,192 13,713 7,119 17,808
Other long-term policyholder liabilities......... 3,937 42 59 41 3,795
Other (3) .......................................................... 12,473 871 714 2,129 8,759
Total............................................................... $101,387 $20,962 $24,054 $15,136 $41,235
(1) Includes interest
(2) Principally relates to NetJets’ aircraft purchases
(3) Principally annuity reserves, employee benefits and derivative contract liabilities
Critical Accounting Policies
Certain accounting policies require management to make estimates and judgments concerning transactions that will be
settled several years in the future. Amounts recognized in the financial statements from such estimates are necessarily based on
numerous assumptions involving varying and potentially significant degrees of judgment and uncertainty. Accordingly, the
amounts currently reflected in the financial statements will likely increase or decrease in the future as additional information
becomes available.
Property and casualty losses
A summary of Berkshire’ s consolidated liabilities for unpaid property and casualty losses is presented in the table
below. Except for certain workers’ compensation reserves, liabilities for unpaid property and casualty losses (referred to in this
section as “gross unpaid losses”) are reflected in the Consolidated Balance Sheets without discounting for time value, regardless
of the length of the claim-tail. Dollars are in millions.
Gross unpaid losses Net unpaid losses*
Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2004
GEICO................................................................................. $ 5,578 $ 5,112 $ 5,285 $ 4,867
General Re........................................................................... 21,524 22,258 20,429 20,056
BHRG.................................................................................. 17,202 16,235 14,577 13,132
Berkshire Hathaway Primary .............................................. 3,730 1,614 3,271 1,542
Total .................................................................................... $48,034 $45,219 $43,562 $39,597
* Net of reinsurance recoverable and deferred charges reinsurance assumed and before foreign currency translation effects.