Berkshire Hathaway 2012 Annual Report Download - page 87

Management’s Discussion (Continued)
Contractual Obligations (Continued)
life, annuity and health benefits are ceded to and receivable from others under reinsurance contracts, such receivables are not
reflected in the table below. A summary of contractual obligations as of December 31, 2012 follows. Amounts are in millions.
Estimated payments due by period
Total 2013 2014-2015 2016-2017 After 2017
Notes payable and other borrowings (1) .......................... $ 96,497 $13,070 $13,554 $ 9,935 $ 59,938
Operating leases ............................................ 8,627 1,186 1,990 1,557 3,894
Purchase obligations ......................................... 38,702 13,096 9,508 5,500 10,598
Losses and loss adjustment expenses (2) .......................... 66,189 14,086 15,656 9,145 27,302
Life, annuity and health insurance benefits (3) ..................... 19,600 1,516 55 225 17,804
Other (4) ................................................... 34,263 15,345 3,115 1,250 14,553
Total ..................................................... $263,878 $58,299 $43,878 $27,612 $134,089
(1) Includes interest.
(2) Before reserve discounts of $1,990 million.
(3) Amounts represent estimated undiscounted benefit obligations net of estimated future premiums.
(4) Includes commitment to invest in Heinz and derivative contract liabilities.
Critical Accounting Policies
Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the
Consolidated Financial Statements. Such estimates are necessarily based on assumptions about numerous factors involving
varying, and possibly significant, degrees of judgment and uncertainty. Accordingly, certain amounts currently recorded in the
financial statements, with the benefit of hindsight, will likely be adjusted in the future based on additional information made
available and changes in other facts and circumstances.
Property and casualty losses
A summary of our consolidated liabilities for unpaid property and casualty losses is presented in the table below. Except
for certain workers’ compensation liabilities, all 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. Amounts are in millions.
Gross unpaid losses Net unpaid losses *
Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011
GEICO ..................................................... $10,300 $10,167 $ 9,791 $ 9,705
General Re .................................................. 15,961 16,288 14,740 15,267
BHRG ..................................................... 31,186 31,489 26,328 26,413
Berkshire Hathaway Primary Group .............................. 6,713 5,875 6,171 5,442
Total ....................................................... $64,160 $63,819 $57,030 $56,827
* Net of reinsurance recoverable and deferred charges on reinsurance assumed and before foreign currency translation effects.
We record liabilities for unpaid losses and loss adjustment expenses under property and casualty insurance and reinsurance
contracts based upon estimates of the ultimate amounts payable under the contracts with respect to losses occurring on or before
the balance sheet date. The timing and amount of loss payments is subject to a great degree of variability and is contingent upon,
among other things, the timing of claim reporting from insureds and cedants and the determination of the ultimate loss amount
through the loss adjustment process. A variety of techniques are used in establishing the liabilities for unpaid losses. Regardless
of the techniques used, significant judgments and assumptions are necessary in projecting the ultimate amounts payable in the
future. As a result, uncertainties are imbedded in and permeate the actuarial loss reserving techniques and processes used.
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