Berkshire Hathaway 2009 Annual Report Download - page 79

Management’s Discussion (Continued)
Contractual Obligations (Continued)
estimated based upon past claim settlement activities and therefore are subject to significant estimation error. The factors
affecting the ultimate amount of claims are discussed in the following section regarding our critical accounting policies.
Although certain insurance losses and loss adjustment expenses are ceded to and recoverable from others under reinsurance
contracts, such recoverables are not reflected in the table.
A summary of contractual obligations as of December 31, 2009 follows. Amounts are in millions.
Estimated payments due by period
Total 2010 2011-2012 2013-2014 After 2014
Notes payable and other borrowings (1) ........................... $ 60,760 $ 6,394 $10,562 $ 8,360 $35,444
Operating leases ............................................ 2,986 577 840 520 1,049
Purchase obligations ......................................... 16,689 5,628 3,711 3,339 4,011
Unpaid losses and loss expenses (2) .............................. 61,889 13,423 14,546 8,072 25,848
Other ..................................................... 24,848 1,619 2,685 2,599 17,945
Total ..................................................... $167,172 $27,641 $32,344 $22,890 $84,297
(1) Includes interest.
(2) Before reserve discounts of $2,473 million.
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 our 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 our financial statements will likely increase or decrease in the future as additional information
becomes available.
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 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. Amounts are in millions.
Gross unpaid losses Net unpaid losses *
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
GEICO ..................................................... $ 8,561 $ 7,336 $ 8,211 $ 7,012
General Re .................................................. 17,594 18,241 16,170 17,235
BHRG ..................................................... 28,109 26,179 23,145 21,386
Berkshire Hathaway Primary Group .............................. 5,152 4,864 4,774 4,470
Total ....................................................... $59,416 $56,620 $52,300 $50,103
* 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 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.
77