Berkshire Hathaway 2014 Annual Report Download - page 72

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Notes to Consolidated Financial Statements (Continued)
(14) Unpaid losses and loss adjustment expenses (Continued)
We are exposed to environmental, asbestos and other latent injury claims arising from insurance and reinsurance contracts.
Liability estimates for environmental and asbestos exposures include case basis reserves and also reflect reserves for legal and
other loss adjustment expenses and IBNR reserves. IBNR reserves are based upon our historic general liability exposure base
and policy language, previous environmental 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 other latent injury claims and claims expenses, net of reinsurance
recoverables, were approximately $14.4 billion at December 31, 2014 and $13.7 billion at December 31, 2013. These liabilities
included approximately $12.7 billion at December 31, 2014 and $11.9 billion at December 31, 2013 of liabilities assumed under
retroactive reinsurance contracts. Liabilities arising from retroactive contracts with exposure to claims of this nature are
generally subject to aggregate policy limits. Thus, our exposure to environmental and other latent injury claims under these
contracts is, likewise, limited. We monitor evolving case law and its effect on environmental and other 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
our results of operations. We are unable to reliably estimate the amount of additional net loss or the range of net loss that is
reasonably possible.
(15) Notes payable and other borrowings
Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity
date ranges shown in the following tables are based on borrowings as of December 31, 2014.
Weighted
Average
Interest Rate
December 31,
2014 2013
Insurance and other:
Issued by Berkshire due 2015-2047 .......................................... 2.8% $ 8,354 $ 8,311
Short-term subsidiary borrowings ........................................... 0.6% 839 949
Other subsidiary borrowings due 2015-2035 ................................... 6.1% 2,701 3,180
$11,894 $12,440
Weighted
Average
Interest Rate
December 31,
2014 2013
Railroad, utilities and energy:
Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:
BHE senior unsecured debt due 2017-2045 ................................ 5.1% $ 7,860 $ 6,616
Subsidiary and other debt due 2015-2064 ................................. 5.1% 28,439 23,033
Issued by BNSF due 2015-2097 ............................................. 5.0% 19,280 17,006
$55,579 $46,655
In December 2014, BHE issued $1.5 billion in senior unsecured notes consisting of $350 million of 2.4% notes due in
2020, $400 million of 3.5% notes due in 2025 and $750 million of 4.5% notes due in 2045. BHE subsidiary debt at
December 31, 2014, included borrowings of approximately $4.0 billion of AltaLink, which was acquired by BHE on
December 1, 2014. BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all
of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure the debt. These
borrowing arrangements generally contain various covenants including, but not limited to, leverage ratios, interest coverage
ratios and debt service coverage ratios. BNSF’s borrowings are primarily senior unsecured debentures. In 2014, BNSF issued
$3.0 billion of debentures consisting of $500 million of 3.75% debentures due in 2024, $700 million of 3.4% debentures due in
2024, $1.0 billion of 4.9% debentures due in 2044 and $800 million of 4.55% debentures due in 2044. As of December 31,
2014, BNSF and BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not
guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.
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