FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-14905

BERKSHIRE HATHAWAY INC.

(Exact name of registrant as specified in its charter)

Delaware		47-0813844
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1440 Kiewit Plaza, Omaha, Nebraska 68131
(Address of principal executive office)
(Zip Code)

(402) 346-1400
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     Number of shares of common stock outstanding as of April 28, 2006:

Class A — 1,259,258
Class B — 8,464,000

 

 

		FORM 10-Q		Q/E 3/31/06

BERKSHIRE HATHAWAY INC.

		Page No.
Part I — Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets — March 31, 2006 and December 31, 2005			2-3
Condensed Consolidated Statements of Earnings — First Quarter 2006 and 2005			4
Condensed Consolidated Statements of Cash Flows — First Quarter 2006 and 2005			5
Notes to Interim Consolidated Financial Statements			6-18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19-30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			30
Part II – Other Information
Item 1. Legal Proceedings			31-35
Item 1A. Risk Factors			35
Item 6. Exhibits			36
Signature			36
Exhibit 31 Rule 13a-14(a)/15d-14(a) Certifications			37
Exhibit 32 Section 1350 Certifications			39

		FORM 10-Q		Q/E 3/31/06

Part I Financial Information

BERKSHIRE HATHAWAY INC.
and Subsidiaries

		March 31,				December 31,
		2006				2005				2005
		(Unaudited)				(Audited)				(Pro Forma)*
ASSETS
Insurance and Other:
Cash and cash equivalents		$	37,675			$	40,471			$	40,471
Investments:
Fixed maturity securities			27,002				27,420				27,420
Equity securities			49,788				46,721				46,721
Other			1,012				1,003				1,003
Receivables			13,097				12,397				12,372
Inventories			4,227				4,143				4,143
Property, plant and equipment			7,705				7,500				7,500
Goodwill			23,101				22,693				22,693
Deferred charges reinsurance assumed			2,297				2,388				2,388
Other			5,045				4,937				4,937
			170,949				169,673				169,648
Utilities and Energy:
Cash and cash equivalents			709				—				358
Property, plant and equipment			22,057				—				11,915
Goodwill			5,449				—				4,156
Other			6,680				—				3,764
Investments in MidAmerican Energy Holdings Company			—				4,125				—
			34,895				4,125				20,193
Finance and Financial Products:
Cash and cash equivalents			4,474				4,189				4,189
Investments in fixed maturity securities			3,255				3,435				3,435
Loans and finance receivables			11,237				11,087				11,087
Goodwill			951				951				951
Other			4,445				4,865				4,865
			24,362				24,527				24,527
		$	230,206			$	198,325			$	214,368

See accompanying Notes to Interim Consolidated Financial Statements

		FORM 10-Q		Q/E 3/31/06

BERKSHIRE HATHAWAY INC.
and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amounts)

		March 31,				December 31,
		2006				2005				2005
		(Unaudited)				(Audited)				(Pro Forma)*
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses		$	47,590			$	48,034			$	48,034
Unearned premiums			7,496				6,206				6,206
Life and health insurance benefits			3,288				3,202				3,202
Other policyholder liabilities			3,840				3,769				3,769
Accounts payable, accruals and other liabilities			8,048				8,699				8,699
Income taxes, principally deferred			17,084				12,252				13,649
Notes payable and other borrowings			3,564				3,583				3,583
			90,910				85,745				87,142
Utilities and Energy:
Accounts payable, accruals and other liabilities			6,916				—				3,780
Notes payable and other borrowings			16,094				—				10,296
			23,010				—				14,076
Finance and Financial Products:
Derivative contract liabilities			4,360				5,061				5,061
Notes payable and other borrowings			10,821				10,868				10,868
Other			4,017				4,351				4,351
			19,198				20,280				20,280
Total liabilities			133,118				106,025				121,498
Minority shareholders’ interests			1,739				816				1,386
Shareholders’ equity:
Common stock — Class A, $5 par value; Class B, $0.1667 par value			8				8				8
Capital in excess of par value			26,424				26,399				26,399
Accumulated other comprehensive income			18,707				17,360				17,360
Retained earnings			50,210				47,717				47,717
Total shareholders’ equity			95,349				91,484				91,484
		$	230,206			$	198,325			$	214,368

See accompanying Notes to Interim Consolidated Financial Statements

		FORM 10-Q		Q/E 3/31/06

BERKSHIRE HATHAWAY INC.
and Subsidiaries

		First Quarter
		2006				2005
		(Unaudited)
Revenues:
Insurance and Other:
Insurance premiums earned		$	5,522			$	5,331
Sales and service revenues			11,992				10,607
Interest, dividend and other investment income			1,031				786
Investment gains			442				278
			18,987				17,002
Utilities and Energy:
Operating revenue			2,055				—
Other revenue			138				—
			2,193				—
Finance and Financial Products:
Interest income			398				368
Investment gains/losses			7				(18	)
Derivative gains/losses			354				(377	)
Other			824				659
			1,583				632
			22,763				17,634
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses			3,765				3,544
Insurance underwriting expenses			1,246				1,295
Cost of sales and services			9,983				8,834
Selling, general and administrative expenses			1,378				1,291
Interest expense			44				30
			16,416				14,994
Utilities and Energy:
Cost of sales and operating expenses			1,594				—
Interest expense			181				—
			1,775				—
Finance and Financial Products:
Interest expense			137				136
Other			822				672
			959				808
			19,150				15,802
Earnings before income taxes and equity in earnings of MidAmerican Energy Holdings Company			3,613				1,832
Equity in earnings of MidAmerican Energy Holdings Company			—				141
Earnings before income taxes and minority interests			3,613				1,973
Income taxes			1,242				600
Minority shareholders’ interests			58				10
Net earnings		$	2,313			$	1,363
Average common shares outstanding *			1,540,935				1,539,100
Net earnings per common share *		$	1,501			$	886

See accompanying Notes to Interim Consolidated Financial Statements

		FORM 10-Q		Q/E 3/31/06

BERKSHIRE HATHAWAY INC.
and Subsidiaries

		First Quarter
		2006				2005
		(Unaudited)
Net cash flows from operating activities		$	2,359			$	1,359
Cash flows from investing activities:
Purchases of securities with fixed maturities			(2,942	)			(1,491	)
Purchases of equity securities			(1,529	)			(1,720	)
Sales of securities with fixed maturities			792				890
Redemptions and maturities of securities with fixed maturities			2,725				954
Sales of equity securities			826				301
Purchases of loans and finance receivables			(105	)			(444	)
Principal collections on loans and finance receivables			222				231
Acquisitions of businesses, net of cash acquired			(5,463	)			(191	)
Purchases of property, plant and equipment			(747	)			(303	)
Other			83				117
Net cash flows from investing activities			(6,138	)			(1,656	)
Cash flows from financing activities:
Proceeds from borrowings of finance businesses			18				3,733
Proceeds from borrowings of utilities and energy businesses			1,702				—
Proceeds from other borrowings			68				71
Repayments of borrowings of finance businesses			(165	)			(36	)
Repayments of borrowings of utilities and energy businesses			(34	)			—
Repayments of other borrowings			(108	)			(223	)
Change in short term borrowings			44				3
Other			94				31
Net cash flows from financing activities			1,619				3,579
Increase (decrease) in cash and cash equivalents			(2,160	)			3,282
Cash and cash equivalents at beginning of year *			45,018				43,427
Cash and cash equivalents at end of first quarter *		$	42,858			$	46,709
Supplemental cash flow information:
Cash paid during the period for:
Income taxes		$	289			$	1,062
Interest of finance and financial products businesses			139				68
Interest of utilities and energy businesses			175				—
Interest of insurance and other businesses			55				37
* Cash and cash equivalents are comprised of the following:
Beginning of year —
Insurance and Other		$	40,471			$	40,020
Finance and Financial Products			4,189				3,407
Utilities and Energy			358				—
		$	45,018			$	43,427
End of first quarter —
Insurance and Other		$	37,675			$	44,058
Finance and Financial Products			4,474				2,651
Utilities and Energy			709				—
		$	42,858			$	46,709

See accompanying Notes to Interim Consolidated Financial Statements

		FORM 10-Q		Q/E 3/31/06

BERKSHIRE HATHAWAY INC.
and Subsidiaries

Note 1. General

     The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (“Berkshire” or “Company”) consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds a controlling financial interest as of the financial statement date.

     Reference is made to Berkshire’s most recently issued Annual Report on Form 10-K (“Annual Report”) that included information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. In particular, Berkshire’s significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report. Certain amounts in 2005 have been reclassified to conform with current year presentation.

     Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with generally accepted accounting principles (“GAAP”).

     For a number of reasons, Berkshire’s results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be relatively more significant to results of interim periods than to results for a full year. Investment gains/losses are recorded when investments are sold, other-than-temporarily impaired or in certain instances, as required by GAAP, when investments are marked-to-market. Variations in the amounts and timing of investment gains/losses can cause significant variations in periodic net earnings.

     On February 9, 2006, Berkshire Hathaway converted its investment in MidAmerican Energy Holdings Company (“MidAmerican”) non-voting convertible preferred stock into MidAmerican common stock and upon conversion, owned approximately 83.4% (80.5% diluted) of the voting and economic interest of MidAmerican. Although Berkshire’s total economic interests in MidAmerican were unaffected by the conversion, Berkshire now controls MidAmerican for financial reporting purposes. Accordingly, the Condensed Consolidated Balance Sheet as of March 31, 2006 and the Condensed Consolidated Statements of Earnings and Cash Flows for the first three months of 2006 reflect the consolidation of MidAmerican. For periods prior to 2006, Berkshire accounted for its investments in MidAmerican pursuant to the equity method. See Note 2 to these Interim Consolidated Financial Statements. The Condensed Consolidated Statements of Earnings and Cash Flows reflect the consolidation of MidAmerican as of January 1, 2006. Berkshire’s share of net earnings of MidAmerican under consolidated financial reporting does not differ from earnings under the equity method.

     Due to the significance of this change on Berkshire’s Consolidated Financial Statement presentations, an unaudited pro forma balance sheet as of December 31, 2005 has been included on the face of the accompanying Condensed Consolidated Balance Sheets reflecting the consolidation of MidAmerican. Berkshire management believes that such unaudited pro forma information is meaningful and relevant to investors, creditors and other financial statement users.

Note 2. Investments in MidAmerican Energy Holdings Company

     MidAmerican owns a combined regulated electric and natural gas utility company in the United States (MidAmerican Energy Company), a regulated electric utility company in the United States (PacifiCorp which was acquired March 21, 2006 – see Note 3 to these Interim Consolidated Financial Statements), two interstate natural gas pipeline companies in the United States (Kern River and Northern Natural Gas), two electricity distribution companies in the United Kingdom, a diversified portfolio of domestic and international electric power projects and the second largest residential real estate brokerage firm in the United States (HomeServices). Collectively this group of businesses is referred to as Berkshire’s utilities and energy businesses.

     During 2005, Berkshire possessed the ability to exercise significant influence on the operations of MidAmerican through its investments in common and convertible preferred stock of MidAmerican. The convertible preferred stock, although generally non-voting, was substantially an identical subordinate interest to a share of common stock and economically equivalent to common stock. Therefore, during this period, Berkshire accounted for its investments in MidAmerican pursuant to the equity method. Reference is made to Note 2 to the Consolidated Financial Statements for the year ending December 31, 2005 included in Berkshire’s most recent Annual Report on Form 10-K for additional information regarding this investment.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 2. Investments in MidAmerican Energy Holdings Company (Continued)

     As indicated in Note 1 to these Interim Consolidated Financial Statements, Berkshire commenced consolidation of MidAmerican in 2006 as a result of converting its non-voting preferred stock of MidAmerican into voting common stock of MidAmerican on February 9, 2006. However, no changes in MidAmerican’s operations, management or capital structure occurred as a result of the conversion. MidAmerican’s debt is currently not guaranteed by Berkshire. However, Berkshire has made a commitment that would allow MidAmerican to request up to $3.5 billion of capital from Berkshire to pay its debt obligations or make investments in its regulated subsidiaries. The commitment expires in 2011. In addition, Berkshire purchased newly issued common shares of MidAmerican for $3.4 billion in March 2006 and increased its voting and economic interests in MidAmerican to 88.2% (86.6% on a diluted basis).

     A condensed consolidated balance sheet of MidAmerican as of December 31, 2005 follows (in millions).

Assets						Liabilities and shareholders’ equity
Properties, plants, and equipment, net		$	11,915			Debt, except debt owed to Berkshire		$	10,296
Goodwill			4,156			Debt owed to Berkshire			1,289
Other assets			4,300			Other liabilities and minority interests			5,401
		$	20,371						16,986
						Shareholders’ equity			3,385
								$	20,371

     A condensed consolidated statement of earnings of MidAmerican for the first quarter of 2005 follows (in millions).

		2005
Operating revenue and other income		$	1,837
Costs and expenses:
Cost of sales and operating expenses			1,380
Interest expense – debt held by Berkshire			41
Other interest expense			187
			1,608
Earnings before taxes			229
Income taxes and minority interests			77
Net earnings		$	152

Note 3. Business acquisitions

     Berkshire’s long-held acquisition strategy is to purchase businesses with consistent earnings, good returns on equity, able and honest management and at sensible prices. During the first quarter of 2006, Berkshire completed two business acquisitions. In May 2005, MidAmerican reached a definitive agreement to acquire PacifiCorp, a regulated electric utility providing service to customers in six Western states for approximately $5.1 billion in cash. The acquisition was completed on March 21, 2006. On February 28, 2006, Berkshire completed the acquisition of Business Wire, a leading global distributor of corporate news, multimedia and regulatory filings.

     The results of operations for each of these businesses are included in Berkshire’s consolidated results from the effective date of each acquisition. The following table sets forth certain unaudited pro forma consolidated earnings data for the first quarter of 2006 and 2005, as if each acquisition was consummated on the same terms at the beginning of each year. Amounts are in millions, except per share amounts. The earnings data for the first quarter of 2005 also reflects the pro forma consolidation of MidAmerican.

		2006				2005
Total revenues		$	23,850			$	20,491
Net earnings			2,380				1,392
Earnings per equivalent Class A common share			1,545				904

     During the first quarter of 2006, Berkshire agreed to acquire an 81% interest in Applied Underwriters, an industry leader in integrated workers’ compensation solutions. The acquisition of Applied Underwriters is expected to close during the second quarter. On April 17, 2006, Berkshire agreed to acquire Russell Corporation (“Russell”), a leading branded athletic apparel and sporting goods company. The acquisition is subject to the approval of Russell shareholders and regulatory approvals and is expected to close in the third quarter. On May 5, 2006, Berkshire agreed to acquire 80% of the Iscar Metalworking Companies (“IMC”) in a transaction that values IMC at $5 billion. IMC, with operations worldwide, is an industry leader in the metal cutting tools business. The transaction is subject to customary closing conditions, including regulatory approvals.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 4. Investments in fixed maturity securities

     Data with respect to investments in fixed maturity securities follows (in millions).

		Insurance and other								Finance and financial products
		Mar. 31, 2006				Dec. 31, 2005				Mar. 31, 2006				Dec. 31, 2005
Amortized cost		$	25,503			$	25,751			$	1,706			$	1,887
Gross unrealized gains			1,641				1,759				100				106
Gross unrealized losses			(142	)			(90	)			(4	)			(2	)
Fair value		$	27,002			$	27,420			$	1,802			$	1,991

     Certain other fixed maturity investments of finance businesses are classified as held-to-maturity, which are carried at amortized cost. The carrying value and fair value of these investments totaled $1,453 million and $1,584 million at March 31, 2006, respectively. At December 31, 2005, the carrying value and fair value of held-to-maturity securities totaled $1,444 million and $1,624 million, respectively. Unrealized losses at March 31, 2006 and December 31, 2005 consisted primarily of securities whose amortized cost exceeded fair value for less than twelve months.

Note 5. Investments in equity securities

     Data with respect to investments in equity securities are shown in the tabulation below (in millions).

		March 31,				December 31,
		2006				2005
Total cost		$	22,298			$	21,339
Gross unrealized gains			28,038				25,892
Gross unrealized losses			(548	)			(510	)
Total fair value		$	49,788			$	46,721
Fair value:
American Express Company		$	7,967			$	7,802
The Coca-Cola Company			8,374				8,062
Other equity securities			33,447				30,857
Total		$	49,788			$	46,721

     Unrealized losses at March 31, 2006 and December 31, 2005 consisted primarily of securities whose cost exceeded fair value for less than twelve months.

Note 6. Loans and Receivables

     Receivables of insurance and other businesses are comprised of the following (in millions).

		March 31,				December 31,
		2006				2005
Insurance premiums receivable		$	5,100			$	4,406
Reinsurance recoverables			2,776				2,990
Trade and other receivables			5,553				5,340
Allowances for uncollectible accounts			(332	)			(339	)
		$	13,097			$	12,397

     Loans and finance receivables of finance and financial products businesses are comprised of the following (in millions).

		March 31,				December 31,
		2006				2005
Consumer installment loans and finance receivables		$	9,913			$	9,792
Commercial loans and finance receivables			1,509				1,481
Allowances for uncollectible loans			(185	)			(186	)
		$	11,237			$	11,087

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 7. Utilities and energy businesses

     Certain unique elements of the utilities and energy businesses include the nature and amount of property, plant and equipment, environmental and regulatory matters. Property, plant and equipment of the utility and energy businesses follow (in millions):

		Ranges of				March 31,				December 31,
		estimated useful life				2006				2005
										(Pro Forma)
Cost:
Utility generation and distribution systems		5-85 years				$	25,811			$	10,499
Interstate pipelines		3-67 years					5,212				5,322
Independent power plants and other assets		3-30 years					1,852				1,861
Construction in progress							1,451				847
							34,326				18,529
Accumulated depreciation and amortization							(12,269	)			(6,614	)
Property, plant and equipment						$	22,057			$	11,915

     Property, plant and equipment are recorded at historical cost. All construction related material and direct labor costs as well as indirect construction costs are capitalized. Indirect construction costs include general engineering, taxes and costs of funds used during construction. The cost of major additions and betterments are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed. Depreciation is generally computed using the straight-line method based on economic lives or regulatorily mandated recovery periods.

     The utility generation and distribution system and interstate pipeline assets are the regulated assets of public utility and natural gas pipeline subsidiaries. At March 31, 2006 and December 31, 2005, accumulated depreciation and amortization related to regulated assets totaled $11.4 billion and $5.7 billion, respectively. Substantially all of the construction in progress at March 31, 2006 and December 31, 2005 relates to the construction of regulated assets.

     When regulated properties are retired, original cost plus the cost of retirement, less salvage value, is charged to the cost of removal accrued regulatory liability, a component of other liabilities of the utilities and energy businesses in the accompanying Condensed Consolidated Balance Sheet. When regulated assets are sold, or non-regulated assets are sold or retired, the cost is removed from the property accounts and the related accumulated depreciation and amortization accounts are reduced. Any gain or loss is recorded as income, unless otherwise required by the applicable regulatory body.

     Environmental Matters

     MidAmerican Energy and PacifiCorp are subject to numerous environmental laws, including the federal Clean Air Act and various state air quality laws; the Endangered Species Act, the Comprehensive Environmental Response, Compensation and Liability Act, and similar state laws relating to environmental cleanups; the Resource Conservation and Recovery Act and similar state laws relating to the storage and handling of hazardous materials; and the Clean Water Act, and similar state laws relating to water quality. The Environmental Protection Agency (“EPA”) has issued numerous rules regarding air quality. The laws and rules will likely impact the operation of their generating facilities and will require them to either reduce emissions from those facilities through the installation of emission controls or purchase additional emission allowances, or some combination thereof.

     While the United States did not ratify the Kyoto Protocol, the ratification and implementation of its requirements in other countries has resulted in increased attention to the climate change issue in the United States. In 2005, the Senate adopted a resolution supporting an effective national program of mandatory, market-based limits and incentives on emissions of greenhouse gases that slow, stop, and reverse the growth of such emissions at a rate and in a manner that will not significantly harm the United States economy; and will encourage comparable action by other nations that are major trading partners and key contributors to global emissions. It is anticipated that the resolution may be further addressed by Congress in 2006. While debate continues at the national level over the direction of domestic climate policy, several states are developing state-specific or regional legislative initiatives to reduce greenhouse gas emissions. The outcome of climate change litigation and federal and state initiatives cannot be determined at this time; however, adoption of stringent limits on greenhouse gas emissions could significantly impact MidAmerican’s fossil-fueled facilities and, therefore, its results of operations.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 7. Utilities and energy businesses (Continued)

     Regulatory Matters

     MidAmerican Energy and PacifiCorp are subject to the jurisdiction of public utility regulatory authorities in each of the states in which they conduct retail electric operations. These authorities regulate various matters, including customer rates, services, accounting policies and practices, allocation of costs by state, issuances of securities and other matters. In addition, both MidAmerican Energy and PacifiCorp are a “license” and a “public utility” as those terms are used in the Federal Power Act and therefore subject to regulation by the Federal Energy Regulatory Commission (“FERC”) as to accounting policies and practices, certain prices and other matters, including the terms and conditions of transmission service.

     Northern Natural Gas and Kern River are subject to regulation by various federal and state agencies. As owners of interstate natural gas pipelines, Northern Natural Gas’ and Kern River’s rates, services and operations are subject to regulation by the FERC. The FERC administers, among other things, the Natural Gas Act and the Natural Gas Policy Act of 1978 giving them jurisdiction over, among other things, the construction and operation of pipelines and related facilities used in the transportation, storage and sale of natural gas in interstate commerce, including the modification or abandonment of such facilities. The FERC also has jurisdiction over the rates and charges and terms and conditions of service for the transportation of natural gas in interstate commerce.

     Additionally, interstate pipeline companies are subject to regulation by the United States Department of Transportation pursuant to the Natural Gas Pipeline Safety Act of 1968, which establishes safety requirements in the design, construction, operations and maintenance of interstate natural gas transmission facilities, and the Pipeline Safety Integrity Act of 2002, which implemented additional safety and pipeline integrity regulations for high consequence areas.

     MidAmerican’s domestic energy subsidiaries (MidAmerican Energy, PacifiCorp, Northern Natural Gas and Kern River) prepare their financial statements in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 71, “Accounting for the Effects of Certain Types of Regulation” (“SFAS 71”), which differs in certain respects from the application of generally accepted accounting principles by non-regulated businesses. In general, SFAS 71 recognizes that accounting for rate-regulated enterprises should reflect the economic effects of regulation. As a result, a regulated entity is required to defer the recognition of costs (a regulatory asset) or the recognition of obligations (a regulatory liability) if it is probable that, through the rate-making process, there will be a corresponding increase or decrease in future rates. Accordingly, these subsidiaries have deferred certain costs and accrued certain obligations, which will be amortized over various future periods. MidAmerican periodically evaluates the applicability of SFAS 71 and considers factors such as regulatory changes and the impact of competition. If cost-based regulation ends or competition increases, these subsidiaries may have to reduce their asset balances to reflect a market basis less than cost and write-off the associated regulatory assets and liabilities. At March 31, 2006, MidAmerican had $1,816 million in regulatory assets and $1,578 million in regulatory liabilities, which are components of other assets and other liabilities of utilities and energy businesses, respectively.

     Management continually assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory environmental changes, recent rate orders received by other regulated entities, and the status of any pending or potential deregulation legislation. Based upon this continual assessment, management believes the existing regulatory assets are probable of recovery. If future recovery of costs ceases to be probable, the asset and liability write-offs would be required to be recognized in operating income.

     The fees charged by Northern Electric and Yorkshire Electricity for use of their distribution systems are controlled by a formula prescribed by the British electricity regulatory body, the Office of Gas and Electricity Markets, and was last reset on April 1, 2005. The distribution price control formula is generally reviewed and reset at five-year intervals.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 8. Deferred income tax liabilities

     The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).

		March 31,				December 31,
		2006				2005
Deferred tax liabilities:
Unrealized appreciation of investments; basis differences		$	12,554			$	11,882
Deferred charges reinsurance assumed			796				828
Property, plant and equipment			4,557				1,202
Other			1,866				1,165
			19,773				15,077
Deferred tax assets:
Unpaid losses and loss adjustment expenses			(807	)			(867	)
Unearned premiums			(452	)			(403	)
Accrued liabilities			(1,083	)			(815	)
Other			(1,401	)			(998	)
			(3,743	)			(3,083	)
Net deferred tax liability		$	16,030			$	11,994

     The increase in net deferred tax liabilities from December 31, 2005 to March 31, 2006 was primarily attributed to the consolidation of MidAmerican as of January 1, 2006.

Note 9. Notes payable and other borrowings

     Notes payable and other borrowings of Berkshire and its subsidiaries are summarized below. Amounts are in millions.

		March 31,				December 31,
		2006				2005
Insurance and other:
Issued by Berkshire due 2007-2033		$	1,001			$	992
Issued by subsidiaries and guaranteed by Berkshire due 2006-2035			1,710				1,696
Issued by subsidiaries and not guaranteed by Berkshire due 2006-2041			853				895
		$	3,564			$	3,583
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation and guaranteed by Berkshire:
Notes due 2007		$	700			$	700
Notes due 2008			3,096				3,095
Notes due 2010			1,993				1,992
Notes due 2012-2015			3,038				3,038
Issued by other subsidiaries and guaranteed by Berkshire due 2006-2027			491				417
Issued by other subsidiaries and not guaranteed by Berkshire due 2006-2030			1,503				1,626
		$	10,821			$	10,868

		March 31,				December 31,
		2006				2005
						(Pro Forma)
Utilities and energy:
Issued by MidAmerican and its subsidiaries and not guaranteed by Berkshire:
MidAmerican senior unsecured debt due 2007-2036		$	4,476			$	2,776
Operating subsidiary and project debt due 2006-2036			11,126				7,150
Other			492				370
		$	16,094			$	10,296

     Operating subsidiary and project debt of utilities and energy businesses represents amounts issued by subsidiaries of MidAmerican or otherwise pursuant to separate project financing agreements. All or substantially all of the assets of certain utility subsidiaries are or may be pledged or encumbered to support or otherwise provide the security for project or subsidiary debt. Like all Berkshire subsidiaries, utility and energy subsidiaries are organized as legal entities separate

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 9. Notes payable and other borrowings (Continued)

and apart from Berkshire and its other subsidiaries. It should not be assumed that any asset of any such subsidiary will be available to satisfy the obligations of Berkshire or any of its other subsidiaries; provided, however, that unrestricted cash or other assets which are available for distribution may, subject to applicable law and the terms of financing arrangements of such parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to Berkshire and the minority shareholders. The restrictions on distributions at these separate legal entities include various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt service coverage ratios. As of March 31, 2006, all of the separate legal entities were in compliance with all applicable covenants.

     In late March 2006, MidAmerican issued $1.7 billion par amount of senior unsecured debt due 2036. Notes payable and other borrowings at March 31, 2006 includes approximately $4.2 billion of existing debt of PacifiCorp. Estimated repayments of the debt of the utilities and energy businesses for the next five years is as follows (in millions): 2006 – $722; 2007 – $1,101; 2008 – $1,980; 2009 – $426; and 2010 – $131.

Note 10. Common stock

     The following table summarizes Berkshire’s common stock activity during the first quarter of 2006.

		Class A common stock				Class B common stock
		(1,650,000 shares authorized)				(55,000,000 shares authorized)
		Issued and Outstanding				Issued and Outstanding
Balance at December 31, 2005			1,260,920				8,394,083
Conversions of Class A common stock to Class B common stock and other			(1,228	)			54,170
Balance at March 31, 2006			1,259,692				8,448,253

     Each share of Class A common stock is convertible, at the option of the holder, into thirty shares of Class B common stock. Class B common stock is not convertible into Class A common stock. Class B common stock has economic rights equal to one-thirtieth (1/30) of the economic rights of Class A common stock. Accordingly, on an equivalent Class A common stock basis, there are 1,541,300 shares outstanding at March 31, 2006 and 1,540,723 shares outstanding at December 31, 2005. Each Class A common share is entitled to one vote per share. Each Class B common share possesses the voting rights of one-two-hundredth (1/200) of the voting rights of a Class A share. Class A and Class B common shares vote together as a single class.

Note 11. Comprehensive income

     Berkshire’s comprehensive income for the first quarter of 2006 and 2005 is shown in the table below (in millions).

		First Quarter
		2006				2005
Net earnings		$	2,313			$	1,363
Other comprehensive income:
Increase (decrease) in unrealized appreciation of investments			1,938				(1,182	)
Applicable income taxes and minority interests			(677	)			412
Other			128				(66	)
Applicable income taxes and minority interests			(42	)			(18	)
			1,347				(854	)
Comprehensive income		$	3,660			$	509

Note 12. Pension plans

     The components of net periodic pension expense for the first quarter of 2006 and 2005 are as follows (in millions).

		First Quarter
		2006				2005
Service cost		$	40			$	26
Interest cost			79				48
Expected return on plan assets			(84	)			(46	)
Net amortization, deferral and other			13				1
		$	48			$	29

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 12. Pension plans (Continued)

     The increase in net periodic pension expense in 2006 over 2005 was principally attributed to the consolidation of MidAmerican. Contributions to defined benefit plans in 2006 are expected to total $234 million, which includes $148 million related to the utilities and energy businesses.

Note 13. Life settlement contracts

     In March 2006, FASB Staff Position No. FTB 85-4-1, “Accounting for Life Settlement Contracts by Third-Party Investors” (“FTB 85-4-1) was issued. This pronouncement provides guidance on the initial and subsequent measurement, financial presentation and disclosures for third-party investors in life settlement contracts. Under FTB 85-4-1, the investor may value such contracts under the investment method or at fair value based upon an irrevocable election made on an investment by investment basis. Under the investment method, the initial transaction price plus all initial and subsequent direct external costs paid by the investor to keep the policy in force are capitalized. Death benefits received by the investor are applied against the capitalized costs and the excess is recorded as a gain. Under the fair value method, the investments in the contracts are measured at fair value each reporting period and the changes in fair value are reported in earnings. Previously, life settlement contracts were valued at the cash surrender value of the underlying insurance policy. FTB 85-4-1 is effective for fiscal years beginning after June 15, 2006 and may be adopted earlier but only if the adoption is in the first quarter of the fiscal year. Berkshire adopted this FTB effective January 1, 2006 and elected to use the investment method. The after-tax cumulative effect of adopting FTB 85-4-1 of $180 million is reflected as an increase in retained earnings as of the beginning of 2006.

Note 14. Accounting pronouncements to be adopted

     In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in specified situations. Such servicing assets or liabilities would be initially measured at fair value, if practicable and subsequently measured at amortized value or fair value based upon an election of the reporting entity. SFAS 156 also specifies certain financial statement presentations and disclosures in connection with servicing assets and liabilities. SFAS 156 is effective for fiscal years beginning after September 15, 2006 and may be adopted earlier but only if the adoption is in the first quarter of the fiscal year. Berkshire does not expect that the adoption of SFAS 156 will have a material effect on its Consolidated Financial Statements.

Note 15. Contingencies

     Berkshire and its subsidiaries are parties in a variety of legal actions arising out of the normal course of business. In particular, such legal actions affect Berkshire’s insurance and reinsurance businesses. Such litigation generally seeks to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. Berkshire does not believe that such normal and routine litigation will have a material effect on its financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties in substantial amounts and are described below.

     a) Governmental Investigations

     In October 2003, General Reinsurance Corporation (“General Reinsurance”), a wholly owned subsidiary of General Re Corporation (“General Re”) and an indirectly wholly owned subsidiary of Berkshire, and four of its current and former employees, including its former president, received subpoenas for documents from the U.S. Attorney for the Eastern District of Virginia, Richmond Division (the “EDVA U.S. Attorney”) in connection with the EDVA U.S. Attorney’s investigation of Reciprocal of America (“ROA”). ROA was a Virginia-based reciprocal insurer of physician, hospital and lawyer professional liability risks.

     General Reinsurance is continuing to cooperate fully with the EDVA U.S. Attorney and the Department of Justice in Washington (the “DOJ”) in their ongoing investigation regarding ROA and, in part, its transactions with General Reinsurance. The EDVA U.S. Attorney and the DOJ have continued to request additional information from General Reinsurance regarding ROA and its affiliate, First Virginia Reinsurance, Ltd. (“FVR”) and General Reinsurance’s transactions with ROA and FVR. The EDVA U.S. Attorney and the DOJ have also interviewed a number of current and former officers and employees of General Re and General Reinsurance. In August 2005, the EDVA U.S. Attorney issued an additional subpoena to General Reinsurance regarding General Reinsurance’s transactions with ROA and FVR. One of the individuals originally subpoenaed in October 2003 has been informed by the EDVA U.S. Attorney that this individual is a target of the EDVA U.S. Attorney’s investigation. General Reinsurance has also been sued in a number of civil actions related to ROA, as described below.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 15. Contingencies (Continued)

     General Re, Berkshire, and certain of Berkshire’s other insurance subsidiaries, including National Indemnity Company (“NICO”) have also been continuing to cooperate fully with the U.S. Securities and Exchange Commission (“SEC”), the DOJ and the New York State Attorney General (“NYAG”) in their ongoing investigations of non-traditional products. The EDVA U.S. Attorney and the DOJ have also been working with the SEC and the NYAG in connection with these investigations. General Re originally received subpoenas from the SEC and NYAG in January 2005. General Re, Berkshire and NICO have been providing information to the government relating to transactions between General Reinsurance or NICO (or their respective subsidiaries or affiliates) and other insurers in response to the January 2005 subpoenas and related requests and, in the case of General Reinsurance (or its subsidiaries or affiliates), in response to subpoenas from other U.S. Attorneys conducting investigations relating to certain of these transactions. In particular, General Re and Berkshire have been responding to requests from the government for information relating to certain transactions that may have been accounted for incorrectly by counterparties of General Reinsurance (or its subsidiaries or affiliates). Berkshire understands that the government is evaluating the actions of General Re and its subsidiaries, as well as those of their counterparties to determine whether General Re or its subsidiaries conspired with others to misstate counterparty financial statements or aided and abetted such misstatements by the counterparties. The SEC, NYAG, DOJ and the EDVA U.S. Attorney have interviewed a number of current and former officers and employees of General Re and General Reinsurance as well as Berkshire’s Chairman and CEO, Warren E. Buffett, and have indicated they plan to interview additional individuals.

     In one case, a transaction initially effected with American International Group (“AIG”) in late 2000 (the “AIG Transaction”), AIG has corrected its prior accounting for the transaction on the grounds, as stated in AIG’s 2004 10-K, that the transaction was done to accomplish a desired accounting result and did not entail sufficient qualifying risk transfer to support reinsurance accounting. General Reinsurance has been named in related civil actions brought against AIG, as described below. As part of their ongoing investigations, governmental authorities have also inquired about the accounting by certain of Berkshire’s insurance subsidiaries for certain assumed and ceded finite transactions.

     In May 2005, General Re terminated the consulting services of its former Chief Executive Officer, Ronald Ferguson, after Mr. Ferguson invoked the Fifth Amendment in response to questions from the SEC and DOJ relating to their investigations. In June 2005, John Houldsworth, the former Chief Executive Officer of Cologne Reinsurance Company (Dublin) Limited (“CRD”), a subsidiary of General Re, pleaded guilty to a federal criminal charge of conspiring with others to misstate certain AIG financial statements and entered into a partial settlement agreement with the SEC with respect to such matters. Mr. Houldsworth, who had been on administrative leave, was terminated following this announcement. In June 2005, Richard Napier, a former Senior Vice President of General Re who had served as an account representative for the AIG account, also pleaded guilty to a federal criminal charge of conspiring with others to misstate certain AIG financial statements and entered into a partial settlement agreement with the SEC with respect to such matters. General Re terminated Mr. Napier following the announcement of these actions.

     In September 2005, Ronald Ferguson, Joseph Brandon, the Chief Executive Officer of General Re, Christopher Garand, a former Senior Vice President of General Reinsurance, and Robert Graham, a former Senior Vice President and Assistant General Counsel of General Reinsurance, each received a “Wells” notice from the SEC. In addition to Messrs. Houldsworth, Napier, Brandon, Ferguson, Garand and Graham, Elizabeth Monrad, the former Chief Financial Officer of General Re, also received a “Wells” notice from the SEC in May 2005 in connection with its investigation.

     On February 2, 2006, the DOJ announced that a federal grand jury had indicted three former executives of General Re on charges related to the AIG Transaction. The indictment charges Mr. Ferguson, Ms. Monrad and Mr. Graham, along with one former officer of AIG, with one count of conspiracy to commit securities fraud, four counts of securities fraud, two counts of causing false statements to be made to the SEC, four counts of wire fraud and two counts of mail fraud in connection with the AIG Transaction. The SEC also announced on February 2, 2006 that it had filed an enforcement action against Mr. Ferguson, Ms. Monrad, Mr. Graham, Mr. Garand and the same former AIG officer, for aiding and abetting AIG’s violations of the antifraud provisions and other provisions of the federal securities laws in connection with the AIG Transaction. The SEC complaint seeks permanent injunctive relief, disgorgement of any ill-gotten gains, civil penalties and orders barring each defendant from acting as an officer or director of a public company. Each of the individuals indicted by the federal grand jury was arraigned on February 16, 2006 and each individual pleaded not guilty to all charges. At present there is no trial date for this matter. On February 9, 2006, AIG announced that it had reached a resolution of claims and matters under investigation with the DOJ, the SEC, the NYAG and the New York State Department of Insurance in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, including claims and matters under investigation relating to the AIG Transaction, as well as claims relating to the underpayment of certain workers’ compensation premium taxes and other assessments. AIG announced that it will make payments totaling approximately $1.64 billion as a result of these settlements.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 15. Contingencies (Continued)

     Various state insurance departments have issued subpoenas or otherwise requested that General Reinsurance, NICO and their affiliates provide documents and information relating to non-traditional products. The Office of the Connecticut Attorney General has also issued a subpoena to General Reinsurance for information relating to non-traditional products. General Reinsurance, NICO and their affiliates have been cooperating fully with these subpoenas and requests.

     On April 14, 2005, the Australian Prudential Regulation Authority (“APRA”) announced an investigation involving financial or finite reinsurance transactions by General Reinsurance Australia Limited (“GRA”), a subsidiary of General Reinsurance. An inspector appointed by APRA under section 52 of the Insurance Act 1973 has been conducting an investigation including a request for the production of documents of GRA’s financial or finite reinsurance business and a request to interview four directors of GRA. GRA has been cooperating fully with this investigation.

     In December 2004, the Financial Services Authority (“FSA”) advised General Reinsurance’s affiliate Faraday Group (“Faraday”) that it was investigating Milan Vukelic, the then Chief Executive Officer of Faraday with respect to transactions entered into between GRA and companies affiliated with FAI Insurance Limited in 1998. Mr. Vukelic previously served as the head of General Re’s international finite business unit. In April 2005, the FSA advised General Reinsurance that it was investigating Mr. Vukelic and a former officer of CRD with respect to certain finite risk reinsurance transactions, including transactions between CRD and several other insurers. In addition, the FSA has requested that General Reinsurance affiliates based in the United Kingdom provide information relating to the transactions involved in their investigations, including transactions with AIG. General Reinsurance and its affiliates are cooperating fully with the FSA in these matters. In May 2005, Mr. Vukelic was placed on administrative leave and in July 2005 his employment was terminated.

     CRD is also providing information to and cooperating fully with the Irish Financial Services Regulatory Authority in its inquiries regarding the activities of CRD. The Office of the Director of Corporate Enforcement in Ireland is conducting a preliminary evaluation in relation to CRD concerning, in particular, transactions between CRD and AIG. CRD is cooperating fully with this preliminary evaluation.

     General Reinsurance’s subsidiary, Kolnische Ruckversicherungs-Gesellschaft AG (“Cologne Re”), is also cooperating fully with requests for information from the German Federal Financial Supervisory Authority regarding the activities of Cologne Re relating to “finite reinsurance” and regarding transactions between Cologne Re or its subsidiaries, including CRD, and AIG. General Reinsurance is also providing information to and cooperating fully with the Office of the Superintendent of Financial Institutions Canada in its inquiries regarding the activities of General Re and its affiliates relating to “finite reinsurance.”

     Berkshire cannot at this time predict the outcome of these matters, is unable to estimate a range of possible loss and cannot predict whether or not the outcomes will have a material adverse effect on Berkshire’s business or results of operations for at least the quarterly period when these matters are completed or otherwise resolved.

     b) Civil Litigation

     Litigation Related to ROA

     General Reinsurance and four of its current and former employees, along with numerous other defendants, have been sued in a number of civil actions related to ROA. Plaintiffs assert various claims in these civil actions, including breach of contract, unjust enrichment, fraud and conspiracy, against General Reinsurance and others, arising from various reinsurance coverages General Reinsurance provided to ROA and related entities.

     Eight putative class actions were initiated by doctors, hospitals and lawyers that purchased insurance through ROA or certain of its Tennessee-based risk retention groups. These complaints seek compensatory, treble, and punitive damages in an amount plaintiffs contend is just and reasonable. General Reinsurance is also subject to actions brought by the Virginia Commissioner of Insurance, as Deputy Receiver of ROA, the Tennessee Commissioner of Insurance, as Liquidator for three Tennessee risk retention groups, a federal lawsuit filed by a Missouri-based hospital group and a state lawsuit filed by an Alabama doctor that was removed to federal court. The first of these actions was filed in March 2003 and additional actions were filed in April 2003 through December 2005. In the action filed by the Virginia Commissioner of Insurance, the Commissioner asserts in several of its claims that the alleged damages being sought exceed $200 million in the aggregate as against all defendants. Eleven of these cases are collectively assigned to the U.S. District Court for the Western District of Tennessee for pretrial proceedings. General Reinsurance has filed motions to dismiss all of the claims against it in ten of these cases and the court has not yet ruled on these motions. The other federal case has been filed in the U.S. District Court for the Northern District of Mississippi and is currently awaiting issuance of a conditional transfer order to the U.S. District Court for the Western District of Tennessee. No discovery has been initiated in any of these cases.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 15. Contingencies (Continued)

     General Reinsurance is also a defendant in two lawsuits filed in Alabama state courts. The first suit was filed in the Circuit Court of Montgomery County by a group of Alabama hospitals that are former members of the Alabama Hospital Association Trust (“AHAT”). This suit (the “AHA Action”) alleged violations of the Alabama Securities Act, conspiracy, fraud, suppression, unjust enrichment and breach of contract against General Reinsurance and virtually all of the defendants in the federal suits based on an alleged business combination between AHAT and ROA in 2001 and subsequent capital contributions to ROA in 2002 by the Alabama hospitals. The allegations of the AHA Action are largely identical to those set forth in the complaint filed by the Virginia receiver for ROA. General Reinsurance previously filed a motion to dismiss all of the claims in the AHA Action. The motion was granted in part by an order in March 2005, which dismissed the Alabama Securities Act claim against General Reinsurance and ordered plaintiffs to amend their allegations of fraud and suppression. Plaintiffs in the AHA Action filed their Amended and Restated Complaint in April 2005, alleging claims of conspiracy, fraud, suppression and aiding and abetting breach of fiduciary duty against General Reinsurance. General Reinsurance filed a motion to dismiss all counts of the Amended and Restated Complaint in May 2005. The Special Master appointed by the court heard arguments on July 13, 2005 and recommended denial of the motion on July 22, 2005. On July 22, 2005, the Court denied General Reinsurance’s motion to dismiss. General Reinsurance filed and served its answer and affirmative defenses to the Amended and Restated Complaint on September 1, 2005. Discovery has begun. The second suit, also filed in the Circuit Court of Montgomery County, was initiated by Baptist Health Systems, Inc. (“BHS”), a former member of AHAT, and alleged claims identical to those in the initial AHA Action, plus claims for breach of fiduciary duty and wantonness. These cases have been consolidated for pretrial purposes. BHS filed its First Amended Complaint in April 2005, alleging violations of the Alabama Securities Act, conspiracy, fraud, suppression, breach of fiduciary duty, wantonness and unjust enrichment against General Reinsurance. General Reinsurance filed a motion to dismiss all counts of the Amended and Restated Complaint in May 2005. The Special Master heard arguments on July 13, 2005, and on July 22, 2005, recommended dismissal of the claim under the Alabama Securities Act, but recommended denial of the motion to dismiss the remaining claims. On July 22, 2005, the Court denied General Reinsurance’s motion to dismiss. General Reinsurance filed and served its answer and affirmative defenses to the Amended and Restated Complaint on September 1, 2005. Discovery has begun. The AHA Action and the BHS complaint claim damages in excess of $60 million in the aggregate as against all defendants. These matters are scheduled for trial on January 8, 2007.

     Actions related to AIG

     General Reinsurance received a Summons and a Consolidated Amended Class Action Complaint on April 29, 2005, in the matter captioned In re American International Group Securities Litigation, Case No. 04-CV-8141-(LTS), United States District Court, Southern District of New York. This is a putative class action asserted on behalf of investors who purchased publicly-traded securities of AIG between October 1999 and March 2005. On June 7, 2005, General Reinsurance received a second Summons and Class Action Complaint in a putative class action asserted on behalf of investors who purchased AIG securities between October 1999 and March 2005, captioned San Francisco Employees’ Retirement System, et al. vs. American International Group, Inc., et al., Case No. 05-CV-4270, United States District Court, Southern District of New York. At a July 2005 conference, the court ruled that the plaintiffs in case no. 04-CV-8141 would be lead plaintiffs. On September 27, 2005, the plaintiffs in case no. 04-CV-8141 filed a Consolidated Second Amended Complaint (the “Complaint”). The Complaint asserts various claims against AIG, and various of its officers, directors, investment banks and other parties. Included among the defendants are General Reinsurance and Messrs. Ferguson, Napier and Houldsworth (whom the Complaint defines as the “General Re Defendants”). The Complaint alleges that the General Re Defendants violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated under that Act through their activities in connection with the AIG Transaction described in “Governmental Investigations,” above. The Complaint seeks damages and other relief in unspecified amounts. The General Re Defendants moved to dismiss the Complaint on the grounds that it failed to state a claim on which relief can be granted against these defendants. The motion was heard on April 20, 2006, and was denied by the Court. No discovery has taken place.

     On July 27, 2005, General Reinsurance received a Summons and a Verified and Amended Shareholder Derivative Complaint in In re American International Group, Inc. Derivative Litigation, Case No. 04-CV-08406, United States District Court, Southern District of New York, naming “Gen Re Corporation” as a defendant. It is unclear whether the plaintiffs are asserting claims against General Reinsurance or its parent, General Re. This case is assigned to the same judge as the class actions described above. The complaint, brought by several alleged shareholders of AIG, seeks damages, injunctive and declaratory relief against various officers and directors of AIG as well as a variety of individuals and entities with whom AIG did business, relating to a wide variety of allegedly wrongful practices by AIG. The allegations against “Gen Re Corporation” focus on the late 2000 transaction with AIG described above, and the complaint purports to assert causes of action against “Gen Re Corporation” for aiding and abetting other defendants’ breaches of fiduciary duty and for unjust enrichment. The complaint does not specify the amount of damages or the nature of any other relief sought against “Gen Re

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 15. Contingencies (Continued)

Corporation.” In August 2005, General Reinsurance received a Summons and First Amended Consolidated Shareholders’ Derivative Complaint in In re American International Group, Inc. Consolidated Derivative Litigation, Case No. 769-N, Delaware Chancery Court. The claims asserted in the Delaware complaint are substantially similar to those asserted in the New York derivative complaint described earlier in this paragraph, except that the Delaware complaint makes clear that the plaintiffs are asserting claims against both General Reinsurance and General Re. Proceedings in both the New York derivative suit and the Delaware derivative suit are stayed until August 31, 2006.

     FAI/HIH Matter

     In December 2003, the Liquidators of both FAI Insurance Limited (“FAI”) and HIH Insurance Limited (“HIH”) advised GRA and Cologne Re that they intended to assert claims arising from insurance transactions GRA entered into with FAI in May and June 1998. In August 2004, the Liquidators filed claims in the Supreme Court of New South Wales in order to avoid the expiration of a statute of limitations for certain plaintiffs, but neither GRA nor Cologne Re have been served with legal process by the Liquidators. The focus of the Liquidators’ allegations against GRA and Cologne Re are the 1998 transactions GRA entered into with FAI (which was acquired by HIH in 1999). The Liquidators contend, among other things, that GRA and Cologne Re engaged in deceptive conduct that assisted FAI in improperly accounting for such transactions as reinsurance, and that such deception led to HIH’s acquisition of FAI and caused various losses to FAI and HIH.

     Insurance Brokerage Antitrust Litigation

     Berkshire, General Re and General Reinsurance are defendants in this multi-district litigation, In Re: Insurance Brokerage Antitrust Litigation, MDL No. 1663 (D.N.J.). In February 2005, the Judicial Panel on Multidistrict Litigation transferred several different cases to the District of New Jersey for coordination and consolidation. Each consolidated case concerned allegations of an industry-wide scheme on the part of commercial insurance brokers and insurance companies to defraud a purported class of insurance purchasers through bid-rigging and contingent commission arrangements. Berkshire, General Re and General Reinsurance were not parties to the original, transferred cases. On August 1, 2005, the named plaintiffs—fourteen businesses, two municipalities, and three individuals—filed their First Consolidated Amended Commercial Class Action Complaint, and Berkshire, General Re and General Reinsurance (along with a large number of insurance companies and insurance brokers) were named as defendants in the Amended Complaint. The plaintiffs claim that all defendants engaged in a pattern of racketeering activity, in violation of RICO, and that they conspired to restrain trade. They further allege that the broker defendants breached fiduciary duties to the plaintiffs, that the insurer defendants aided and abetted that breach, and that all defendants were unjustly enriched in the process. Plaintiffs seek treble damages in an unspecified amount, together with interest and attorneys fees and expenses. They also seek a declaratory judgment of wrongdoing as well as an injunction against future anticompetitive practices. On November 29, 2005, General Re, General Reinsurance and Berkshire, together with the other defendants, filed motions to dismiss the complaint. The Court has not yet set a hearing on these motions. On February 1, 2006, plaintiffs filed a motion for leave to file a Second Consolidated Amended Complaint. Among other things, plaintiffs sought leave to add numerous new defendants, including several additional Berkshire subsidiaries including, among others, NICO. Berkshire opposed the motion for leave to amend, and the Court has denied the motion without prejudice to plaintiffs’ renewing it following a ruling on defendants’ motion to dismiss the First Consolidated Amended Complaint.

     Berkshire cannot at this time predict the outcome of these matters, is unable to estimate a range of possible loss, if any, and cannot predict whether or not the outcomes will have a material adverse effect on Berkshire’s business or results of operations for at least the quarterly period when these matters are completed or otherwise resolved.

		FORM 10-Q		Q/E 3/31/06

Notes To Interim Consolidated Financial Statements (Continued)

Note 16. Business segment data

     Berkshire’s consolidated segment data for the first quarter of 2006 and 2005 is as follows. Amounts are in millions.

		Revenues
		First Quarter
		2006				2005
Operating Businesses:
Insurance:
Premiums earned:
GEICO		$	2,638			$	2,388
General Re			1,434				1,658
Berkshire Hathaway Reinsurance Group			1,020				985
Berkshire Hathaway Primary Group			430				300
Investment income			1,023				792
Total insurance group			6,545				6,123
Apparel			532				559
Building products			1,198				1,109
Finance and financial products			1,222				1,019
Flight services			919				767
McLane Company			6,107				5,652
Retail			655				603
Shaw Industries			1,439				1,294
Utilities and energy *			2,193				—
Other businesses			1,234				715
			22,044				17,841
Reconciliation of segments to consolidated amount:
Investment and derivative gains/losses			805				(106	)
Eliminations and other			(86	)			(101	)
		$	22,763			$	17,634

		Earnings (loss) before taxes
		First Quarter
		2006				2005
Operating Businesses:
Insurance:
Underwriting:
GEICO		$	311			$	312
General Re			71				19
Berkshire Hathaway Reinsurance Group			94				143
Berkshire Hathaway Primary Group			35				18
Net investment income			1,018				787
Total insurance group			1,529				1,279
Apparel			51				72
Building products			191				175
Finance and financial products			251				199
Flight services			21				7
McLane Company			55				69
Retail			37				29
Shaw Industries			155				88
Utilities and energy *			418				141
Other businesses			130				81
			2,838				2,140
Reconciliation of segments to consolidated amount:
Investment and derivative gains/losses			805				(120	)
Interest expense, excluding interest allocated to business segments			(18	)			(21	)
Eliminations and other			(12	)			(26	)
		$	3,613			$	1,973

		FORM 10-Q		Q/E 3/31/06

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     Net earnings for the first quarter of 2006 and 2005 are disaggregated in the table that follows. Amounts are after deducting minority interests and income taxes. Amounts are in millions.

		First Quarter
		2006				2005
Insurance — underwriting		$	330			$	319
Insurance — investment income			703				554
Utilities and energy			233				141
Manufacturing, services and retailing			378				325
Finance and financial products			157				124
Interest expense, unallocated and other			(14	)			(23	)
Investment and derivative gains/losses			526				(77	)
Net earnings		$	2,313			$	1,363

     Berkshire’s operating businesses are managed on an unusually decentralized basis. There are essentially no centralized or integrated business functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by Berkshire’s corporate headquarters in the day-to-day business activities of the operating businesses. Berkshire’s corporate office management participates in and is ultimately responsible for significant capital allocation decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses.

     Accordingly, Berkshire’s reportable business segments are organized in a manner that reflects how Berkshire’s top management views those business activities. Certain businesses have been grouped based upon similar products or product lines, marketing, selling and distribution characteristics even though those businesses are operated by separate local management. There are over 40 separate reporting units. The business segment data (Note 16 to the Interim Consolidated Financial Statements) should be read in conjunction with this discussion. Utilities and energy results include MidAmerican Energy Holdings Company and its subsidiaries (“MidAmerican”). See Notes 1, 2, 3 and 7 to the Interim Consolidated Financial Statements.

     Insurance — Underwriting

     A summary follows of underwriting results from Berkshire’s insurance businesses for the first quarter of 2006 and 2005. Amounts are in millions.

		First Quarter
		2006				2005
Underwriting gain attributable to:
GEICO		$	311			$	312
General Re			71				19
Berkshire Hathaway Reinsurance Group			94				143
Berkshire Hathaway Primary Group			35				18
Underwriting gain — pre-tax			511				492
Income taxes and minority interests			181				173
Net underwriting gain		$	330			$	319

     Berkshire engages in both primary insurance and reinsurance of property and casualty risks. Through General Re, Berkshire also reinsures life and health risks. In primary insurance activities, Berkshire subsidiaries assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance activities, Berkshire subsidiaries assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in their own insuring activities. Berkshire’s principal insurance and reinsurance businesses are: (1) GEICO, one of the four largest auto insurers in the U.S., (2) General Re, (3) Berkshire Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway Primary Group. On June 30, 2005, Berkshire acquired Medical Protective Company (“Med Pro”), a provider of professional liability insurance to physicians, dentists and other healthcare providers. Underwriting results from this business are included in the Berkshire Hathaway Primary Group beginning July 1, 2005.

     Berkshire’s management views insurance businesses as possessing two distinct operations — underwriting and investing. Underwriting decisions are the responsibility of the unit managers; investing, with limited exceptions at GEICO and at General Re’s international operations, is the responsibility of Berkshire’s Chairman and CEO, Warren E. Buffett. Accordingly, Berkshire evaluates performance of underwriting operations without any allocation of investment income.

		FORM 10-Q		Q/E 3/31/06

     Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

     Insurance — Underwriting (Continued)

     A significant marketing strategy followed by all these businesses is the maintenance of extraordinary capital strength. Statutory surplus of Berkshire’s insurance businesses totaled approximately $52 billion at December 31, 2005. This superior capital strength creates opportunities, especially with respect to reinsurance activities, to negotiate and enter into insurance and reinsurance contracts specially designed to meet unique needs of insurance and reinsurance buyers. Additional information regarding Berkshire’s insurance and reinsurance operations follows.

     Periodic underwriting results can be affected significantly by changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for occurrences in prior years. In addition, the timing and amount of catastrophe losses can produce significant volatility in periodic underwriting results. Hurricanes and tropical storms affecting the United States and Caribbean tend to occur between June and December. Berkshire experienced significant losses from such events during the third and fourth quarters of the last two years.

     GEICO

     GEICO provides primarily private passenger automobile coverages to insureds in 49 states and the District of Columbia. GEICO policies are marketed mainly by direct response methods in which customers apply for coverage directly to the company via the Internet, over the telephone or through the mail. This is a significant element in GEICO’s strategy to be a low cost insurer. In addition, GEICO strives to provide excellent service to customers, with the goal of establishing long-term customer relationships.

     GEICO’s pre-tax underwriting results for the first quarter of 2006 and 2005 are summarized in the table below. Dollar amounts are in millions.

		First Quarter
		2006								2005
		Amount				%				Amount				%
Premiums earned		$	2,638				100.0			$	2,388				100.0
Losses and loss adjustment expenses			1,834				69.5				1,651				69.1
Underwriting expenses			493				18.7				425				17.8
Total losses and expenses			2,327				88.2				2,076				86.9
Pre-tax underwriting gain		$	311							$	312

     Premiums earned in the first quarter of 2006 were $2,638 million, an increase of $250 million (10.5%) over the first quarter of 2005. The growth in premiums earned for voluntary auto was 10.3% and reflects a 12.3% increase in policies-in-force during the past year. Policies-in-force over the last twelve months increased 13.7% in the preferred risk auto markets and increased 8.6% in the standard and nonstandard auto markets. Voluntary auto new business sales in the first quarter of 2006 increased 11.8% compared to 2005. Voluntary auto policies-in-force at March 31, 2006 were 273,000 higher than at December 31, 2005. Over the past two years, GEICO reduced premium rates in certain markets to better match price with the underlying risk resulting in relatively lower premiums per policy.

     Losses and loss adjustment expenses incurred for the first quarter of 2006 totaled $1,834 million, an increase of $183 million (11.1%) over the first quarter of 2005. The loss ratio was 69.5% in the first quarter of 2006 compared to 69.1% in 2005. Claims frequencies for physical damage coverages decreased in the three to six percent range from 2005 while frequencies for injury coverages decreased in the four to six percent range. Injury severity increased in the three to five percent range over 2005 while physical damage severity increased in the four to seven percent range. Incurred losses from catastrophe events for the first quarter of 2006 totaled approximately $8 million compared to $13 million in the first quarter of 2005. Underwriting expenses increased 16% in the first quarter of 2006 to $493 million, reflecting increased underwriting, policy issuance and advertising costs associated with new business.

     General Re

     General Re conducts a reinsurance business offering property and casualty and life and health coverages to clients worldwide. In North America, property and casualty reinsurance is written on a direct basis through General Reinsurance Corporation. Internationally, property and casualty reinsurance is written on a direct basis through 91% owned Cologne Re (based in Germany) and other wholly-owned affiliates as well as through brokers with respect to Faraday in London. Life

		FORM 10-Q		Q/E 3/31/06

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

     General Re (Continued)

and health reinsurance is written for clients worldwide through Cologne Re. General Re’s pre-tax underwriting results for the first quarter of 2006 and 2005 are summarized below. Amounts are in millions.

		First Quarter
		Premiums earned								Pre-tax underwriting gain (loss)
		2006				2005				2006				2005
Property/casualty:
North America		$	467			$	580			$	38			$	19
International			406				527				5				(13	)
Life/health			561				551				28				13
		$	1,434			$	1,658			$	71			$	19

     General Re strives to generate pre-tax underwriting gains in essentially all of its product lines. Underwriting performance is not evaluated based upon market share and underwriters are instructed to reject inadequately priced risks. The decline in both North American and International property/casualty premiums in the first quarter of 2006 as compared to the prior year was attributable to maintaining underwriting and pricing discipline.

North American property/casualty

     General Re’s North American property/casualty operations underwrite predominantly excess reinsurance across essentially all lines of property and casualty business. Excess reinsurance provides indemnification of losses above a stated retention on either an individual claim basis or in the aggregate across all claims in a portfolio. Reinsurance contracts are written on both a treaty (group of risks) and facultative (individual risk) basis.

     North American first quarter 2006 premiums earned decreased by $113 million (19.5%) from the same quarter in 2005. The decline was primarily due to cancellations and non-renewals exceeding new contracts, with a minimal effect from rate increases. Premiums written in the first quarter of 2006 declined 16.2% from amounts written in the first quarter of 2005. Continued current market conditions may result in further declines in written and earned premiums during 2006 as compared with 2005.

     The North American property/casualty business produced a pre-tax underwriting gain of $38 million in the first quarter of 2006 compared with an underwriting gain of $19 million in the first quarter of 2005. The results for 2006 were comprised of $72 million in property gains and $34 million in casualty losses, including workers’ compensation. The casualty losses included $35 million in accretion and amortization. Comparable period 2005 results consisted of $81 million in gains from property lines and $62 million of losses from casualty lines (including $30 million in accretion and amortization). Results for both 2006 and 2005 benefited from good property results, favorable reserve run-off and pricing and underwriting discipline.

International property/casualty

     Premiums earned declined $121 million (23.0%) in the first quarter of 2006 from the same period in 2005. In local currencies, premiums earned in 2006 declined 15.3% from 2005 amounts. The decline in local currencies was primarily due to maintaining underwriting discipline, which included the non-renewal of unprofitable business.

     The International property/casualty operations produced a pre-tax underwriting gain of $5 million in the first quarter of 2006 compared with an underwriting loss of $13 million in the comparable 2005 period. Underwriting results for 2006 benefited from $38 million in gains in property and aviation lines of business. Substantially offsetting these gains were $33 million in casualty line losses. Results for the first quarter of 2005 included catastrophe losses of $32 million from winter storm Erwin, which affected Northern Europe in January 2005.

Life/health

     Premiums earned increased 1.8% in the first quarter of 2006 from 2005 amounts. Adjusting for the effects of foreign currency exchange rates, premiums earned increased 7.1% in 2006. The increase in premiums earned occurred in both North American and International life business.

     The global life/health operations produced pre-tax underwriting gains of $28 million and $13 million in the first quarter of 2006 and 2005, respectively. The results for 2006 reflected $32 million in gains for the international business, and $4 million in losses from the U.S. business. The favorable international results consisted of gains primarily in life business, due to favorable mortality. The U.S. losses were primarily driven by the health business.

		FORM 10-Q		Q/E 3/31/06

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

     Berkshire Hathaway Reinsurance Group

     The Berkshire Hathaway Reinsurance Group (“BHRG”) underwrites excess-of-loss reinsurance and quota-share coverages for insurers and reinsurers world-wide. BHRG’s business includes catastrophe excess-of-loss reinsurance and excess direct and facultative reinsurance for large or otherwise unusual discrete property risks referred to as individual risk. Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses with respect to past loss events. Other multi-line refers to other business written on both a quota-share and excess basis, participations in and contracts with Lloyd’s syndicates as well as aviation and workers’ compensation programs.

     BHRG’s pre-tax underwriting results for the first quarter of 2006 and 2005 are summarized in the table below. Amounts are in millions.

		First Quarter
		Premiums earned								Pre-tax underwriting gain (loss)
		2006				2005				2006				2005
Catastrophe and individual risk		$	425			$	356			$	200			$	141
Retroactive reinsurance			—				—				(87	)			(98	)
Other multi-line			595				629				(19	)			100
		$	1,020			$	985			$	94			$	143

     Premiums earned from catastrophe and individual risk contracts increased $69 million (19.4%) in the first quarter of 2006 from the same period in 2005. About two thirds of the increase related to catastrophe business. The underwriting results in the first quarter of 2006 reflect losses incurred of approximately $90 million attributed to pre-2006 catastrophes, primarily Hurricane Wilma in 2005. The underwriting gains from the catastrophe and individual risk business in 2005 are net of losses of $47 million from 2005 events, primarily European winter storm Erwin as well as approximately $50 million of additional losses incurred in connection with 2004 events, including hurricanes in the Southeast U.S. and Caribbean and the Southeast Asia tsunami.

     Retroactive policies normally provide very large, but limited, indemnification of unpaid losses and loss adjustment expenses with respect to past loss events which are generally expected to be paid over long periods of time. The underwriting losses from retroactive reinsurance are primarily attributed to the recurring amortization of deferred charges established on retroactive reinsurance contracts written over the past several years, and predominantly prior to 2004. The deferred charges are amortized over the expected claim payment period using the interest method. The amortization charges are recorded as losses incurred and, therefore, produce underwriting losses. The amount of amortization charges in a given period is based upon estimates of the timing and amount of future loss payments. No significant changes in such estimates were made in the first quarter of 2006 or 2005. At March 31, 2006, unamortized deferred charges totaled approximately $2.0 billion and gross unpaid losses totaled approximately $8.8 billion.

     Premiums earned in the first quarter of 2006 from other multi-line business totaled $595 million, a decrease of $34 million (5.4%) from the first quarter of 2005. The comparative decrease was attributed to a decrease in Lloyd’s syndicate participations and reduced multi-line quota-share and excess volume (approximately $200 million) which was partially offset by an increase in premium volume from workers’ compensation programs. Multi-line business produced a pre-tax underwriting loss of $19 million or approximately 3% of earned premiums. Results for the first quarter of 2006 include higher losses under property quota-share contracts. Net underwriting results in the first quarter of 2005 reflected increased underwriting gains from property coverages due to favorable loss experience as well as a gain from the reduction of prior year reserve estimates for certain casualty exposures.

     The timing and amount of catastrophe losses can produce extraordinary volatility in the periodic underwriting results of the BHRG, and, in particular, in the catastrophe and individual risk business.

		FORM 10-Q		Q/E 3/31/06

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

     Berkshire Hathaway Primary Group

     Premiums earned in the first quarter by Berkshire’s various primary insurers totaled $430 million in 2006 and $300 million in 2005. Premiums earned in the first quarter of 2006 included $139 million from Med Pro, which was acquired June 30, 2005. For the first three months, Berkshire’s primary insurers produced underwriting gains of $35 million in 2006 and $18 million in 2005. The increase in underwriting gains in 2006 versus 2005 was primarily attributed to an underwriting gain generated by Med Pro.

     Insurance — Investment Income

     Net investment income produced by Berkshire’s insurance and reinsurance businesses for the first quarter of 2006 and 2005 is summarized in the table below. Amounts are in millions.

		First Quarter
		2006				2005
Investment income before taxes		$	1,018			$	787
Applicable income taxes and minority interests			315				233
Investment income after taxes and minority interests		$	703			$	554

     Investment income consists of interest and dividends earned on cash equivalents and fixed maturity and equity investments of Berkshire’s insurance businesses. Pre-tax investment income earned in the first quarter of 2006 exceeded amounts earned in 2005 by $231 million (29.4%). The increase primarily reflects comparatively higher short-term interest rates in the United States during the first quarter of 2006 as compared to 2005.

     A summary of investments (including cash and cash equivalents) held in Berkshire’s insurance businesses follows. Amounts are in millions.

		March 31,				Dec. 31,				March 31,
		2006				2005				2005
Cash and cash equivalents		$	36,561			$	38,814			$	43,324
Equity securities			49,471				46,412				38,364
Fixed maturity securities			26,967				27,385				22,078
Other			927				918				1,975
		$	113,926			$	113,529			$	105,741

     Fixed maturity securities as of March 31, 2006 were as follows. Amounts are in millions.

		Amortized				Unrealized
		Cost				Gains/losses				Fair value
U.S. Treasury, government corporations and agencies		$	7,465			$	(35	)		$	7,430
States, municipalities and political subdivisions			3,590				52				3,642
Foreign governments			7,900				17				7,917
Corporate bonds and redeemable preferred stocks, investment grade			2,806				151				2,957
Corporate bonds and redeemable preferred stocks, non-investment grade			2,136				1,285				3,421
Mortgage-backed securities			1,571				29				1,600
		$	25,468			$	1,499			$	26,967