Results of Operations

Net earnings attributable to Berkshire are disaggregated in the table that
follows. Amounts are after deducting income taxes and exclude earnings
attributable to noncontrolling interests. Amounts are in millions.



                                              Third Quarter            First Nine Months
                                           2012          2011          2012          2011
 Insurance - underwriting                 $   392      $  1,089      $   1,065      $   261
 Insurance - investment income                733           783          2,592        2,730
 Railroad                                     937           766          2,440        2,063
 Utilities and energy                         438           372          1,029          888
 Manufacturing, service and retailing *       991           836          2,870        2,183
 Finance and financial products               108           103            332          309
 Other                                       (200 )        (137 )         (544 )       (325 )
 Investment and derivative gains/losses       521        (1,534 )          489         (903 )

 Net earnings attributable to Berkshire   $ 3,920      $  2,278      $  10,273      $ 7,206

* Includes earnings of Lubrizol from the acquisition date of September 16, 2011.

Through our subsidiaries, we engage in a number of diverse business activities. Our 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 our corporate headquarters in the day-to-day business activities of the operating businesses. Our senior corporate management team 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. It also is responsible for establishing and monitoring Berkshire's corporate governance efforts, including, but not limited to, communicating the appropriate "tone at the top" messages to its employees and associates, monitoring governance efforts at the operating businesses, and participating in the resolution of governance-related issues as needed. The business segment data (Note 17 to the Consolidated Financial Statements) should be read in conjunction with this discussion.

In 2012, insurance underwriting activities generated after-tax earnings of $392 million for the third quarter and $1,065 million for the first nine months. In the first nine months of 2012, the aggregate impact of catastrophe losses, changes in retroactive reinsurance liabilities and foreign currency gains and losses was relatively insignificant. Insurance underwriting earnings for the third quarter of 2011 included an after-tax gain of $855 million from the reduction in estimated liabilities related to retroactive reinsurance contracts which was primarily attributable to lower than expected loss experience of one ceding company and from reductions in certain reinsurance contract liabilities that are settled in foreign currencies due to changes in currency exchange rates. During the first nine months of 2011, our reinsurance operations also incurred insurance losses of approximately $1.3 billion, after tax, from several significant catastrophe events, most of which occurred in the first quarter.

Our railroad and utilities and energy businesses continued to generate significant earnings in 2012. Earnings from our manufacturing, service and retailing businesses in 2012 increased significantly over 2011 due primarily to the acquisition of The Lubrizol Corporation ("Lubrizol"), which was completed on September 16, 2011. Lubrizol's results are fully included for the third quarter and first nine months of 2012 and for the post-September 16 periods of 2011, as a component of manufacturing, service and retailing businesses in the preceding table. Excluding the impact of Lubrizol, earnings from our manufacturing, service and retailing businesses were mixed, reflecting modest improvements in building and construction in the U.S., and deterioration in several foreign markets affecting certain of our manufacturing and service operations.

In the third quarter and first nine months of 2012, investment and derivative gains/losses included after-tax losses from derivative contracts of $76 million and $119 million, respectively. In 2011, derivative contracts produced after-tax losses of $1,587 million in the third quarter and $1,531 million in the first nine months. In the third quarter of 2012, we also recognized after-tax investment gains of $597 million from sales of securities and repayments of certain loan portfolios. In the second quarter of 2011, we recognized an after-tax gain of approximately $806 million from the redemption of our investment in Goldman Sachs 10% Preferred Stock. We believe that realized investment gains/losses are often meaningless in terms of understanding our reported results or evaluating our economic performance. The timing and magnitude of investment and derivative gains and losses has caused and will likely continue to cause significant volatility in our periodic earnings.

Insurance-Underwriting

We engage in both primary insurance and reinsurance of property and casualty risks. In primary insurance activities, we assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance activities, we assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in their own insuring activities. Our insurance and reinsurance businesses are:
(1) GEICO, (2) General Re, (3) Berkshire Hathaway Reinsurance Group ("BHRG") and
(4) Berkshire Hathaway Primary Group. General Re and BHRG also reinsure life and health risks.

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

Insurance-Underwriting (Continued)

Our management views insurance businesses as possessing two distinct operations
- underwriting and investing. Underwriting decisions are the responsibility of the unit managers; investing decisions, with limited exceptions, are the responsibility of Berkshire's Chairman and CEO, Warren E. Buffett. Accordingly, we evaluate the performance of underwriting operations without any allocation of investment income or investment gains/losses.

Our periodic underwriting results are affected significantly by changes in estimates for unpaid losses and loss adjustment expenses, including amounts established for loss occurrences in prior years. In the first nine months of 2012, we recorded net reductions of approximately $150 million with respect to unpaid losses on retroactive reinsurance contracts. In the third quarter of 2011, we reduced unpaid losses related to certain retroactive reinsurance contracts by approximately $875 million. In addition, the timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to BHRG and General Re. Incurred losses from catastrophes occurring in the first nine months of 2012 were relatively insignificant. In the first nine months of 2011, we recorded aggregate pre-tax provisions for estimated catastrophe losses of approximately $2 billion arising from several events, including the earthquakes in Japan and New Zealand, as well as weather related events in Australia and the U.S. Our periodic underwriting results may also include significant foreign currency transaction gains and losses arising from the changes in the valuations of certain non-U.S. Dollar denominated reinsurance liabilities as a result of foreign currency exchange rate fluctuations. In recent years, currency exchange rates have been volatile and the resulting impact on our underwriting results has been significant.

A key marketing strategy followed by all of our insurance businesses is the maintenance of extraordinary capital strength. Statutory surplus of our insurance businesses was approximately $95 billion at December 31, 2011. This superior capital strength creates opportunities to negotiate and enter into insurance and reinsurance contracts specially designed to meet the unique needs of insurance and reinsurance buyers.

Underwriting results of our insurance businesses are summarized as follows. Amounts are in millions.

                                                Third Quarter          First Nine Months
                                              2012        2011          2012          2011
 Underwriting gain (loss) attributable to:
 GEICO                                       $  435      $   114     $      714      $  610
 General Re                                     154          148            373         (46 )
 Berkshire Hathaway Reinsurance Group          (102 )      1,375            320        (322 )
 Berkshire Hathaway Primary Group               121           58            243         168

 Pre-tax underwriting gain                      608        1,695          1,650         410
 Income taxes and noncontrolling interests      216          606            585         149

 Net underwriting gain                       $  392      $ 1,089     $    1,065      $  261

GEICO

Through GEICO, we primarily write private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO's policies are marketed mainly by direct response methods in which customers apply for coverage directly to the company via the Internet or over the telephone. This is a significant element in our strategy to be a low-cost auto insurer. In addition, we strive to provide excellent service to customers, with the goal of establishing long-term customer relationships. GEICO's underwriting results are summarized below. Dollars are in millions.

                                                     Third Quarter                                  First Nine Months
                                             2012                    2011                     2012                     2011
                                      Amount         %        Amount         %         Amount         %         Amount         %
Premiums earned                       $ 4,240       100.0     $ 3,907       100.0     $ 12,388       100.0     $ 11,400       100.0

Losses and loss adjustment expenses     3,011        71.0       3,100        79.3        9,089        73.4        8,707        76.4
Underwriting expenses                     794        18.7         693        17.8        2,585        20.8        2,083        18.3

Total losses and expenses               3,805        89.7       3,793        97.1       11,674        94.2       10,790        94.7

Pre-tax underwriting gain             $   435                 $   114                 $    714                 $    610

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

Insurance -Underwriting (Continued)

GEICO (Continued)

Premiums earned in the third quarter and first nine months of 2012 increased $333 million (8.5%) and $988 million (8.7%), respectively, compared to premiums earned in the corresponding 2011 periods. The growth in premiums earned for voluntary auto was 8.7% as a result of a 5.9% increase in policies-in-force and a 2.8% increase in average premium per policy over the past twelve months. Voluntary auto new business sales in the first nine months of 2012 declined slightly compared with 2011. Voluntary auto policies-in-force at September 30, 2012 were approximately 547,000 greater than at December 31, 2011.

Losses and loss adjustment expenses incurred in the third quarter of 2012 declined $89 million (2.9%) and increased $382 million (4.4%) in the first nine months compared to the corresponding 2011 periods. The loss ratio (the ratio of losses and loss adjustment expenses incurred to premiums earned) was 73.4% in the first nine months of 2012 and 76.4% in the first nine months of 2011. In 2012, losses and loss adjustment expenses reflected no significant changes in collision and physical damage frequencies, a sharp decline in comprehensive frequencies (due to lower catastrophe losses) and modestly higher average claims severities in most of the significant coverage categories. In the first nine months of 2012, bodily injury severities generally increased in the two to four percent range versus 2011, while physical damage severities increased in the three to five percent range. In 2012, catastrophe losses were $15 million in the third quarter and $151 million in the first nine months. In 2011, catastrophe losses were $116 million in the third quarter and $240 million in the first nine months.

Underwriting expenses incurred in the third quarter and first nine months of 2012 increased $101 million (14.6%) and $502 million (24.1%), respectively, over underwriting expenses incurred in the third quarter and first nine months of 2011. The increases were primarily the result of a change in U.S. GAAP concerning deferred policy acquisition costs ("DPAC"). DPAC represents the underwriting costs that are eligible to be capitalized and expensed as premiums are earned over the policy period. Upon adoption of the new accounting standard as of January 1, 2012, GEICO ceased deferring a large portion of its direct advertising costs. The new accounting standard was adopted on a prospective basis and as a result, DPAC recorded as of December 31, 2011 is being amortized to expense over the remainder of the related policy periods and policy acquisition costs related to policies written and renewed after December 31, 2011 are being deferred at lower levels than in the past. The new accounting standard for DPAC does not impact the cash basis periodic underwriting costs or our assessment of GEICO's underwriting performance. However, the new accounting standard accelerates the timing of when certain underwriting costs are recognized in earnings.

We estimate that GEICO's underwriting expenses for the first nine months of 2012 would have been about $410 million less had we computed DPAC under the prior accounting standard and that, as a result, GEICO's expense ratio (the ratio of underwriting expenses to premiums earned) in 2012 would have been less than in 2011. The effect of transitioning to this new accounting standard was substantially completed as of September 30, 2012.

General Re

Through General Re, we conduct a reinsurance business offering property and casualty and life and health coverages to clients worldwide. We write property and casualty reinsurance in North America on a direct basis through General Reinsurance Corporation and internationally through Germany-based General Reinsurance AG and other wholly-owned affiliates. Property and casualty reinsurance is also written through brokers with respect to Faraday in London. Life and health reinsurance is written in North America through General Re Life Corporation and internationally through General Reinsurance AG. General Re strives to generate underwriting profits in essentially all of its product lines. Our management does not evaluate underwriting performance based upon market share and our underwriters are instructed to reject inadequately priced risks. The timing and magnitude of catastrophe and large individual losses has produced and is expected to continue to produce significant volatility in General Re's periodic underwriting results. General Re's underwriting results are summarized in the following table. Amounts are in millions.

                                                     Premiums earned                              Pre-tax underwriting gain (loss)
                                         Third Quarter          First Nine Months             Third Quarter             First Nine Months
                                       2012        2011          2012         2011         2012           2011          2012          2011
Property/casualty                     $   727     $   750     $    2,164     $ 2,220     $    118       $    114      $    354       $  (169 )
Life/health                               718         688          2,178       2,099           36             34            19           123

                                      $ 1,445     $ 1,438     $    4,342     $ 4,319     $    154       $    148      $    373       $   (46 )

Property/casualty

Property/casualty premiums earned in the third quarter and first nine months of 2012 declined $23 million (3.1%) and $56 million (2.5%), respectively, versus the corresponding 2011 periods. Excluding the effects of foreign currency exchange rate changes, premiums earned in the first nine months of 2012 increased $34 million (1.5%). Price competition in most property and casualty lines persists and the volume of business written in recent years has been less than our capacity. Our underwriters continue to exercise discipline by not accepting offers to write business where prices are deemed inadequate. We remain prepared to increase premium volumes should market conditions improve.

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

Insurance -Underwriting (Continued)

General Re (Continued)

Property/casualty (Continued)

Property/casualty operations produced net underwriting gains of $118 million and $354 million in the third quarter and the first nine months of 2012, respectively. For the first nine months of 2012, underwriting results included net underwriting gains of $343 million from property business and $11 million from casualty/workers' compensation business. The property underwriting results during the first nine months of 2012 reflected an absence of significant catastrophe losses during the year as well as underwriting gains from the run-off of prior years' business, including reductions of liabilities established for prior years' catastrophe losses. The underwriting gains from casualty/workers' compensation business included favorable run-off of prior years' business, offset in part by $79 million of loss reserve discount accretion and deferred charge amortization.

The property/casualty operations generated underwriting gains of $114 million in the third quarter of 2011 and underwriting losses of $169 million for the first nine months of 2011. In 2011, the property business produced underwriting gains of $86 million in the third quarter and net underwriting losses of $267 million for the first nine months. In 2011, property underwriting results included catastrophe losses of $126 million in the third quarter and $787 million in the first nine months related to a number of events including the earthquakes in Japan and New Zealand and various tornado and other weather related loss events in the United States, Europe and Australia. The casualty/workers' compensation business generated underwriting gains of $98 million for the first nine months of 2011, reflecting overall reductions in estimated prior years' casualty loss reserves.

Life/health

Premiums earned in 2012 increased $30 million (4.4%) in the third quarter and $79 million (3.8%) in the first nine months over the premiums earned in the corresponding 2011 periods. Adjusting for the effects of foreign currency exchange rate changes, premiums earned in the first nine months of 2012 increased $211 million (10.1%) versus 2011, which was primarily attributable to increased non-U.S. life business.

Life/health operations produced net underwriting gains of $36 million in the third quarter of 2012 and $19 million during the first nine months of 2012. Underwriting results in 2012 reflected favorable claims experience across most regions in Europe and reductions in estimated liabilities related to the 2011 earthquakes in New Zealand and Japan. However, in 2012, underwriting results were negatively impacted by greater than expected claims frequency and duration in the individual and group disability business in Australia and to a lesser extent, by increased losses in the U.S. health business. In 2011, life/health operations produced underwriting gains of $34 million in the third quarter and $123 million for the first nine months. The third quarter underwriting gains were driven by lower than expected mortality in our international operations. Underwriting results in the first nine months of 2011 were negatively affected by losses attributable to the earthquakes in Japan and New Zealand and losses attributable to increased frequency and severity of life claims in the U.S.

Berkshire Hathaway Reinsurance Group ("BHRG")

Through BHRG, we underwrite excess-of-loss reinsurance and quota-share coverages on property and casualty risks for insurers and reinsurers worldwide. BHRG's business includes catastrophe excess-of-loss reinsurance and excess primary and facultative reinsurance for large or otherwise unusual property risks referred to as individual risk. BHRG also writes retroactive reinsurance, which provides indemnification of losses and loss adjustment expenses with respect to past loss events. Other multi-line business refers to other property and casualty business written on both a quota-share and excess basis and includes a quota-share contract with Swiss Reinsurance Company Ltd. ("Swiss Re") covering a 20% share of substantially all of Swiss Re's property/casualty contracts incepting between January 1, 2008 and December 31, 2012. We currently do not anticipate that the Swiss Re quota-share contract will be renewed or extended. BHRG also underwrites life reinsurance and annuity risks. BHRG's underwriting results are summarized in the table below. Amounts are in millions.

                                                     Premiums earned                             Pre-tax underwriting gain/loss
                                         Third Quarter          First Nine Months           Third Quarter           First Nine Months
                                       2012        2011          2012         2011        2012        2011          2012           2011
Catastrophe and individual risk       $   215     $   192     $      600     $   551     $   86      $    35      $     342       $ (130 )
Retroactive reinsurance                   278         104            649       1,923        (48 )        750           (160 )        495
Other multi-line property/casualty      1,341       1,012          3,734       3,055        (85 )        609            311         (621 )
Life and annuity                          744         531          2,000       1,522        (55 )        (19 )         (173 )        (66 )

                                      $ 2,578     $ 1,839     $    6,983     $ 7,051     $ (102 )    $ 1,375      $     320       $ (322 )

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

Insurance -Underwriting (Continued)

Berkshire Hathaway Reinsurance Group ("BHRG") (Continued)

Premiums earned in the third quarter and first nine months of 2012 from catastrophe and individual risk contracts exceeded premiums earned in the corresponding 2011 periods by $23 million (12%) and $49 million (9%), respectively. Catastrophe reinsurance premiums written in the third quarter and first nine months of 2012 were approximately 20% greater than premiums written in the comparable 2011 periods. The level of business written in a given period will vary significantly due to changes in market conditions and management's assessment of the adequacy of premium rates. In recent years, we have generally constrained the volume of business written as premium rates have not been attractive enough to warrant increasing volume. However, we have the capacity and will to write substantially more business when appropriate pricing can be obtained.

Catastrophe and individual risk underwriting results for the first nine months of 2012 reflected no significant losses from catastrophe events. Catastrophe and individual risk underwriting results for the first nine months of 2011 included estimated losses of $454 million, which were attributable to the earthquakes in Japan and New Zealand. The timing and magnitude of losses produces extraordinary volatility in periodic underwriting results of this business.

Premiums earned under retroactive reinsurance contracts in the first nine months of 2012 primarily derived from four new contracts. In the first nine months of 2011 premiums earned included approximately $1.7 billion from a single reinsurance contract with Eaglestone Reinsurance Company, a subsidiary of American International Group, Inc. ("AIG"). Under the contract, we agreed to reinsure the bulk of AIG's U.S. asbestos liabilities. The AIG agreement provides for a maximum limit of indemnification of $3.5 billion.

Retroactive reinsurance policies generally provide very large, but limited, indemnification of losses and loss adjustment expenses with respect to past loss events. Such losses are recognized at the estimated ultimate amount and are usually expected to be paid over long periods of time. At the inception of a contract, deferred charge assets are recorded as the excess, if any, of the estimated ultimate losses over the premiums earned. Deferred charge balances are subsequently amortized over the estimated claims payment period using the interest method, which reflects estimates of the timing and amount of loss payments. Deferred charge balances are also adjusted to reflect changes in the timing and amount of actual and re-estimated future loss payments. The recurring periodic amortization of deferred charges and deferred charge adjustments resulting from changes to the estimated timing and amount of loss payments are included in earnings as a component of losses and loss adjustment expenses.

The underwriting results from retroactive policies in 2012 and 2011 reflected the recurring periodic amortization of deferred charges. In 2012, amortization charges were partially offset by net reductions in estimated unpaid losses of about $150 million with respect to contracts written in prior years. During the third quarter of 2011, we recognized a net reduction in estimated unpaid losses with respect to contracts written in prior years of approximately $875 million, which was primarily attributable to lower than expected loss experience related to one contract. At September 30, 2012 and December 31, 2011, unamortized deferred charges for all of BHRG's retroactive contracts were approximately $3.8 billion and $4.0 billion, respectively. Gross unpaid losses from retroactive reinsurance contracts were approximately $18.3 billion at September 30, 2012, compared to approximately $18.8 billion as of December 31, 2011.

Premiums earned in the third quarter and first nine months of 2012 from other multi-line property and casualty business increased $329 million (33%) and $679 million (22%), respectively, over the corresponding 2011 periods. Premiums earned in the third quarter and first nine months of 2012 included $848 million and $2,408 million, respectively, from the Swiss Re quota-share contract. Premiums earned in the third quarter and first nine months of 2011 from this contract were $686 million and $2,061 million, respectively. In 2012, premiums . . .