Results of Operations

     Net earnings for each of the past three years are disaggregated in the table that follows. Amounts are after deducting minority interests and taxes.

	-- (dollars in millions) --
	1999	1998	1997
Insurance segments - underwriting ..........................................	$ (897)	$   171	$   298
Insurance segments - investment income ..................................	1,764	731	704
Non-Insurance business segments ...........................................	427	389	311
Interest expense ......................................................................	(70)	(63)	(67)
Goodwill amortization and other purchase-accounting-adjustments	(648)	(118)	(94)
Other ......................................................................................	95	167	45
Earnings before realized investment gain .........................	671	1,277	1,197
Realized investment gain ..........................................................	886	1,553	704
Net earnings ..................................................................	$1,557 =====	$2,830 =====	$1,901 =====

     The business segment data (Note 16 to Consolidated Financial Statements) should be read in conjunction with this discussion.

Insurance Segments -- Underwriting

     A summary follows of underwriting results from Berkshire's insurance segments for the past three years.

	-- (dollars in millions) --
	1999	1998	1997
Underwriting gain (loss) attributable to:
GEICO ........................................................................	$    24	$ 269	$ 281
General Re ....................................................................	(1,184)	--	--
Berkshire Hathaway Reinsurance Group ........................	(256)	(21)	128
Berkshire Hathaway Direct Insurance Group ..................	22	17	52
Underwriting gain (loss) -- pre-tax .....................................	(1,394)	265	461
Income taxes and minority interest ......................................	(497)	94	163
Net underwriting gain (loss) ........................................	$ (897) =====	$ 171 ====	$ 298 ====

     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 businesses are: (1) GEICO, the sixth largest auto insurer in the United States, (2) General Re, one of the four largest reinsurers in the world, (3) Berkshire Hathaway Reinsurance Group ("BHRG") and (4) Berkshire Hathaway Direct Insurance Group. See Note 2 to the Consolidated Financial Statements for information regarding the General Re acquisition.

     A significant marketing strategy followed by all these businesses is the maintenance of extraordinary capital strength. Statutory surplus as regards policyholders of Berkshire's insurance businesses increased to approximately $45 billion at December 31, 1999. This superior capital strength creates opportunities, especially with respect to reinsurance activities, to negotiate and enter into contracts of insurance specially designed to meet unique needs of sophisticated insurance and reinsurance buyers. Additional information regarding Berkshire's insurance and reinsurance operations is presented on the following pages.

     GEICO

     GEICO provides primarily private passenger automobile coverages to insureds in 48 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 over the telephone, through the mail or via the Internet. This is a significant element in GEICO's strategy to be a low cost insurer and, yet, provide high value to policyholders.

     GEICO's underwriting results for the past three years are summarized below.

	-- (dollars are in millions) --
	1999		1998		1997
	Amount	%	Amount	%	Amount	%
Premiums written ......................	$4,953 =====		$4,182 =====		$3,588 =====
Premiums earned .......................	$4,757	100.0	$4,033	100.0	$3,482	100.0
Losses and loss expenses ..........	3,815	80.2	2,978	73.8	2,630	75.5
Underwriting expenses ..............	918	19.3	786	19.5	571	16.4
Total losses and expenses .........	4,733	99.5 ====	3,764	93.3 ====	3,201	91.9 ====
Underwriting gain -- pre-tax ......	$    24 ====		$   269 =====		$   281 =====

     Premiums earned in 1999 exceeded premiums earned in 1998 by 17.9%, which followed growth in 1998 of 15.8% over 1997 and 12.6% in 1997 over 1996. The increased premiums earned in recent years reflects significant growth in the numbers of voluntary auto policies-in-force, partially offset by the effects of premium rate reductions taken in certain states. Rate reductions have been taken during the past three years to better align premium rates with pricing targets. Voluntary auto policies-in-force during 1999 grew by 21.5% over 1998 following growth of 20.8% in 1998 and 16.0% in 1997. Over the past three years, GEICO experienced significant growth in the preferred-risk markets, as well as the standard and non-standard auto lines. New business sales in 1999 exceeded 1998 by 31.9%. The growth in premium volume in recent years is attributed to substantially higher amounts of advertising and competitive premium rates.

     GEICO's net underwriting profits in 1999 declined significantly from the underwriting profits in 1998 and 1997. Underwriting results in 1999 reflect the aforementioned premium rate reductions, relatively higher levels of claim costs and increased marketing expenditures. In 1998 and 1997, GEICO's underwriting results were better than expected primarily due to favorable claims experience. Also, GEICO's underwriting results are subject to volatility, given the inherent uncertainty in anticipating the levels of claim losses for a given period.

     Losses and loss expenses incurred as percentages of premiums earned were 80.2% in 1999, 73.8% in 1998 and 75.5% in 1997. As a result of the aforementioned premium rate reductions, claim costs incurred in 1999 were expected to rise at faster rates than premiums. In addition, higher claim frequency was experienced in 1999. Claim costs in 1998 and 1997 were lower than normal reflecting generally mild weather conditions and declining severity of auto liability claims. Catastrophe losses added 1.0% to the loss and loss expense ratio in 1999, compared to 0.7% in 1998 and 0.3% in 1997.

     GEICO's underwriting expenses in 1999 exceeded 1998 by $132 million (16.8%) and underwriting expenses in 1998 exceeded 1997 by $215 million (37.7%). The increase in expenses in 1999 relates primarily to costs incurred in connection with the generation and servicing of new business, offset somewhat by the effect of the deferral of certain costs associated with the development of computer software for internal use, as prescribed by new accounting rules effective in 1999. GEICO expects to increase spending to generate new policy growth in 2000.

     During 1999, GEICO was named as a defendant in a number of class action lawsuits related to the use of repair parts not produced by original equipment manufacturers in connection with settlement of collision damage claims. Similar lawsuits have been filed against several other major private-passenger auto insurers. Management intends to vigorously defend GEICO's position of recommending the use of after-market parts in certain auto accident repairs. The lawsuits are in the early stages of development and the ultimate outcome cannot be reasonably determined at this time.

     Although competition for private passenger auto insurance remains intense, GEICO expects voluntary auto policies-in-force to continue to grow in 2000 as a result of accelerating marketing efforts and competitive rates. New business is initially unprofitable due in large part to first year acquisition costs. The costs of acquiring new business are expected to rise further in 2000. These factors produce lower overall underwriting margins during periods of growth. Thus, GEICO's underwriting results are expected to further decline in 2000 from 1999.

      General Re

     On December 21, 1998, General Re became a wholly owned subsidiary of Berkshire upon completion of the merger of the two companies. General Re's results of operations are included in Berkshire's consolidated results beginning as of that date. For comparative purposes in this discussion, the historical results for all of 1998 are presented although the full-year results are not included in Berkshire's 1998 consolidated results.

     General Re and its affiliates conduct a global reinsurance business, which provides reinsurance coverage in the United States and 125 other countries around the world. General Re's principal reinsurance operations are: (1) North American property/casualty, (2) International property/casualty, and (3) Global life/health. The International property/casualty operations are conducted primarily through Germany-based Cologne Re and its subsidiaries. At December 31, 1999, General Re had an 88% economic ownership interest in Cologne Re.

     General Re's consolidated underwriting results for the past two years are summarized below. Dollar amounts are in millions.

1999

1998

	Amount	%	Amount	%
Premiums written .............................................	$7,043 =====		$6,084 =====
Premiums earned ..............................................	$6,905	100.0	$6,095	100.0
Losses and loss expenses .................................	6,022	87.2	4,607	75.6
Underwriting expenses .....................................	2,067	29.9	1,858	30.5
Total losses and expenses ................................	8,089	117.1 ====	6,465	106.1 ====
Underwriting loss -- pre-tax .............................	$(1,184) ======		$(370) =====

     General Re's reinsurance operations produced large net underwriting losses in 1999. The aggregate net underwriting loss of $1,184 million in 1999 is the worst annual underwriting result of the company over the past 15 years. Following is additional information and discussion with respect to each of General Re's underwriting units.

     General Re's North American property/casualty pre-tax underwriting results for the years ending December 31,1999 and 1998 are summarized below. Dollar amounts are in millions.

1999

1998

	Amount	%	Amount	%
Premiums written .............................................	$2,801 =====		$2,707 =====
Premiums earned ..............................................	$2,837	100.0	$2,708	100.0
Losses and loss expenses .................................	2,547	89.8	1,830	67.6
Underwriting expenses .....................................	874	30.8	857	31.6
Total losses and expenses ................................	3,421	120.6 ====	2,687	99.2 ====
Underwriting gain (loss) -- pre-tax ....................	$  (584) =====		$     21 =====

     General Re's North American property/casualty operations underwrite predominantly excess reinsurance across multiple lines of business. North American property/casualty premiums earned grew 4.8% in 1999. Premiums earned in 1999 included $154 million related to a single new stop-loss reinsurance contract. Otherwise, premiums decreased primarily due to reduced business with national accounts and declines in excess and surplus lines insurance businesses. These declines exceeded growth in regional, specialty, and casualty facultative reinsurance businesses during 1999.

     Underwriting results from North American property/casualty operations in 1999 deteriorated significantly when compared to results for 1998. Net underwriting losses in 1999 include fourth quarter losses of $353 million. Large net underwriting losses in 1999 were generated in both property and casualty reinsurance lines, which in the aggregate, produced a small net underwriting profit in 1998.

     The North American property/casualty loss ratio of 89.8% in 1999 exceeded the loss ratio for 1998 by 22.2 percentage points. The increase in the 1999 loss ratio was primarily due to the effects of inadequate premium rates, higher current accident year losses in property lines of business and considerably lower amounts of favorable development of loss reserves established for previous years' casualty claims. Losses in 1999 arising from catastrophic events and other large property losses under facultative and treaty contracts added 9.4 percentage points to the loss and loss expense ratio in 1999 compared to 4.1 percentage points in 1998.

     General Re's International property/casualty underwriting results for years ending December 31,1999 and 1998 are summarized below. Dollar amounts are in millions.

1999

1998

	Amount	%	Amount	%
Premiums written .............................................	$2,506 =====		$2,072 =====
Premiums earned ..............................................	$2,343	100.0	$2,095	100.0
Losses and loss expenses .................................	2,041	87.1	1,514	72.3
Underwriting expenses .....................................	775	33.1	682	32.5
Total losses and expenses ................................	2,816	120.2 ====	2,196	104.8 ====
Underwriting loss -- pre-tax .............................	$ (473) =====		$ (101) =====

     The International property/casualty operations write quota-share and excess reinsurance on risks around the world. Earned premiums in 1999 exceeded premiums earned in 1998 by 11.8%. The increase was primarily due to business produced by DP Mann, reduced levels of premiums ceded, including amounts ceded to General Re's North American reinsurance operations and a large new contract involving motor business in Argentina. DP Mann is a Lloyd's underwriting manager that was acquired by General Re at the end of 1998.

     General Re's International property/casualty underwriting results for 1999 were poor. Loss and loss expense ratios for 1999 were 87.1% as compared to 72.3% for 1998. The increase in the 1999 loss ratio was mainly due to inadequate premium rates, higher catastrophe losses and deteriorating results in the excess liability, motor and the Australian professional indemnity lines of businesses. In addition, the motion picture film finance business experienced significant losses in the fourth quarter of 1999. Losses from catastrophic events, including fourth quarter 1999 European winter storms, earthquakes in Taiwan and Turkey and an Australian hailstorm, aggregated $126 million in 1999 or 5.4 loss ratio points, compared to $28 million of catastrophic losses or 1.3 loss ratio points in 1998.

     General Re's Global life/health underwriting results for the years ending December 31,1999 and 1998 are summarized below. Dollar amounts are in millions.

1999

1998

	Amount	%	Amount	%
Premiums written .............................................	$1,736 =====		$1,305 =====
Premiums earned ..............................................	$1,725	100.0	$1,292	100.0
Losses and loss expenses .................................	1,434	83.2	1,263	97.8
Underwriting expenses .....................................	418	24.2	319	24.6
Total losses and expenses ................................	1,852	107.4 ====	1,582	122.4 ====
Underwriting loss -- pre-tax .............................	$ (127) =====		$ (290) =====

     General Re's Global life/health affiliates reinsure such risks worldwide. The life business represented approximately 52% of the total life/health premiums in 1999 compared to about 63% in 1998. Global life/health premiums earned increased 33.6% in 1999 over 1998. The increase was principally related to higher premiums earned in connection with the run off of health lines written by a former London agent of Cologne Re's U.S. subsidiary ("GCL" formerly "CLR") and growth from several new contracts written in the U.S. individual and group health markets.

     The Global life/health net underwriting losses in 1999 and 1998 were principally attributed to the health business. In both 1999 and 1998, the life business produced modest underwriting profits although mortality experience in the individual life business worsened in 1999. The unsatisfactory underwriting experience in the group health business in 1999 reflected increases in GCL's health claim reserves that resulted from a comprehensive review conducted during the first half of 1999. Prior to the merger with Berkshire in 1998, a loss provision of $275 million was established on GCL's portion of a pool of workers' compensation carve-out business written by the former London-based managing underwriter. After considering settlements negotiated by other parties involved in this business and actuarial reviews of other available loss information, management concluded that no change to the reserve was warranted for 1999.

      Berkshire Hathaway Reinsurance Group

     The Berkshire Hathaway Reinsurance Group ("BHRG") underwrites principally excess-of-loss reinsurance coverages for insurers and reinsurers. BHRG is believed to be one of the world leaders in providing catastrophe excess-of-loss reinsurance. In recent years, BHRG has generated significant premium volume from a few very sizable retroactive reinsurance contracts.

     Underwriting results for the past three years are summarized in the following table. Dollar amounts are in millions.

	1999		1998		1997
	Amount	%	Amount	%	Amount	%
Premiums written ......................	$2,410 =====		$ 986 =====		$ 955 ====
Premiums earned .......................	$2,382	100.0	$ 939	100.0	$ 967	100.0
Losses and loss expenses ..........	2,573	108.0	765	81.5	676	69.9
Underwriting expenses ..............	65	2.7	195	20.7	163	16.9
Total losses and expenses .........	2,638	110.7 ====	960	102.2 ====	839	86.8 ====
Underwriting gain (loss) -- pre-tax	$(256) =====		$ (21) ====		$ 128 ====

     Premiums earned from retroactive reinsurance contracts, including structured settlements, were $1,508 million in 1999, $343 million in 1998 and $144 million in 1997. Premiums earned in 1999 included $1,250 million related to a single contact entered into with an affiliate of a major U.S. property/casualty insurer.

     Generally, retroactive reinsurance contracts indemnify the ceding company, subject to aggregate loss limits, with respect to past loss events that were insured by the counterparty. It is generally expected that losses ultimately paid under these arrangements will exceed the premiums received, possibly by a wide margin. Premiums are based in part on time-value-of-money concepts because loss payments are expected to occur over lengthy time periods. However, retroactive contracts do not significantly impact earnings in the year of inception. Consistent with Berkshire's accounting policy, the excess of the estimated ultimate losses payable over the premiums received is established as a deferred charge and amortized against income over the estimated future claim settlement periods.

     Net underwriting losses with respect to retroactive reinsurance contracts were $97 million in 1999, $90 million in 1998 and $82 million in 1997. The net underwriting losses from this business reflect the recurring recognition of time-value-of-money concepts, the amortization of deferred charges on retroactive reinsurance and accretion of discounted structured settlement liabilities. The amortization and accretion charges are reported as losses incurred and because there are no offsetting premiums, as underwriting losses. Due to the large retroactive reinsurance contracts entered into during 1999, deferred charges increased significantly. Consequently, the periodic amortization and therefore, underwriting losses are expected to increase in future periods.

     Premiums earned from non-catastrophe reinsurance contracts totaled $560 million in 1999, $310 million in 1998 and $513 million in 1997. In each of the last three years, the premiums earned from this business were derived predominantly from a small number of sizable contacts. Premiums earned in 1999 included $113 million from contracts with General Re's North American property/casualty operations.

     Net underwriting losses from the non-catastrophe reinsurance business were $355 million in 1999, $86 million in 1998 and $73 million in 1997. BHRG incurred a net loss of approximately $220 million from a single aggregate excess contract during the fourth quarter of 1999. Also, the 1999 underwriting loss includes $126 million of net losses on reinsurance assumed from General Re's North American property/casualty businesses. As with retroactive reinsurance contracts, the premiums established for non-catastrophe reinsurance contracts are based on time-value-of-money concepts because loss payments are expected to occur over lengthy time periods. Loss reserves for this business are established without such time discounting but, unlike retroactive reinsurance contracts, no deferred charges are established. Consequently, significant underwriting losses result. This business is accepted because of the large amounts of investable policyholder funds ("float") that is produced. It is anticipated that Berkshire will derive significant economic benefits over the lengthy period of time that the float will be available for investment.

     Premiums earned from catastrophe excess contracts were $314 million in 1999, $286 million in 1998 and $310 million in 1997. Competition within the catastrophe reinsurance markets remains intense, which in many instances, makes premium rates inadequate or coverage conditions unacceptable. As a result, BHRG has accepted relatively few new arrangements. However, it is expected that this business will still produce meaningful amounts of earned premiums during 2000.

     Net underwriting gains from catastrophe reinsurance were $196 million in 1999, $155 million in 1998 and $283 million in 1997. Catastrophe losses incurred in 1999 and 1998 were relatively minor. Significant exposure to losses remains with respect to contracts that are in-force at year-end 1999, especially with respect to a major earthquake in California or a hurricane affecting the U.S. Future periodic underwriting results of this business are subject to extreme volatility. However, Berkshire's management is willing to accept volatility in reported results, provided there is a reasonable prospect of long-term profitability.

      Berkshire Hathaway Direct Insurance Group

     The Berkshire Hathaway Direct Insurance Group is comprised of a wide variety of smaller property/casualty businesses. These businesses include: National Indemnity Company's traditional commercial motor vehicle and specialty risk operations; six companies collectively referred to as "homestate" operations that provide primarily standard commercial coverages to insureds in an increasing number of states; Cypress Insurance Company, a provider of workers' compensation insurance in California and other states; Central States Indemnity Company, a provider of credit card credit insurance to individuals nationwide through financial institutions; Kansas Bankers Surety Company, an insurer for primarily small and medium size banks located in the midwest; and Berkshire Hathaway International, a London-based writer of personal and commercial auto insurance.

     Collectively, direct insurance businesses produced earned premiums of $262 million in 1999, $328 million in 1998 and $312 million in 1997. The decrease in premiums earned in 1999 compared to 1998 was essentially attributed to the credit card and international auto businesses, whereas the comparative increase in premiums earned in 1998 over 1997 was largely due to those same operations. Net underwriting gains of the direct businesses totaled $22 million in 1999, $17 million in 1998 and $52 million in 1997. The increase in underwriting profits in 1999 over 1998 was due primarily to lower net losses from the international auto business. The decline in net underwriting gains in 1998 from 1997 was principally due to lower profits from the specialty risk operations.

      Insurance Segments - Investment Income

     Following is a summary of the insurance segments net investment income for the past three years.

	(dollars in millions)
	1999	1998	1997
Investment income before taxes .......................................	$2,482	$974	$882
Applicable income taxes and minority interest ..................	718	243	178
Investment income after taxes and minority interest ...........	$1,764 =====	$731 ====	$704 ====

     Investment income before taxes from the insurance operations in 1999 includes $1,328 million from General Re, which was acquired by Berkshire on December 21, 1998. Invested assets grew by approximately $25 billion as a result of the General Re acquisition. At December 31, 1999, cash and invested assets totaled approximately $72 billion. Excluding the impact of General Re, net investment income in 1999 grew 18.5% over amounts earned in 1998. In 1998, net investment income exceeded 1997 by 10.4%.

     Berkshire's insurance businesses generate large amounts of investment income derived from shareholder capital, as well as policyholder float. Float represents an estimate of the amount of funds ultimately payable to policyholders that is available for investment. Float denotes the sum of net loss and loss adjustment expense reserves, unearned premiums, and funds held under reinsurance agreements, less premiums receivable, deferred acquisition costs, deferred charges on retroactive reinsurance and prepaid income taxes. The aggregate float was approximately $25.3 billion at December 31, 1999 and $22.8 billion at December 31, 1998. The acquisition of General Re increased float by approximately $14.9 billion.

     Income taxes and minority interest as a percentage of investment income before taxes were 28.9% for 1999, 24.9% for 1998 and 20.2% for 1997. The increase in the rates reflects an increase in the proportion of taxable interest income relative to the amounts of dividend and tax-exempt interest, which are effectively taxed at lower rates. Minority interest applicable to investment income in 1999 also increased due to amounts related to investment income of Cologne Re.

     Non-Insurance Business Segments

     A summary follows of results to Berkshire from these identified business segments for the past three years.

	-- (dollars in millions) --
	1999		1998		1997
	Amount	%	Amount	%	Amount	%
Revenues ........................................	$ 5,701	100	$ 4,438	100	$ 3,404	100
Cost and expenses ..........................	4,997	88	3,803	86	2,892	85
Operating profit ..............................	704	12	635	14	512	15
Income taxes and minority interest ...	277	5	246	5	201	6
Contribution to net earnings .............	$   427 =====	7 ===	$   389 =====	9 ===	$   311 =====	9 ===

     A comparison of revenues and operating profits between 1999, 1998 and 1997 for each of the eight identifiable non-insurance business segments follows.

	-- (dollars in millions) --						Operating Profit
	Revenues			Operating Profits			as a % of Revenues
Segment	1999	1998	1997	1999	1998	1997	1999	1998	1997
Buffalo News ........................	$ 157	$ 157	$ 156	$ 55	$ 53	$ 56	35	34	36
Flight Services .....................	1,856	858	411	225	181	140	12	21	34
Home Furnishings ...............	917	793	667	79	72	57	9	9	9
International Dairy Queen	460	420	--	56	58	--	12	14	--
Jewelry ..................................	486	420	398	51	39	32	10	9	8
Scott Fetzer Companies ......	1,021	1,002	961	147	137	119	14	14	12
See's Candies .......................	306	288	269	74	62	59	24	22	22
Shoe Group ..........................	498	500	542	17	33	49	3	7	9
	$5,701 =====	$4,438 =====	$3,404 =====	$704 ====	$635 ====	$512 ====

     1999 compared to 1998

     Revenues from the eight identifiable non-insurance business segments of $5,701 million in 1999 increased $1,263 million (28.5%) from the prior year. The aggregate operating profits from these business segments of $704 million in 1999 increased $69 million (10.9%). The inclusion of Executive Jet, which was acquired during August, 1998, for a full year in 1999 accounts for a significant portion of the comparative increases. The following is a discussion of other significant matters impacting comparative results for each of the non-insurance business segments.

      Buffalo News

     The Buffalo News revenues were relatively unchanged in 1999 as compared to 1998. Operating profits in 1999 of $55 million increased $2 million (3.8%) from the comparable 1998 amount. Much of the increase arose as a result of a special non recurring charge which was recorded in 1998 related to workers' compensation insurance. Without the charge, operating profits in 1999 would have been comparable to the prior year.

      Flight Services

     This segment includes FlightSafety and Executive Jet. FlightSafety provides high technology training to operators of aircraft and ships. FlightSafety's worldwide clients include corporations, the military and government agencies. On August 7, 1998, Berkshire acquired Executive Jet, the worlds' leading provider of fractional ownership programs for general aviation aircraft. Executive Jet operates the NetJets® fractional ownership program in the United States and Europe. Revenues of this segment increased $998 million (116.3%) over comparable prior year amounts. The inclusion of Executive Jet for the full year of 1999 accounts for a substantial portion of the overall revenue increase. Operating profits of this segment increased $44 million (24.3%) over comparable prior year amounts. Executive Jet accounts for almost 2/3 of the overall increase. FlightSafety's operating profits increased significantly over 1998 as a result of continued growth in all areas of its training business.

      Home Furnishings

      This segment is comprised of four separately managed but similar retail home furnishing businesses: Nebraska Furniture Mart ("NFM"), based in Omaha, Nebraska; R.C. Willey Home Furnishings ("Willey"), based in Salt Lake City, Utah; Star Furniture Company ("Star"), based in Houston, Texas; and Jordan's Furniture, Inc. ("Jordan's"), based in Boston, Massachusetts. Berkshire acquired NFM in 1983, Willey in 1995 and Star in 1997. Jordan's was acquired on November 13, 1999 and is the largest furniture retailer in Massachusetts and New Hampshire. Revenues of this segment increased $124 million (15.6%) as compared to the prior year. NFM, Willey and Star each reported revenue increases of between 8% and 10%. Additionally, Jordan's results were included in Berkshire's segments results for about the last 45 days of the year. Operating profits of $79 million in 1999 increased $7 million (9.7%) over the comparable prior year amount. The increase arose from increased sales and improved margins at NFM, Willey and Star.

      International Dairy Queen

     At the beginning of 1998, Berkshire completed the acquisition of Dairy Queen. Dairy Queen develops, licenses and services a system of about 6,000 Dairy Queen stores located throughout the United States, Canada and other foreign countries. Dairy Queen stores feature hamburgers, hot dogs, various dairy desserts and beverages. Dairy Queen revenues increased $40 million (9.5%) as compared to the prior year. About 75% of the increase relates to increased distribution business. A significant portion of the remaining increase relates to sales by company-owned stores. Operating profit of $56 million declined $2 million (3.4%) from the prior year.

      Jewelry

     This segment consists of two separately managed retailers of fine jewelry. Borsheim's operates from a single location in Omaha, Nebraska. Helzberg's Diamonds operates a national chain of retail stores located primarily in malls throughout the United States. Revenues of $486 million increased $66 million (15.7%) and operating profits of $51 million increased $12 million (30.8%) over the comparable prior year amounts. While the revenue increase accounted for much of the increase in operating profits, both of these businesses were able to effectively control operating expenses resulting in improved results.

      Scott Fetzer Companies

     The Scott Fetzer companies are a group of about twenty diverse manufacturing and distribution businesses under common management. Principal businesses in this group of companies sell products under the Kirby (home cleaning systems), Campbell Hausfeld (air compressors, paint sprayers and pressure washers) and World Book (encyclopedias and other educational products) names. Revenues of $1,021 million increased $19 million (1.9%) over the comparable prior year amount. The increase in revenues was primarily due to revenue increases at Campbell Hausfeld and World Book offset somewhat by lower revenues from Kirby's home cleaning system's business. Operating profits of $147 million increased $10 million (7.3%) from the prior year. Increased sales at Campbell Hausfeld along with improved results from World Book's domestic and international businesses account for a significant portion of the improved results.

     See's Candies

     See's revenues increased $18 million (6.2%) over comparable prior year amounts. Total pounds of candy sold increased about 7.2% with strong increases being achieved both in See's quantity order business as well as its retail stores. Operating profits increased $12 million (19.3%) as compared to the prior year. The revenue increase as well as a slightly over 1% increase in gross margin percentage accounts for the increase.

     Shoes

     This segment includes H. H. Brown Shoe Company, Inc., Lowell Shoe, Inc. and Dexter Shoe Companies. These businesses manufacture and distribute work, dress, casual and athletic footwear. In addition, over 100 retail shoe stores are included in this segment. Revenues for this segment decreased by $2 million in 1999 as compared to 1998. Operating profits of $17 million in 1999 decreased $16 million (48.5%) from the prior year. The significant profit decline arose at Dexter. It has become increasingly difficult for a domestic producer of shoes like Dexter to compete in an industry where over 90% of the items sold are produced abroad, where low-cost labor is the rule. In order to remain competitive, Dexter has begun shutting down certain of its domestic plants and sourcing more of its output internationally. The results for 1999 include severance and relocation costs.

     1998 compared to 1997

     Revenues from the non-insurance business segments increased $1,034 million (30.4%) in 1998 as compared to 1997. Operating profits of $635 million during 1998 increased $123 million (24.0%) from the comparable 1997 amount. The most significant factor which gave rise to the increase in both revenues and operating profits were the acquisitions of Dairy Queen at the beginning of 1998 and Executive Jet during August, 1998. With the exception of the shoe group, all other reportable segments reported excellent results in 1998 as compared to 1997.

     Realized Investment Gain

     Realized investment gain has been a recurring element in Berkshire's net earnings for many years. The amount -- recorded when investments are sold, other-than-temporarily impaired or in certain situations, as required by GAAP, when investments are marked-to-market with the corresponding gain or loss included in earnings -- may fluctuate significantly from period to period, with a meaningful effect upon Berkshire's consolidated net earnings. However, the amount of realized investment gain or loss for any given period has no predictive value, and variations in amount from period to period have no practical analytical value, particularly in view of the net unrealized price appreciation now existing in Berkshire's consolidated investment portfolio.

     While the effects of realized gains are often material to the Consolidated Statements of Earnings, such gains often produce a minimal impact on Berkshire's total shareholders' equity. This is due to the fact that Berkshire's investments are carried in prior periods' consolidated financial statements at market value with unrealized gains, net of tax, reported as a separate component of shareholders' equity.

     Goodwill amortization and other purchase-accounting-adjustments

     Goodwill amortization and other purchase-accounting-adjustments reflect the after-tax effect on net earnings with respect to the amortization of goodwill of acquired businesses and the amortization of fair value adjustments to certain assets and liabilities which were recorded at the acquisition dates of certain businesses (principally General Re and GEICO). The significant increase in such charges during 1999 as compared to 1998 periods is primarily due to the acquisition of General Re on December 21, 1998.

     Market Risk Disclosures

     Berkshire's Consolidated Balance Sheet includes a substantial amount of assets and liabilities whose fair values are subject to market risks. Berkshire's significant market risks are primarily associated with equity prices and interest rates and to a lesser degree financial products. The following sections address the significant market risks associated with Berkshire's business activities.

     Equity Price Risk

     Strategically, Berkshire strives to invest in businesses that possess excellent economics, with able and honest management and at sensible prices. Berkshire's management prefers to invest a meaningful amount in each investee. Accordingly, Berkshire's equity investments are concentrated in relatively few investees. At year-end 1999 and 1998, approximately 60% of the total fair value of investments in equity securities was concentrated in three investees.

     Berkshire's preferred investment strategy contemplates that equity investments will be held for very long periods of time. Thus, Berkshire management is not necessarily troubled by short term price volatility with respect to its investments provided that the underlying business, economic and management characteristics of the investees remain favorable. Berkshire strives to maintain above average levels of shareholder capital to provide a margin of safety against short term equity price volatility.

     The carrying values of investments subject to equity price risks are based on quoted market prices or management's estimates of fair value as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.

     In addition to its equity investments, Berkshire's obligations with respect to the 1% Senior Exchangeable Notes are subject to equity price risks. See Note 10 to the Consolidated Financial Statements for information regarding the Exchange Notes. Given the current market price of the underlying stock into which Exchange Notes may be converted, the fair values of the Exchange Notes are primarily subject to equity price risk.

     The table below summarizes Berkshire's equity price risks as of December 31, 1999 and 1998 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected hypothetical change does not reflect what could be considered the best or worst case scenarios. Indeed, results could be far worse due both to the nature of equity markets and the aforementioned concentrations existing in Berkshire's equity investment portfolio. Dollars are in millions.

			Estimated	Hypothetical
			Fair Value after	Percentage
		Hypothetical	Hypothetical	Increase (Decrease) in
	Fair Value	Price Change	Change in Prices	Shareholders' Equity
As of December 31, 1999 Equity securities ............................	$37,772	30% increase	$49,104	12.6
		30% decrease	26,440	(12.6)
1% Senior Exchangeable Notes ...	447	30% increase	581	(0.2)
		30% decrease	313	0.2
As of December 31, 1998 Equity securities * .........................	$38,476	30% increase	$50,019	12.8
		30% decrease	26,933	(12.8)
1% Senior Exchangeable Notes ...	489	30% increase	636	(0.2)
		30% decrease	342	0.2
* Includes redeemable convertible preferred shares of investees in which the market prices of the common stock of the investees significantly exceeded the related conversion prices.

     Interest Rate Risk

     This section discusses interest rate risks associated with Berkshire's financial assets and liabilities, other than those of its finance and financial products businesses, which are discussed later. Berkshire's management prefers to invest in equity securities or to acquire entire businesses based upon the principles discussed in the preceding section on equity price risk. When unable to do so, management may alternatively invest in bonds or other interest rate sensitive instruments. Berkshire's strategy is to acquire securities that are attractively priced in relation to the perceived credit risk. Management recognizes and accepts that losses may occur. Berkshire has historically utilized a modest level of corporate borrowings and debt. Further, Berkshire strives to maintain the highest credit ratings so that the cost of debt is minimized. Berkshire utilizes derivative products to manage interest rate risks to a very limited degree.

     The fair values of Berkshire's fixed maturity investments and borrowings under investment agreements and other debt will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the credit worthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions.

     The following table summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets and liabilities that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. The hypothetical fair values are based upon the same prepayment assumptions utilized in computing fair values at year-end 1999 and 1998. Significant variations in market interest rates could produce changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table which follows. Dollars are in millions.

		Estimated fair value after
		Hypothetical change in interest rates
		(bp=basis points)
		100 bp	100 bp	200 bp	300 bp
	Fair Value	decrease	increase	increase	increase
As of December 31, 1999
Investments in securities with fixed maturities ....................................	$30,222	$31,942	$28,483	$26,852	$25,413
Borrowings under investments agreements and other debt ................	1,971	2,059	1,891	1,819	1,753
As of December 31, 1998
Investments in securities with fixed maturities ....................................	$20,891	$21,774	$19,974	$19,093	$18,130
Borrowings under investments agreements and other debt ................	1,986	2,095	1,865	1,768	1,681

     Financial Products Risk

     The finance and financial products operations are subject to market risk principally through General Re Financial Products ("GRFP"). GRFP monitors its market risk on a daily basis across all swap and option products by calculating the effect on operating results of potential changes in market variables over a one week period, based on historical market volatility, correlation data and informed judgment. This evaluation is done on an individual trading book basis, against limits set by individual book, to a 95% probability level. GRFP sets market risk limits for each type of risk, and for an aggregate measure of risk, based on a 99% probability that movements in market rates will not affect the results from operations in excess of the risk limit over a one week period. GRFP's weekly aggregate market risk limit is $15 million. During 1999, the actual losses exceeded the market risk limit on one occasion. In addition to these daily and weekly assessments of risk, GRFP prepares periodic stress tests to assess its exposure to extreme movements in various market risk factors.

     The table below shows the highest, lowest and average value at risk, as calculated using the above methodology, by broad category of market risk to which GRFP is exposed. Dollars are in millions.

	1999
		Foreign				1998
	Interest Rate	Exchange Rate	Equity	Credit	All Risks	All Risks
Highest ........	$11	$5	$7	$5	$10	$13
Lowest ........	6	3	4	1	4	6
Average ......	8	4	6	2	8	9

     GRFP evaluates and records a fair-value adjustment to recognize counterparty credit exposure and future costs associated with administering each contract. The expected credit exposure for each trade is initially established on the trade date and is determined through the use of a proprietary credit exposure model that is based on historical default probabilities, market volatilities and, if applicable, the legal right of setoff. These exposures are continually monitored and adjusted due to changes in the credit quality of the counterparty, changes in interest and currency rates or changes in other factors affecting credit exposure. Since inception, GRFP has not experienced any credit losses.

Liquidity and Capital Resources

     Berkshire's Consolidated Balance Sheet as of December 31, 1999, reflects continuing capital strength. In the past three years, Berkshire shareholders' equity has increased from approximately $23.4 billion at December 31, 1996, to approximately $57.8 billion at December 31, 1999. In that three-year period, realized and unrealized securities gains increased equity capital by approximately $8.2 billion, and reinvested earnings, other than realized securities gains, were about $3.1 billion.

Year 2000 Issue

     Prior to January 1, 2000, there was widespread concern that many computer systems in use would be unable to correctly process data or may not operate at all after December 31, 1999. It was feared that some computer programs may interpret the year "2000" incorrectly, causing errors in calculations or causing the system to fail. Year 2000 issues affect: (1) Information Technology (IT) utilized in Berkshire's widely diversified business information systems, (2) non-IT systems, such as communications, facilities management, and manufacturing and service equipment containing embedded computer chips, and (3) IT and non-IT systems of significant customers, suppliers, business partners and equity investees.

     To date, Berkshire has not experienced any significant Year 2000 related failures or disruptions with respect to its IT and non-IT systems. In addition, Berkshire has not experienced any significant adverse consequences due to Year 2000 related problems suffered by its significant business partners, including equity investees.

     Berkshire and its subsidiaries could still be adversely affected if Year 2000 issues are not resolved by Berkshire or its significant customers, suppliers, business partners or equity investees. However, the most likely adverse consequence at this date could ultimately relate to losses incurred under property and casualty insurance and reinsurance contracts issued by subsidiaries. Otherwise, Berkshire management believes that the potential for adverse consequences arising out of the ordinary day-to-day operations of its businesses has diminished greatly since December 31, 1999. The financial impact of any adverse consequences cannot currently be estimated.

     Berkshire and its subsidiaries have incurred about $60 million in identification, remediation and testing of Year 2000 issues. Year 2000 related costs are expensed as incurred. Berkshire management does not believe that any significant IT projects were delayed due to Year 2000 efforts.

Forward-Looking Statements

     Investors are cautioned that certain statements contained in this document, as well as some statements by the Company in periodic press releases and some oral statements of Company officials during presentations about the Company, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, which may be provided by management are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about the Company, economic and market factors and the industries in which the Company does business, among other things. These statements are not guaranties of future performance and the Company has no specific intention to update these statements.

      Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. The principal important risk factors that could cause the Company's actual performance and future events and actions to differ materially from such forward-looking statements, include, but are not limited to, changes in market prices of Berkshire's significant equity investees, the occurrence of one or more catastrophic events, such as an earthquake or hurricane that causes losses insured by Berkshire's insurance subsidiaries, changes in insurance laws or regulations, changes in Federal income tax laws, and changes in general economic and market factors that affect the prices of securities or the industries in which Berkshire and its affiliates do business, especially those affecting the property and casualty insurance industry.