BERKSHIRE HATHAWAY INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

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) 
                                                           1996     1995    1994 
                                                         --------  ------  ------ 
Insurance segment, except realized gain. . . . . . . .   $  689.6  $496.4  $487.3 
Non-Insurance business segments. . . . . . . . . . . .      163.2   139.4   159.4 
Other businesses . . . . . . . . . . . . . . . . . . .       63.3    52.0    42.8 
Interest expense . . . . . . . . . . . . . . . . . . .      (55.7)  (34.9)  (37.3) 
Other. . . . . . . . . . . . . . . . . . . . . . . . .       23.0    17.0    12.3 
                                                         --------  ------  ------ 

  Earnings before realized gains and non-recurring charge   883.4   669.9   664.5 
Realized gain. . . . . . . . . . . . . . . . . . . . .    1,605.2   125.0    61.1   
Non-recurring charge                                         --      --    (172.6)* 
                                                         --------  ------  ------ 

  Net earnings . . . . . . . . . . . . . . . . . . . .   $2,488.6  $794.9  $553.0 
                                                         ========  ======  ====== 

* As described in Note 4 to the Consolidated Financial Statements,  
  during 1994 the Company recorded a pre-tax charge of $268.5  
  million ($172.6 million after-tax) as a result of recognizing an  
  other-than-temporary decline in the value of its investment in  
  USAir Group, Inc. Preferred Stock. 
 
     The business segment data (Note 15 to Consolidated Financial  
Statements) should be read in conjunction with this discussion. 
 
  Insurance Segment 
 
     A summary follows of results to Berkshire from the insurance  
segment for the past three years. 
                                                           (dollars in millions)
                                                           1996     1995    1994
                                                         --------  ------  ------
Premiums earned from: 
  Direct insurance. . . . . . . . . . . . . . . . . . .  $3,360.3  $239.9  $234.8
  Reinsurance assumed . . . . . . . . . . . . . . . . .     757.5   717.6   688.4
                                                         --------  ------  ------

                                                         $4,117.8  $957.5  $923.2
                                                         ========  ======  ======
Underwriting gain (loss) attributable to: 
  Direct insurance. . . . . . . . . . . . . . . . . . .    $238.5  $ 40.6  $ 48.3
  Reinsurance assumed . . . . . . . . . . . . . . . . .      (7.8)  (21.0)   80.7
                                                         --------  ------  ------
                                                            230.7    19.6   129.0
Net investment income . . . . . . . . . . . . . . . . .     712.1   575.8   481.0
Goodwill amortization . . . . . . . . . . . . . . . . .     (42.6)*  --      -- 
                                                         --------  ------  ------
  Pre-tax earnings. . . . . . . . . . . . . . . . . . .     900.2   595.4   610.0
Income taxes. . . . . . . . . . . . . . . . . . . . . .     203.3    92.0   117.2
Minority interest . . . . . . . . . . . . . . . . . . .       7.3     7.0     5.5
                                                         --------  ------  ------

  Net earnings from insurance, except realized gain . .    $689.6  $496.4  $487.3
                                                         ========  ======  ======
 
* Virtually all of the goodwill amortization relates to the  
  amortization of goodwill that arose in connection with the GEICO  
  merger. 
 
     The Berkshire Hathaway Insurance Group engages in both direct  
insurance and reinsurance of property and casualty risks. In direct  
insurance activities, Insurance Group members assume defined portions of  
the risks of loss from persons or organizations that are directly subject  
to the risks. In reinsurance assumed activities, Insurance Group members  
assume defined portions of similar or dissimilar risks to that other  
insurers or reinsurers have subjected themselves in their own insuring  
activities. 
 
     In January 1996, Berkshire acquired control of GEICO Corporation  
("GEICO"). The inclusion of the accounts of GEICO dramatically affects  
the operating results of the Insurance Group. 
 
     A significant marketing strategy followed by all Insurance Group  
members is the maintenance of extraordinary capital strength. Statutory  
surplus as regards policyholders of the Insurance Group increased to  
approximately $26.1 billion at December 31, 1996. This superior capital  
strength creates opportunities for Insurance Group members to negotiate  
and enter into contracts of insurance specially designed to meet unique  
needs of sophisticated insurance and reinsurance buyers. 
 
     For purposes of this Discussion, premiums and losses and loss  
expenses are stated net of reinsurance ceded. 
 
  Direct Insurance Underwriting 
 
     A summary follows of the combined underwriting results, stated  
on the basis of generally accepted accounting principles ("GAAP") of  
Berkshire's direct insurance businesses. 

                              ___________(dollars are in millions)___________
                                   1996             1995            1994  
                              ---------------   -------------   -------------       
                               Amount     %     Amount     %    Amount     %
                              --------  -----   ------  -----   ------  -----
Premiums written. . . . . . . $3,389.7          $247.2          $225.7 
                              ========          ======          ======
Premiums earned . . . . . . . $3,360.3  100.0   $239.9  100.0   $234.8  100.0
                              --------  -----   ------  -----   ------  -----
Losses and loss expenses. . .  2,516.6   74.9     90.0   37.5     88.4   37.6
Underwriting expenses . . . .    605.2   18.0    109.3   45.6     98.1   41.8
                               --------  -----   ------  -----   ------  -----
Total losses and expenses . .  3,121.8   92.9    199.3   83.1    186.5   79.4
                              --------  -----   ------  -----   ------  -----
Underwriting gain - pre-tax   $  238.5          $ 40.6          $ 48.3
                              ========          ======          ======   
 
     As previously indicated, the net underwriting results from  
direct insurance in 1996 include the results of GEICO. Through its  
subsidiaries, 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  
or through the mail. This is a significant element in GEICO's strategy to  
be a low-cost provider of such coverages. In previous years, a relatively  
small percentage of GEICO's insurance business derived from homeowner's  
and other non-automobile insurance coverages. In 1995, GEICO entered into  
an agreement with another major insurance provider that over time will  
allow it to effectively exit the homeowner's insurance business. 
 
     GEICO's underwriting results for 1996 are summarized below.  
Amounts for 1995 are shown for comparative purposes, although such  
amounts are not included in Berkshire's Consolidated Financial  
Statements. 

                                   _____(dollars are in millions)_____
                                         1996               1995
                                   ----------------   ----------------
                                    Amount      %      Amount      % 
                                   --------   -----   --------   -----
Premiums earned. . . . . . . . .   $3,091.6   100.0   $2,787.0   100.0
                                   --------   -----   --------   -----
Losses and loss expenses . . . .    2,424.9    78.4    2,254.2    80.9
Underwriting expenses . . . . . .     486.7    15.8      440.7    15.8
                                   --------   -----   --------   -----
Total losses and expenses . . . .   2,911.6    94.2    2,694.9    96.7
                                   ========   =====   ========   =====
Underwriting gain - pre-tax . . .  $  180.0           $   92.1
                                   ========           ========
 
     Premiums earned in 1996 were $3,091.6 million, up 10.9% from  
$2,787.0 million in 1995. Premium growth for voluntary auto business was  
15.3%, reflecting a 10.1% increase in policies-in-force during the year,  
changes in the mix of business and very modest rate increases. This  
growth was partially offset by declines in premiums for residual market  
auto (unprofitable business assigned to insurers by state regulators that  
insurers normally would not voluntarily accept) and homeowners insurance  
business. 
 
     Policy growth over the last year was 7.3% in the preferred-risk auto  
market and 33.5% in the standard and nonstandard auto lines as efforts  
have been expanded to offer a rate quote to potential customers who do  
not meet GEICO's preferred-risk underwriting guidelines. Voluntary auto  
new business sales increased 33.8% over 1995. 
 
     Losses and loss expenses incurred increased 7.6% to $2,424.9 million  
in 1996. The loss and loss expense ratio, which measures the portion of  
premiums earned, paid or reserved for losses and related claims handling  
expenses, was 78.4% in 1996 compared to 80.9% a year ago. The lower ratio  
reflects a flattening of average severity trends for auto liability  
coverages. Underwriting expenses increased 10.4% in 1996 to $486.7  
million. The increase reflects additional advertising and other costs  
related to new business growth. 
 
     Berkshire's other direct insurance businesses include National  
Indemnity Company's traditional motor vehicle business and professional  
liability/specialty risk operations; five companies referred to as  
"homestate" operations that principally provide coverages to residents of  
their home states or branch operations; Central States Indemnity Company,  
a provider of credit-card credit insurance to individuals through  
financial institutions; and Kansas Bankers Surety Company, which  
Berkshire acquired in July 1996, and which is an insurer for primarily  
small and medium sized banks located in the midwest. 
 
     Collectively, these direct insurance businesses produced earned  
premiums of $268.7 million in 1996, $239.9 million in 1995 and $234.8  
million in 1994. Net underwriting gains of these businesses were $58.5  
million in 1996, $40.6 million in 1995 and $48.3 million in 1994. The  
increases in premium volume in recent years have been achieved primarily  
by the credit-card credit, "homestate," and specialty risk insurance  
businesses offset by declines in the traditional motor vehicle business.  
Nearly all of these direct insurance businesses produced net underwriting  
gains in each of the past three years. However, the net underwriting  
gains were primarily recorded by the traditional motor vehicle, specialty  
risk and credit-card credit businesses. 
 
  Reinsurance Assumed 
 
     Underwriting results for the past three years, stated on a "GAAP"  
basis with respect to the reinsurance assumed business, are summarized in  
the following table. 

                                    __________(dollars are in millions)__________
                                        1996            1995            1994  
                                    -------------   -------------   -------------       
                                    Amount    %     Amount    %     Amount    %
                                    ------  -----   ------  -----   ------  -----
Premiums written. . . . . . . . .   $715.5          $777.0          $689.8
                                    ======          ======          ======
Premiums earned . . . . . . . . .   $757.5  100.0   $717.6  100.0   $688.4  100.0
                                    ------  -----   ------  -----   ------  -----
Losses and loss expenses. . . . .    572.9   75.6    522.0   72.7    476.9   69.3
Underwriting expenses . . . . . .    192.4   25.4    216.6   30.2    130.8   19.0
                                    ------  -----   ------  -----   ------  -----
Total losses and expenses . . . .    765.3  101.0    738.6  102.9    607.7   88.3
                                    ------  -----   ------  -----   ------  -----
Underwriting gain (loss) - pre-tax  $ (7.8)         $(21.0)         $ 80.7
                                    ======          ======          ======
 
     Reinsurance premiums earned from catastrophe excess-of-loss  
policies were $268.0 million in 1996, $260.0 million in 1995 and $447.1  
million in 1994. Net underwriting gains from catastrophe policies were  
$167.0 million in 1996, $152.1 million in 1995 and $240.4 million in  
1994. Over the past three years, the only significant catastrophe loss  
sustained by the Insurance Group resulted from the 1994 earthquake in  
Northridge, California. As of December 31, 1996, the estimated aggregate  
claim losses to the Insurance Group from that event were approximately  
$155 million. 
 
     The net underwriting gains earned over the most recent three  
years from this business should not be considered predictive of future  
results. Insurance Group members continue to offer and accept catastrophe  
reinsurance policies that subject the Insurance Group to substantial risk  
of loss. For instance, in late 1996, the Insurance Group agreed to  
provide aggregate reinsurance protection of about $1 billion to the newly  
formed California Earthquake Authority ("CEA"). The coverage will be  
called upon if the CEA incurs aggregate earthquake losses in excess of  
about $5 billion during the four year period ending March 31, 2001. 

     Berkshire's management believes that, eventually, a future  
catastrophic event will result in a significant loss to the Insurance  
Group, although the timing and magnitude of loss cannot be predicted.  
Thus, the periodic underwriting results are subject to extreme  
volatility. Berkshire's management is willing to accept such volatility,  
provided there is a reasonable prospect of long-term profitability. 
 
     Premiums earned from other property and casualty excess-of-loss  
and quota-share policies totaled $489.5 million in 1996, $457.6 million  
in 1995 and $241.3 million in 1994. These policies produced net  
underwriting losses of $101.0 million in 1996, $97.7 million in 1995 and  
$82.0 million in 1994. Premiums for non-catastrophe contracts are often  
based, in part, on time discounting of estimated losses because of  
assumptions that the reinsurer will not be required to pay for losses  
under the contracts for extended periods of time. Reserves for unpaid  
losses and loss expenses are established for financial reporting purposes  
without recognition of such discounting, thus producing net underwriting  
losses. Berkshire accepts this business, nevertheless, because of the  
large amounts of investable policyholder funds (or "float") that it  
produces. 
 
     In addition, underwriting losses from retroactive reinsurance  
contracts - excess of loss coverage of past loss events - and structured  
settlement reinsurance providing periodic payments to claimants with  
respect to settled claims aggregated $73.8 million in 1996, $75.4 million  
in 1995 and $77.7 million in 1994. Most of these contracts were entered  
into several years ago and the related losses are expected to be paid  
over extended time periods. The underwriting losses reflect the recurring  
recognition of time-value-of-money concepts - accretion of discounted  
structured settlement liabilities and amortization of deferred charges re  
reinsurance assumed. The amortization and accretion charges are reported  
as losses incurred and, because there is no related premium income, as  
net underwriting losses. See Notes to the Consolidated Financial  
Statements for more information concerning these charges. 
 
  Insurance Segment Investment Income
 
     Following is a summary of Insurance Group net investment income  
for the past three years. 
                                                      (dollars in millions)
                                                      1996     1995     1994
                                                     ------   ------   ------
Investment income before taxes . . . . . . . . . .   $712.1   $575.8   $481.0
Applicable income taxes. . . . . . . . . . . . . .    122.6     84.8     68.9
Applicable minority interest . . . . . . . . . . .      5.7      5.0      4.7
                                                     ------   ------   ------
Investment income after taxes and minority interest  $583.8   $486.0   $407.4
                                                     ======   ======   ======   
 
     Investment income of the Insurance Group for 1995 and 1994 has  
been restated to account for the Group's investment in GEICO under the  
equity method. (See Notes 1 and 2 to the Consolidated Financial  
Statements.)  Accordingly, restated investment income before taxes of the  
Insurance Group for 1995 and 1994 includes $112.6 million and $97.1  
million, respectively, reflecting the Group's equity in the net income of  
GEICO less a charge for related goodwill amortization. In addition, the  
Insurance Group's investment income before taxes for 1995 and 1994  
includes its share of the net earnings or losses with respect to its  
investment in common stock of Salomon Inc. For 1995, the Group's equity  
in net earnings of Salomon was $16.9 million compared to a loss of $32.9  
million for 1994. During 1995 when Berkshire's ownership of Salomon  
dropped below 20 percent of the total voting rights of that company, the  
Group discontinued applying the equity method. 
 
     Investment income excluding the aforementioned equity method  
amounts was $712.1 million in 1996, $446.3 million in 1995 and $416.8  
million in 1994. Investment income in 1996 includes $227.2 million from  
the consolidation of the investment results of GEICO. The Insurance Group  
members continue to generate significant levels of investment income,  
reflecting large amounts of invested assets. Increases in invested assets  
derive from reinvested earnings and additional capital contributed to the  
Insurance Group - approximately $3.3 billion over the past three years  
and increases in the amount of "float," an approximation of the net  
policyholder funds held. "Float" represents the sum of unpaid losses and  
loss adjustment expenses, unearned premiums and other liabilities to  
policyholders less the aggregate of premiums receivable, reinsurance  
balances receivable, deferred acquisition costs, deferred charges re  
reinsurance assumed and prepaid income taxes. The acquisition of GEICO  
increased float by $2.6 billion and at December 31, 1996, total float  
approximated $6.9 billion. 
 
     Income tax expense related to investment income, as a percentage  
of investment income before taxes was 17.2% in 1996, 14.7% in 1995 and  
14.3% in 1994. Investment income in each of these years includes  
substantial amounts of interest on municipal obligations and dividends  
from equity investments that are effectively taxed at rates below the  
full statutory federal rate. 
 
  Non-Insurance Business Segments 
 
     A summary follows of results to Berkshire from these identified  
business segments for the past three years. 

                              _____________(dollars are in millions)_____________
                                   1996              1995              1994  
                              ---------------   ---------------   ---------------       
                               Amount     %      Amount     %      Amount     %
                              --------  -----   --------  -----   --------  -----
Revenues. . . . . . . . . .   $1,922.9  100.0   $1,775.1  100.0   $1,620.7  100.0
Cost and expenses . . . . .    1,655.7   86.1    1,541.9   86.9    1,358.8   83.9
                              --------  -----   --------  -----   --------  -----
Operating profit. . . . . .      267.2   13.9      233.2   13.1      261.9   16.1
Income taxes. . . . . . . .      101.6    5.3       91.8    5.2      100.3    6.2
Minority Interest . . . . .        2.4    0.1        2.0    0.1        2.2    0.1
                              --------  -----   --------  -----   --------  -----
Contribution to net earnings  $  163.2    8.5   $  139.4    7.8   $  159.4    9.8
                              ========  =====   ========  =====   ========  =====
 
     A comparison of revenues and operating profits between 1996, 1995 and  
1994 for each of the six identifiable non-insurance business segments  
follows. 
							              
                              _______________(dollars in millions)_______________   Operating Profit
                                       Revenues              Operating Profits     as a % of Revenues
                              --------------------------   ----------------------  ------------------
Segment                         1996     1995     1994      1996    1995    1994    1996  1995  1994
-------                       -------- -------- --------   ------  ------  ------   ----  ----  ----
Candy. . . . . . . . . . . . . $ 248.9  $ 233.6  $ 216.1   $ 50.9  $ 49.3  $ 46.6   20.4  21.1  21.6
Encyclopedias, 
  other reference materials. .   119.0    157.9    191.3     10.3     7.4    24.4    8.7   4.7  12.8
Home cleaning systems. . . . .   253.7    235.6    207.6     62.5    52.6    43.9   24.6  22.3  21.1
Home furnishings . . . . . . .   586.6    428.1    245.4     41.0    28.1    16.9    7.0   6.6   6.9
Newspaper. . . . . . . . . . .   154.2    154.8    150.9     49.8    46.3    53.7   32.3  29.9  35.6
Shoes. . . . . . . . . . . . .   560.5    565.1    609.4     52.7    49.5    76.4    9.4   8.8  12.5
                              -------- -------- --------   ------  ------  ------
                              $1,922.9 $1,775.1 $1,620.7   $267.2  $233.2  $261.9
                              ======== ======== ========   ======  ======  ======  
 
  1996 compared to 1995 
 
     Revenues from the six identifiable non-insurance business  
segments of $1,922.9 million increased $147.8 million (8.3%) from the  
prior year. The overall operating profit from these business segments of  
$267.2 million increased $34.0 million (14.6%). The following is a  
discussion of significant matters impacting comparative results for each  
of the non-insurance business segments. 
 
     Candy 
 
     Revenues of the candy segment increased $15.3 million (6.5%)  
over comparable prior year amounts. Total pounds of candy sold increased  
about 4.3%. Substantially all of the volume increase arose from See's  
quantity order, mail order and licensee programs. Pounds sold during 1996  
from quantity order and mail order programs increased about 10% over  
1995's volume. Operating profits increased $1.6 million (3.3%) over  
comparable prior year amounts. Somewhat offsetting the favorable impact  
on profits of increased volume were increased raw material and payroll  
costs. 
 
     Encyclopedias, Other Reference Materials
 
     Revenues of this segment declined $38.9 million (24.6%) from  
1995. The decline continues the trend of reduced sales of printed  
encyclopedias (World Book and Childcraft) that began in 1989 when this  
segment's revenues were in excess of $300 million. Operating profits  
increased $2.9 million (39.2%) over the comparable prior year amount.  
During 1996, World Book incurred about $5 million of costs in connection  
with the development of a new CD-ROM product which was introduced in  
association with IBM in early 1997. In spite of the reduced volume of  
printed encyclopedia sales and the costs incurred in connection with the  
new CD-ROM product, operating profits increased in 1996. This achievement  
was directly related to World Book revamping its distribution methods and  
the successful implementation of cost cutting measures that have  
significantly reduced fixed costs. While it's too early to assess the  
impact of the new CD-ROM product, management believes it is taking  
appropriate measures to assure that World Book remains a viable business  
in both the print and electronic marketplace. 
 
     Home Cleaning Systems
 
     Revenues of the home cleaning systems segment (which consists of  
products sold principally under the Kirby name) increased $18.1 million  
(7.7%) and operating profits increased $9.9 million (18.8%) over  
comparable prior year amounts. Unit sales volume in foreign markets,  
which comprise about 27% of total volume, increased about 28%. The  
significant growth in foreign sales resulted from entering new markets  
and increased penetration in existing markets. Kirby will be introducing  
a new model both domestically and in foreign markets in 1997. Management  
expects continued successful results from this segment's businesses. 
 
     Home Furnishings
 
     Revenues from this segment increased in 1996 by $158.5 million  
(37.0%) over the prior year. Substantially all of the revenue increase  
related to the acquisition on June 29, 1995 of R.C. Willey Home  
Furnishings ("R.C. Willey"). R.C. Willey, through its seven retail  
locations, is the dominant retailer of home furnishings in Utah.  
Operating profits of $41.0 million were $12.9 million (45.9%) greater in  
1996 than in the prior year. R.C. Willey's inclusion in this segment's  
results for a full year in 1996 versus six months in 1995 accounts for  
about two-thirds of the comparative increase. The remainder of the  
increase arose primarily from improved margins at Nebraska Furniture  
Mart. 
 
     Newspaper
 
     Operating profits during 1996 of $49.8 million increased $3.5  
million (7.6%) over the comparable 1995 amount. These results were  
obtained in spite of total revenues being slightly lower. In 1995, the  
cost of newsprint increased dramatically and negatively impacted results.  
While newsprint costs continued to rise early in 1996, during the second  
half of 1996 this trend reversed sharply and there were significant price  
reductions. As a result, 1996's full year newsprint costs were slightly  
less than comparable 1995 costs. Also favorably impacting the improved  
comparative results was that during 1995 special one-time charges were  
recorded to accrue the costs of buying out the contracts of a number of  
composing room employees, and adjustments were recorded reflecting  
changes in the periods over which certain data handling and electronic  
equipment were being depreciated. Excluding 1995's special charges,  
operating profits were relatively unchanged in 1996 as compared to 1995. 
 
     Shoes 
 
     Revenues for this segment were down slightly in 1996 as compared  
to 1995. Operating profits of $52.7 million increased $3.2 million  
(6.5%). This segment includes H. H. Brown Shoe Company, Inc., Lowell  
Shoe, Inc. and Dexter Shoe Companies. These businesses, acquired by  
Berkshire between 1991 and 1993, manufacture and distribute work, dress,  
casual and athletic footwear. In addition, over 90 retail shoe stores are  
included in this segment. Management was successful during 1996 in  
capitalizing on opportunities to more successfully market and distribute  
the functional footwear products manufactured and distributed by these  
businesses. Additionally, measures were undertaken that resulted in  
lowering production and administrative costs. Accordingly, management  
anticipates further operating profit increases during 1997. 
 
  1995 compared to 1994
 
     Revenues from the non-insurance business segments increased  
$154.4 million (9.5%) in 1995 as compared to 1994. The most significant  
revenue increase arose in the "home furnishings" segment where revenues  
increased $182.7 million (74.4%) over the comparable prior year figures.  
The acquisition of R.C. Willey in mid-1995 accounts for a substantial  
portion of the comparative revenue increase for this segment. Offsetting  
this increase were declines in the "encyclopedia, other reference  
materials" segment and the "shoes" segment. The decline in the  
"encyclopedias, other reference material" segment was a result of the  
continuation of a reduction in printed encyclopedia sales. The  
unfavorable results of the "shoe" segment was consistent with results  
reported for the entire footwear industry (except for athletic footwear).  
Operating profits of $233.2 million during 1995 declined $28.7 million  
(10.9%) from the comparable 1994 amount. Declines from the "encyclopedia,  
other reference material" and "shoes" segment more than account for the  
comparative decline. 
 
  Business Other Than Identified Segments 

                                       ____(dollars in millions)___             
                                         1996       1995      1994
                                       --------   --------   ------
Revenues. . . . . . . . . . . . . . .  $1,195.6   $1,021.7   $758.5
                                       ========   ========   ======
Operating profits . . . . . . . . . .    $108.5     $ 93.8   $ 72.7
  Income taxes. . . . . . . . . . . .      43.2       39.5     28.0  
  Minority interest . . . . . . . . .       2.0        2.3      1.9
                                         ------     ------   ------
Contribution to net earnings. . . . .    $ 63.3     $ 52.0   $ 42.8
                                         ======     ======   ======
 
     The above represent aggregate data for businesses that numbered  
26 in 1996. Revenues from businesses not identified with specific  
business segments increased by $173.9 million (17.0%) in 1996 as compared  
to the prior year. Operating profits from this group of businesses  
increased by $14.7 million (15.7%) in 1996 versus the prior year. The  
increase in revenues was due primarily to the inclusion of Helzberg's  
Diamond Shops for a full year in 1996 versus eight months in 1995. Also,  
several of Scott Fetzer's diversified manufacturing businesses (including  
Campbell Hausfeld products and Wayne pumps) had significant comparative  
revenue increases. 
 
  Interest Expense and Other
 
     As previously discussed, effective January 2, 1996, the results  
of GEICO are included in Berkshire's consolidated results. Berkshire's  
investment in GEICO for years prior to 1996 has been accounted for under  
the equity method. After-tax interest expense for 1996 includes about  
$18.5 million of interest costs related to GEICO borrowings that were  
outstanding at the time of the GEICO merger. Excluding costs related to  
these borrowings, interest costs were relatively unchanged between years. 
 
     Other earnings consist primarily of investment income of  
Berkshire and its non-insurance subsidiaries offset by Berkshire's  
corporate costs (including charges related to Berkshire's shareholder  
designated contribution program). The increase in 1996 as compared to  
1995 primarily relates to an increase in interest income earned by  
Berkshire. 
 
  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. 
 
     The Consolidated Statement of Earnings for 1996 reflects a pre-tax  
realized investment gain of $2.5 billion ($1.6 billion after tax). Most  
of this gain resulted from The Walt Disney Company's ("Disney")  
acquisition of Capital Cities/ABC, Inc. ("Capital Cities"). Prior to the  
acquisition, subsidiaries of Berkshire owned common stock of Capital  
Cities that had been acquired in 1986 for an aggregate cost of $345.0  
million. In exchange for the Capital Cities common stock, Berkshire  
subsidiaries received cash and Disney common stock having an aggregate  
value of $2.5 billion. 
 
     While the effect of this transaction is material to the Consolidated  
Statement of Earnings, the completion of the acquisition had a minimal  
impact on Berkshire's shareholders' equity. This is due to the fact that  
Berkshire's investment in Capital Cities had been carried in the prior  
periods' consolidated financial statements at market value with  
unrealized gains, net of tax, reported as a separate component of  
shareholders' equity. As of December 31, 1995, the pre-tax unrealized  
gain related to Berkshire's investment in Capital Cities was  
approximately $2.1 billion. 
 
Liquidity and Capital Resources 
 
     Berkshire's Consolidated Balance Sheet as of December 31, 1996,  
reflects continuing capital strength. In the past three years, Berkshire  
shareholders' equity has increased from approximately $10.1 billion at  
December 31, 1993, to approximately $23.4 billion at December 31, 1996.  
In that three-year period, realized and unrealized securities gains  
increased equity capital by approximately $9.6 billion, and reinvested  
earnings, other than realized securities gains, were about $2.0 billion. 

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