Berkshire Hathaway 2015 Annual Report Download - page 84

Management’s Discussion and Analysis (Continued)
Insurance—Investment Income (Continued)
Interest earned in 2015 declined $121 million (12%) from 2014, which declined $684 million (40%) from 2013. The
reductions reflected the maturities and dispositions of fixed maturity securities with higher interest rates, including $4.4 billion
par amount of Wrigley 11.45% subordinated notes as a result of the repurchase of those notes by the issuer in 2013. We also
continue to hold significant cash and cash equivalent balances earning very low yields. We believe that maintaining ample
liquidity is paramount and we insist on safety over yield with respect to such balances.
Dividend income in 2015 increased $314 million (9%) versus 2014, while dividend income in 2014 exceeded 2013 by
$328 million (11%). The increases reflected higher dividend rates for certain of our equity holdings and increased investment
levels. Beginning in 2015, dividend income included income from our investment in Restaurant Brands International, Inc. 9%
Preferred Stock ($3 billion stated value), which was acquired in December 2014.
Invested assets of our insurance businesses derive from shareholder capital, including reinvested earnings, and from net
liabilities under insurance contracts or “float.” The major components of float are unpaid losses, life, annuity and health benefit
liabilities, unearned premiums and other liabilities to policyholders less premium and reinsurance receivables, deferred charges
assumed under retroactive reinsurance contracts and deferred policy acquisition costs. Float approximated $88 billion at
December 31, 2015, $84 billion at December 31, 2014 and $77 billion at December 31, 2013. The cost of float was negative
over the last three years as our insurance business generated pre-tax underwriting gains in each year.
A summary of cash and investments held in our insurance businesses as of December 31, 2015 and 2014 follows. Other
investments include investments in The Dow Chemical Company, Bank of America Corporation and Restaurant Brands
International, Inc. See Note 5 to the accompanying Consolidated Financial Statements. Amounts are in millions.
December 31,
2015 2014
Cash and cash equivalents ............................................................... $ 43,762 $ 42,760
Equity securities ...................................................................... 109,607 114,876
Fixed maturity securities ................................................................ 23,621 26,010
Other investments ..................................................................... 15,998 16,346
$192,988 $199,992
Fixed maturity investments as of December 31, 2015 were as follows. Amounts are in millions.
Amortized
cost
Unrealized
gains/losses
Carrying
value
U.S. Treasury, U.S. government corporations and agencies ............................ $ 3,370 $ 1 $ 3,371
States, municipalities and political subdivisions ..................................... 1,578 69 1,647
Foreign governments .......................................................... 9,536 141 9,677
Corporate bonds, investment grade ............................................... 5,484 381 5,865
Corporate bonds, non-investment grade ........................................... 1,540 233 1,773
Mortgage-backed securities ..................................................... 1,129 159 1,288
$22,637 $984 $23,621
U.S. government obligations are rated AA+ or Aaa by the major rating agencies and approximately 87% of all state,
municipal and political subdivisions, foreign government obligations and mortgage-backed securities were rated AA or higher.
Non-investment grade securities represent securities that are rated below BBB- or Baa3. Foreign government securities include
obligations issued or unconditionally guaranteed by national or provincial government entities.
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