Berkshire Hathaway 1998 Annual Report Download - page 36

35
(7) Unpaid losses and loss adjustment expenses (Continued)
reserves estimates related to these exposures may be considerably less reliable than for other lines of business (e.g.,
automobile). The effect of joint and several liability claims severity and a provision for inflation have been included in the
loss development estimate. The Company has also established a liability for litigation costs associated with coverage disputes
arising out of direct insurance policies.
The gross liabilities for environmental and latent injury claims and claim expenses and the related reinsurance
recoverable were $2,329 million and $416 million, respectively, at December 31, 1998. The liabilities recorded for
environmental and latent injury claims and claim expenses are management’s best estimate of future ultimate claim an d
claim expense payments and recoveries and are expected to develop over the next several decades.
Berkshire monitors evolving case law and its effect on environmental and latent injury claims. Changing government
regulations, newly identified toxins, newly reported claims, new theories of liability, new contract interpretations and other
factors could result in significant amounts of adverse development of the balance sheet liabilities. Such development could
be material to Berkshire’s results of operations. It is not possible to estimate reliably the amount of additional net loss, or the
range of net loss, that is reasonably possible.
(8) Income taxes
The liability for income taxes as reflected in the accompanying Consolidated Balance Sheets is as follows (in
millions):
Dec. 31, Dec. 31,
1998 1997
Payable currently ................................... $ 1,006 $ 139
Deferred ......................................... 10,756 10,400
$11,762 $10,539
The Consolidated Statements of Earnings reflect charges for income taxes as shown below (in millions):
1998 1997 1996
Federal ......................................................... $1,421 $865 $1,170
State ........................................................... 31 32 26
Foreign ......................................................... 5 1 1
$1,457 $898 $1,197
Current ......................................................... $1,643 $692 $ 819
Deferred ........................................................ (186) 206 378
$1,457 $898 $1,197
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax
liabilities at December 31, 1998 and 1997, are shown below (in millions): 1998 1997
Deferred tax liabilities:
Relating to unrealized appreciation of investments ......... $10,149 $ 9,940
Other ............................................ 1,615 1,168
11,764 11,108
Deferred tax assets ................................... (1,008) (708)
Net deferred tax liability .............................. $10,756 $10,400