BRK-B · Forward model · McLane · Bear case

The basis quarter is a benign one and three disclosed items say so. There was NO significant catastrophe event — none over $150M — in the first six months of 2026, against $1.1 billion of Southern California wildfire losses in 1H 2025, and underwriting earnings still fell 13.1%. On top of that, $1.5 billion of favourable prior-accident-year development was taken in the half, $268M of it at GEICO and $609M at BH Reinsurance in the quarter alone — a release of reserves, not a rate. And PacifiCorp's 2020 Oregon and 2022 McKinney wildfire litigation is live and unresolved in Note 22. This case takes underwriting back below its through-cycle margin, marks Pilot down to roughly its 0.30% trailing-twelve-month margin, charges BHE and the industrials a point for a wildfire accrual and for the $2,084M of energy production tax credits a policy change could remove, and re-rates the operating businesses to a 10x exit at a 10.5% cost of equity. WHAT THIS CASE CANNOT DO, and it is the larger risk: netCash is fixed at a 30 June 2026 mark on a $323,779M equity book carrying $217,258M of unrealised gains, and the engine cannot move it per scenario. A 20% drawdown in that book is $64,756M gross; the deferred tax liability falls with it by $14,764M, so netCash falls $49,992M — $23.28 a share, 4.5% of fair value — with nothing in the DCF moving at all. Subtract that by hand from every case on this page. Result: $459.71 a share, -8.7%.