Warren Buffett back in profit

Berkshire Hathaway announced a return to profit due to better investment performance.

Q3 premiums earned (2008 in brackets)

• GEICO $3,448m ($3,150m)
• General Re $1,476m ($1,458m)
• Berkshire Hathaway Reinsurance Group $1,229m ($1,383m)
• Berkshire Hathaway Primary Group $442m ($474m)
• Investment income $1,362m ($1,080m)
• Total insurance group $7,957 ($7,545m)

Underwriting gain/loss

GEICO $200 ($246m)

• General Re $186m ($54)
• Berkshire Hathaway Reinsurance Group $167m (-$166m)
• Berkshire Hathaway Primary Group $7m (-$8m)
• Pre-tax underwriting gain $560m ($126m)
• Net underwriting gain $363m ($81m)

General Re

Property/casualty premiums earned in the third quarter of 2009 were relatively flat when compared to the third quarter of 2008.

Premiums earned in the first nine of months of 2009 declined $281m (10.5%), versus the corresponding 2008 period.

The property results in 2009 were net of $80m of losses from catastrophes, primarily from winter storm Klaus in Europe, the Victoria bushfires in Australia and an earthquake in Italy.

Berkshire Hathway Re

Premiums earned in the first nine months of 2009 from catastrophe and individual risk contracts declined $39m

(5%) versus the first nine months of 2008. The level of business written in a given period will vary significantly due to changes in market conditions and management’s assessment of the adequacy of premium rates.

In early 2009, management constrained the volume of business written in response to the decline in Berkshire’s net worth that occurred in the first quarter of 2009.

Though net worth has recovered significantly since then, management will continue to constrain the volume of business written in light of the pending BNSF acquisition

Unattractive premiums

Also, premium rates have not been attractive enough to actually warrant increasing volume thus far in 2009.

Underwriting results reflect reductions of loss reserves primarily due to lower estimated ultimate losses from hurricanes in 2004 and 2005.

Premiums earned in the first nine months of 2009 from retroactive reinsurance included CHF2bn ($1.7bn) from an adverse loss development contract with Swiss Re and its affiliates covering substantially all of Swiss Re’s non-life insurance losses and allocated loss adjustment expenses for loss events occurring prior to January 1, 2009.

The Swiss Re contract provides aggregate limits of indemnification of CHF5bn in excess of a retention of Swiss Re’s reported loss reserves at December 31, 2008 (CHF58.725bn) less CHF2bn.

The impact on underwriting results from this contract was negligible as the premiums earned were offset by a corresponding amount of losses incurred.