Berkshire Hathaway 2000 Annual Report Download - page 49

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Management's Discussion (Continued)
Insurance — Underwriting (Continued)
General Re
General Re was acquired by Berkshire effective December 21, 1998. General Re’s results of operations
are included in Berkshire’s consolidated results beginning as of that date. The historical results for all of 1998 are
presented for comparative purposes, although the full-year results are not included in Berkshire’s 1998
consolidated results.
General Re and its affiliates conduct a global reinsurance business, which provides reinsurance coverage
in the United States and 129 other countries around the world. General Re’s principal reinsurance operations are:
(1) North American property/casualty, (2) International property/casualty, and (3) Global life/health. The
International property/casualty operations are conducted primarily through Germany-based Cologne Re and its
subsidiaries. At December 31, 2000, General Re had an 88% economic ownership interest in Cologne Re.
General Re’s consolid ated underwriting results for the past three years are summarized below. Dollar
amounts are in millions.
2000
(1)
1999 1998
Amount Amount Amount
Premiums earned .......................................................................... $ 8,696 $ 6,905 $ 6,095
Underwriting loss — pre-tax......................................................... $(1,224)$(1,184) $ (370)
(1) During the fourth quarter of 2000, the International property/casualty and Global life/health operations discontinued
reporting their results on a one-quarter lag. Consequently, General Re’s 2000 results include one additional quarter for
these businesses. See Note 1(a) to the accompanying Consolidated Financial Statements for additional information.
Generally, underwriting conditions within the reinsurance industry during 2000 remained difficult.
General Re’s overall underwriting results during 2000 and 1999 were unsatisfactory in both the property/casualty
and life/health reinsurance businesses. General Re management continues to take underwriting actions to address
these matters with the objective of returning underwriting results to acceptable levels. Although the underwriting
losses for 2000 were considerable, $239 million of the loss was attributed to a single large aggregate excess
contract written in 2000. Additional information regarding this arrangement is provided in the North American
property/casualty discussion.
Otherwise, General Re’s results for 2000 were improved over 1999. The improvement is believed to be a
result of the actions already taken both in the North American and international businesses, as well as signs of
improvement in certain segments of the reinsurance market. However, the impact of underwriting initiatives on
international business may take longer to become effective than on U.S. business. Absent large
property/catastrophe losses or adverse development with respect to existing loss reserves, Berkshire expects that
General Re’s underwriting results will continue to improve in 2001. Additional information and analysis with
respect to each of General Re’s underwriting units is presented below. In the tables that follow, dollar amounts are
in millions.
General Re’s North American property/casualty underwriting results for the years ending December 31,
2000, 1999 and 1998 are summarized below.
2000 1999 1998
Amount %Amount %Amount %
Premiums written............................................... $3,517 $2,801 $2,707
Premiums earned ............................................... $3,389 100.0 $2,837 100.0 $2,708 100.0
Losses and loss expenses.................................... 3,161 93.3 2,547 89.8 1,830 67.6
Underwriting expenses....................................... 854 25.2 874 30.8 857 31.6
Total losses and expenses................................... 4,015 118.5 3,421 120.6 2,687 99.2
Underwriting gain (loss) — pre-tax ................... $ (626)$ (584)$ 21