Berkshire Hathaway 2002 Annual Report Download - page 53

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52
BERKSHIRE HATHAWAY INC.
and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net earnings for each of the past three years are disaggregated in the table that follows. Amounts are after
deducting income taxes and minority interest.
— (dollars in millions) —
2002 2001 2000
Insurance – underwriting ................................................................................. $ (292) $(2,662) $(1,041)
Insurance – investment income........................................................................ 2,096 1,968 1,946
Non-insurance businesses ................................................................................ 2,218 1,305 891
Interest expense................................................................................................ (55) (60) (61)
Purchase-accounting adjustments .................................................................... (65) (603) (818)
Other ................................................................................................................ 1 5 19
Earnings before realized investment gains ........................................... 3,903 (47) 936
Realized investment gains................................................................................ 383 842 2,392
Net earnings.......................................................................................... $ 4,286 $ 795 $ 3,328
The business segment data (Note 18 to Consolidated Financial Statements) should be read in conjunction
with this discussion.
Insurance — Underwriting
A summary follows of underwriting results from Berkshire’ s insurance businesses for the past three years.
— (dollars in millions) —
2002 2001 2000
Underwriting gain (loss) attributable to:
GEICO........................................................................................................ $ 416 $ 221 $ (224)
General Re.................................................................................................. (1,393) (3,671) (1,254)
Berkshire Hathaway Reinsurance Group ................................................... 534 (647) (162)
Berkshire Hathaway Primary Group .......................................................... 32 30 25
Underwriting loss — pre-tax............................................................................ (411) (4,067) (1,615)
Income taxes and minority interest ................................................................. (119) (1,405) (574)
Net underwriting loss............................................................................ $ (292) $(2,662) $(1,041)
Berkshire engages in both primary insurance and reinsurance of property and casualty risks. Through
General Re, Berkshire also reinsures life and health risks. In primary insurance activities, Berkshire subsidiaries
assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In
reinsurance activities, Berkshire subsidiaries assume defined portions of similar or dissimilar risks that other
insurers or reinsurers have subjected themselves to in their own insuring activities. Berkshire’ s principal insurance
businesses are: (1) GEICO, the sixth largest auto insurer in the U.S., (2) General Re, one of the four largest
reinsurers in the world, (3) Berkshire Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway
Primary Group. Berkshire’ s management views insurance businesses as possessing two distinctive operations –
underwriting and investment. Accordingly, Berkshire evaluates performance of underwriting operations without
any allocation of investment income.
A significant marketing strategy followed by all these businesses is the maintenance of extraordinary capital
strength. Statutory surplus of Berkshire’ s insurance businesses totaled approximately $28.4 billion at December 31,
2002. This superior capital strength creates opportunities, especially with respect to reinsurance activities, to
negotiate and enter into contracts of insurance and reinsurance specially designed to meet unique needs of
sophisticated insurance and reinsurance buyers. Additional information regarding Berkshire’ s insurance and
reinsurance operations follows.