Berkshire Hathaway 1999 Annual Report Download - page 44

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43
BERKSHIRE HATHAWAY INC.
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 minority interests and taxes.
— (dollars in millions) —
1999 1998 1997
Insurance segments - underwriting ............................... $ (897) $ 171 $ 298
Insurance segments - investment income ........................... 1,764 731 704
Non-Insurance business segments ................................ 427 389 311
Interest expense .............................................. (70) (63) (67)
Goodwill amortization and other purchase-accounting-adjustments ....... (648) (118) (94)
Other ...................................................... 95 167 45
Earnings before realized investment gain .................... 671 1,277 1,197
Realized investment gain ....................................... 886 1,553 704
Net earnings ......................................... $1,557 $2,830 $1,901
The business segment data (Note 16 to Consolidated Financial Statements) should be read in conjunction with
this discussion.
Insurance Segments — Underwriting
A summary follows of underwriting results from Berkshire’s insurance segments for the past three years.
— (dollars in millions) —
1999 1998 1997
Underwriting gain (loss) attributable to:
GEICO .................................................. $ 24 $ 269 $ 281
General Re ............................................... (1,184) — —
Berkshire Hathaway Reinsurance Group ......................... (256) (21) 128
Berkshire Hathaway Direct Insurance Group ..................... 22 17 52
Underwriting gain (loss) — pre-tax ............................... (1,394) 265 461
Income taxes and minority interest ............................... (497) 94 163
Net underwriting gain (loss) ............................. $ (897)$ 171 $ 298
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 United States, (2) General Re, one of the four largest reinsurers
in the world, (3) Berkshire Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway Direct Insurance
Group. See Note 2 to the Consolidated Financial Statements for information regarding the General Re acquisition.
A significant marketing strategy followed by all these businesses is the maintenance of extraordinary capital
strength. Statutory surplus as regards policyholders of Berkshire’s insurance businesses increased to approximately
$45 billion at December 31, 1999. This superior capital strength creates opportunities, especially with respect to
reinsurance activities, to negotiate and enter into contracts of insurance specially designed to meet unique needs of
sophisticated insurance and reinsurance buyers. Additional information regarding Berkshire’s insurance an d
reinsurance operations is presented on the following pages.