Berkshire Hathaway 2010 Annual Report Download - page 70

Management’s Discussion (Continued)
derivatives markets) and stimulate economic activity. In the United States, regulatory reform legislation known as the Dodd-
Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. The ultimate impact that these
governmental actions will have on us is not entirely certain at this time. Our operating companies have taken and will continue
to take actions as necessary to manage through the current economic situation and to improve our operations for the long-term.
We continue to believe that the economic franchises of our operating businesses remain intact. We anticipate that general
economic conditions will continue to gradually improve, albeit unevenly, over time.
Insurance—Underwriting
We engage in both primary insurance and reinsurance of property and casualty risks. In primary insurance activities, we
assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance
activities, we assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to
in their own insuring activities. Our insurance and reinsurance businesses are: (1) GEICO, (2) General Re, (3) Berkshire
Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway Primary Group. Through General Re and BHRG, we also
reinsure life and health risks.
We view insurance businesses as possessing two distinct operations – underwriting and investing. Underwriting decisions
are the responsibility of the unit managers; investing, with limited exceptions, is the responsibility of Berkshire’s Chairman and
CEO, Warren E. Buffett. Accordingly, we evaluate performance of underwriting operations without any allocation of
investment income.
Our periodic underwriting results can be affected significantly by changes in estimates for unpaid losses and loss
adjustment expenses, including amounts established for occurrences in prior years. In addition, the timing and amount of
catastrophe losses can produce significant volatility in our periodic underwriting results. Our underwriting results also
include significant unrealized foreign currency transaction gains and losses arising from the periodic revaluation of certain
non-U.S. Dollar denominated reinsurance liabilities into U.S. Dollars as a result of foreign currency exchange rate
fluctuations.
A key marketing strategy followed by all of our insurance businesses is the maintenance of extraordinary capital strength.
Statutory surplus of our insurance businesses was approximately $94 billion at December 31, 2010. This superior capital
strength creates opportunities, especially with respect to reinsurance activities, to negotiate and enter into insurance and
reinsurance contracts specially designed to meet the unique needs of insurance and reinsurance buyers.
Underwriting results from our insurance businesses are summarized below. Amounts are in millions.
2010 2009 2008
Underwriting gain attributable to:
GEICO ...................................................................... $1,117 $ 649 $ 916
General Re ................................................................... 452 477 342
Berkshire Hathaway Reinsurance Group ............................................ 176 250 1,222
Berkshire Hathaway Primary Group ............................................... 268 84 210
Pre-tax underwriting gain ............................................................ 2,013 1,460 2,690
Income taxes and noncontrolling interests ............................................... 712 511 951
Net underwriting gain ....................................................... $1,301 $ 949 $1,739
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