Berkshire Hathaway Inc. has decided upon a succession plan forits legendary chief executive, Warren E. Buffett, and said itsinsurance business posted a profit despite more than $3 billion inlosses from three major hurricanes.

On Saturday, Berkshire reported its financial results andreleased a letter to investors on the state of the company andplans for its future.

Mr. Buffett, the company president and chief executive officer,said in his investors' letter and annual report that the BerkshireHathaway board has decided on a successor to replace him if he diesor deteriorates intellectually, "particularly if this decay isaccompanied by my delusionally thinking that I am reaching newpeaks of managerial brilliance."

Berkshire has chosen one candidate from three managers withinthe company, but did not name the individuals involved. It will bethe responsibility of the board to inform Mr. Buffett if it feelshe can no longer perform his duties.

However, he added, "I feel terrific."

Berkshire's insurance operations, which include GEICO, GeneralRe and B-H Reinsurance, reported an underwriting profit of $53million in 2005, compared with $1.6 billion in 2004. General Rereported a loss for 2005 of $334 million, while B-H reported a lossof $1.1 billion. GEICO posted an underwriting profit of more than$1.2 billion.

The Omaha, Neb.-based company is a diversified holdingcorporation whose main interest is insurance but which also ownsinterests in consumer products, services and manufacturing.

As a result of Hurricanes Katrina, Rita and Wilma, and theevidence of increased storm activity, Berkshire will write"mega-cat policies only at prices far higher than prevailed lastyear--and then only with an aggregate exposure that would not causedistress if shifts in some important variable produce far morecostly storms in the near future," Mr. Buffet wrote.

Mr. Buffet continued, "To a lesser degree, we felt this wayafter 2004--and cut back our writings when prices didn't move. Nowour caution has intensified. If prices seem appropriate, however,we continue to have both the ability and the appetite to be thelargest writer of mega-cat coverage in the world."

Don Thorpe, senior director of insurance with Fitch Ratings inChicago, said that on the issue of succession, there was not muchnew except that the board had identified one person to succeed Mr.Buffet and it appears the succession will be from internalmanagement. It is also clear, he noted, that Mr. Buffet has nointentions of stepping down anytime soon.

Not naming the individual, said Mr. Thorpe, keeps the board frombecoming hamstrung with a single individual that the board couldfeel it would need to change in the future, depending upon Mr.Buffet's longevity. The announcement, he continued, was aimed atgiving comfort to the markets by letting them know there is a planin place.

On the insurance side, the company is doing the smart thing byincreasing rates for catastrophe risks, falling in line with whatothers are doing, he noted.

The company primarily writes in two niche areas, largecatastrophe and retrocession reinsurance, where there are fewplayers, said Mr. Thorpe. Some of the new capital flowing into theBermuda reinsurance market may help with capacity, he pointed out.But Berkshire's increase and the business troubles of PXRE (whichcompeted for the retrocession business) may point to sometightening, he said.