Berkshire Insurance Earnings Up 30 Percent For 2Q

Berkshire Hathaway reported a 33 percent jump in second-quarter net income with operating earnings for its insurance units growing nearly 30 percent.

On Friday, the Omaha, Neb.-based company said net income in the quarter was $3.12 billion, or $2,018 per share, 33 percent higher than the $2.35 billion total ($1,522 per share) reported during the same period last year.

Operating earnings overall–for insurance and non-insurance operations–were $2.51 billion, up 22 percent from $2.05 billion for the same period last year.

Operating earnings totaled $608 million during the quarter compared with $294 million in the second quarter of 2006.

Focusing on insurance operations, after-tax operating earnings were $1.45 billion in the quarter with $632 million coming from insurance underwriting and $862 million from investment income.

Underwriting profit was 70 percent higher than the comparable figure for second-quarter 2006 at $371 million.

Investment income from insurance operations rose 10 percent from $782 million in second-quarter 2006.

On a pre-tax basis, every insurance unit reported higher underwriting profits in 2007.

For reinsurance operations, second-quarter 2007 underwriting profit figures were more than double last year. These included:

o General Reinsurance's property-casualty was $182 million, up from $73 million in second-quarter 2006.

o Berkshire-Hathaway Reinsurance was $356 million, compared with $137 million in second-quarter 2006.

Business written by Berkshire-Hathaway Reinsurance Group includes: catastrophe excess-of-loss reinsurance and excess direct and facultative reinsurance for large or otherwise unusual discrete property risks; retroactive reinsurance policies that provide indemnification of losses with respect to past loss events; other multiline business including participation in Lloyd's syndicates as well as aviation and workers' compensation programs.

Berkshire's personal auto insurance unit, GEICO, reported $325 million of underwriting profit was 13 percent higher than last year's second quarter. This translates into a combined ratio under 90.

Although reinsurance operations reported the highest earnings growth rates, they had the weakest jumps in premium growth.

While GEICO's net earned premiums jumped 7 percent to $2.9 billion in the quarter, General Re's p-c operations reported a 4 percent drop in earned premiums to $871 million.

Berkshire-Hathaway's other primary insurance operations reported a 6 percent increase in net earned premiums to $495 million in second-quarter 2006, while Berkshire-Hathaway Reinsurance Group reported a 10 percent decline to just over $1 billion.

The decrease in reinsurance premiums “was principally attributable to increased industry capacity for catastrophe reinsurance which has produced increased price competition and consequently fewer opportunities to write business,” the company said in its Securities & Exchange Commission filing.

The level of catastrophe and individual risk business written in a given period will vary significantly based upon market conditions and management's assessment of the adequacy of premium rates, Berkshire-Hathaway said.

Overall, for all the insurance and reinsurance units combined, the company reported $5.95 billion of net earned premiums for the quarter, up only 2 percent from second-quarter 2006.

For the first half, premiums grew more than 70 percent to $19.5 billion, with more than $7.1 billion coming from a retroactive reinsurance agreement with Equitas, the Lloyd's runoff vehicle.

First-half net income for insurance and non-insurance operations was $5.7 billion, or $3,700 per share, up 23 percent from the same period last year.

Six-month insurance operating earnings contributed $2.8 billion to the first-half result, rising 30 percent above the $2.2 billion total reported for the first six months of 2006.