Combined
Ratios
Insurance units'
2nd-quarter results.
Companies
2004 2003
Geico 89.5 96.5
General Re
98.1 97.3
Aggregate
88.1 92.8
Source: Morgan Stanley
Berkshire Hathaway
Inc.'s secondquarter
profit fell 42%, as
investment
losses outpaced gains
in the group's
insurance underwriting
results.
Second-quarter net
income for
Berkshire Hathaway (NYSE:BRKa) fell
to $1.28 billion, or
$834 a share, from
$2.23 billion, or
$1,452 a share, a year
earlier.The group had investment losses
of $172 million,
compared with
gains of $905 million
for the second
quarter last year.
Net income from
insurance underwriting
rose to $422 million
from $263
million, and net
income from noninsurance
business rose to $579
million from
$512 million.
Investment income for the
insurance operations
fell to $479 million
from $571 million.
Emphasizing m
view that the group's
investment
results are best
judged over the long
term, Berkshire
Hathaway noted that
investment gains or
losses in any one
period are
"meaningless" for
purposes.
"Shareholders and others
should focus their
attention on net earnings
excluding investment
gains/losses,"
the group said in a
statement.
"
are performing very
well," the
group said.
"However, there were no
major catastrophes
during the first
half of either 2004 or
2003 and
underwriting results
benefited
from this
environment."
Morgan Stanley equity
Saqi said in a research note
that Berkshire
Hathaway's business
growth was
generally in line with
predictions but
that several pressure
points could
impact future
insurance earnings.
Excluding auto insurer
Geico Corp. and
a large retroactive
reinsurance policy,
the second quarter,
the largest drop
among
property/casualty companies
covered by Morgan
Stanley, Saqi wrote.
"M
the reinsurance market
was becoming
'increasingly
price-competitive' along
with its move to
reduce its future participation
as a reinsurer of Lloyd's,
should be a pretty
clear sign of what
Berkshire sees in the
insurance market,"
Saqi wrote.
Saqi also noted that
inflationary
trends could trim
future earnings in
noninsurance businesses, and
investment earnings
are uncertain, given
trends in interest
rates and credit
spreads.
loss of $445 million
on its foreign currency
contracts, and
"it appears the company
still maintains a
sizeable foreign currency
position," with a
notional value of
$12 billion as of
year-end 2003,Saqi said.
-David Pilla