Berkshire Hathaway

Although the Omaha-based investment holding company Berkshire Hathaway’s insurance and reinsurance operations delivered an underwriting profit for the sixth consecutive year last year (despite an increased level of catastrophe losses), 2008 was a tough year for the group with overall net profits slumping from $13.2bn in 2007 to $4.99bn. Consolidated revenue also fell by $10.5bn to $107.8bn. Losses of around $900mn from hurricanes Gustav and Ike resulted in a reduced underwriting profit of $2.8bn in 2008 for the company’s (re)insurance operations, Berkshire’s core business. This figure was $582mn, or 17%, down on the previous year’s surplus.

The impact on Berkshire’s earnings of these catastrophe events was, however, largely offset by unrealised foreign currency transaction gains on certain reinsurance liabilities during the second half of the year due to a significant strengthening of the US dollar. At the same time, “float” – Berkshire’s estimate of the amount of funds ultimately payable to policyholders that is available for investment – fell by $210mn to $58.5bn at the end of 2008.