Net income for Berkshire-Hathaway soared nearly 41 percent to $6.4 billion in second-quarter 2014, with nearly $2.0 billion of investment gains lifting the total, while underwriting profits for Berkshire-Hathaway’s property/casualty operations dipped 1.6 percent (before taxes).
Pretax underwriting profits overall—for both life and P/C units together—dropped 22.9 percent to $637 million in the quarter, with the bulk of the decline attributable from Berkshire Hathaway Reinsurance Group.
Investment income, coming in at nearly $1.5 billion, brought operating income for insurance and reinsurance operations up to $2.1 billion for the quarter before taxes, or $1.5 billion, after taxes—roughly 7.9 percent lower than last year’s second-quarter.
Noting that investment decisions are the responsibility of Chairman and CEO Warren Buffett, while individual unit managers are responsible for underwriting decisions, Berkshire reports underwriting results by division but investment income overall, with no allocation to individual units.
Operating income for all of Berkshire-Hathaway, including earnings from noninsurance operations in retail, railroads and other businesses, rose 10.5 percent to $4.3 billion.
Breaking down the insurance underwriting results, Berkshire Hathaway Reinsurance Group posted the only underwriting loss of the Berkshire insurance and reinsurance units in the quarter—a $9 million loss in the quarter, consisting of a $99 million loss for life and annuity business and $90 million of profit for P/C business.
While the $90 million of profit for Berkshire Hathaway Reinsurance Group was lower than last year’s $315 million underwriting gain in the second-quarter, Berkshire’s other P/C reinsurance operation—General Re—saw underwriting profits climb in the quarter.
Gen Re also reported an 8.7 percent jump in earned premiums.
Eclipsing that, Berkshire’s GEICO reported double-digit jumps in earned premiums and underwriting profits for the quarter.
The other primary insurance units—making up Berkshire Hathaway Primary Group—reported a 2.7 percent drop in premiums to $1.5 billion.
Across all the P/C businesses—insurance and reinsurance—earned premiums reached $8.3 billion for the second-quarter, just 1.0 percent higher than last year’s second-quarter.
For the first half, P/C earned premiums rose 4.8 percent to $15.9 billion, while underwriting profits fell 17.1 percent.
For both the quarter and the six month periods, Berkshire’s 10-Q filing notes that large gains for Berkshire Hathaway Reinsurance Group in 2013, which weren’t repeated in 2014, explain overall declines in underwriting results for both periods.
Overall, the P/C combined ratio is still more than nine points better than breakeven, coming in at roughly 90.8 for the first six months of 2014.