What was the primary driver for the significant increase in net earnings for the first nine months of 2002 compared to 2001?

The significant increase in net earnings was primarily driven by a substantial turnaround in the insurance underwriting results, which moved from a large net loss in the first nine months of 2001 to a much smaller net loss in 2002, aided by improved performance at GEICO and fewer large catastrophe losses. Additionally, the non-insurance businesses showed strong growth, and the adoption of SFAS No. 142 (eliminating goodwill amortization) also favorably impacted reported earnings.

How did General Re perform during this period, and what were the main challenges?

General Re's underwriting results showed improvement compared to the significant losses in 2001, which were heavily impacted by the September 11th terrorist attacks and prior-year reserve strengthening. While current underwriting year results improved due to better pricing and fewer property losses, the segment continued to face challenges from increases in prior-year loss reserves, particularly in North American casualty lines, leading to a pre-tax underwriting loss for the first nine months of 2002.

What is the company's financial condition like, in terms of liquidity and capital?

Berkshire Hathaway's financial condition remained very strong. Consolidated shareholders' equity grew to $62.6 billion. The company maintained significant liquidity with approximately $77.1 billion in cash and invested assets (excluding finance businesses). Borrowings were managed, with a decrease in borrowings for finance and financial products businesses, and the company continues to believe it has sufficient liquidity for its needs.

What impact did the adoption of SFAS No. 142 have on the financial statements?

Effective January 1, 2002, Berkshire adopted SFAS No. 142, which changed accounting for goodwill from amortization to an impairment-only model. This means Berkshire no longer records periodic goodwill amortization. For the first nine months of 2002, this resulted in $476 million less in after-tax goodwill amortization compared to the same period in 2001, positively impacting reported net earnings.

BRK-B/BRK-A 10-Q Quarterly Report Q3 FY2002

Summary

Berkshire Hathaway Inc. reported a strong third quarter and nine-month period ending September 30, 2002, demonstrating significant earnings growth compared to the same period in 2001. Net earnings for the nine months reached $3.102 billion, a substantial increase from $700 million in the prior year, driven by improved performance across its diverse business segments. The insurance operations showed a marked recovery, particularly in underwriting results, with GEICO showing robust premium growth and improved loss ratios. While General Re continued to face challenges related to prior-year reserve strengthening, overall underwriting results improved significantly, aided by the absence of major catastrophe losses. Non-insurance businesses also delivered solid revenue and earnings growth, with notable contributions from finance and financial products, Shaw Industries, and newly acquired entities like Fruit of the Loom.

Key Highlights

1Net earnings for the first nine months of 2002 increased to $3.102 billion, a significant improvement from $700 million in the same period of 2001.
2The insurance underwriting segment saw a substantial reduction in net losses, improving from $(1.969) billion in the first nine months of 2001 to $(64) million in 2002, largely due to improved GEICO performance and fewer large catastrophe losses.
3GEICO experienced strong premium growth (8.9% for the nine months) and a lower loss ratio (76.1% vs. 81.3%), indicating effective pricing and claims management.
4Non-insurance businesses reported a significant increase in net earnings to $1.576 billion for the first nine months of 2002, up from $895 million in 2001, driven by growth in finance, Shaw Industries, and new acquisitions.
5Invested assets within the insurance businesses grew to $75.5 billion, supporting investment income which increased to $1.514 billion (pre-tax) for the nine months.
6Berkshire adopted SFAS No. 142, ceasing goodwill amortization, which positively impacted reported earnings by removing a $476 million after-tax charge from the prior year's nine-month results.
7Consolidated shareholders' equity increased to $62.6 billion as of September 30, 2002, reflecting retained earnings growth and overall financial strength.

BERKSHIRE HATHAWAY INC Quarterly Report for Q3 Ended Sep 30, 2002

Summary

Key Highlights

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