"So far, it's been a banner year for Berkshire, but there are still two more quarters to go," Fred Loeloff, director of Standard & Poor's in New York, told National Underwriter. "Still, what you have here is a significant improvement in both rates, terms and condition coming together. This is what should happen when all cylinders are clicking because you have no prior-year issues or large loss event preventing the flow of earnings to the bottom line."

Profit results, including realized investment gains, may not fully reflect the ongoing health of business subsidiaries, as Berkshire itself pointed out.

"The amount of realized investment gains in any period is meaningless for analytical purposes. Shareholders and others should focus their attention on earnings before realized investment gains," the company said in its earnings announcement.

But even without realized investment gains, Berkshire put in strong results for its second quarter. The company's underwriting earnings were $260 million for the quarter, in contrast to a year-earlier net loss of $12 million.

Underwriting results improved this quarter, reflecting increasing rates and lower claims. The company also didn't face any adverse prior-year reserve issues, in contrast to last year when General Re had a reserve boost for prior-year claims which hurt the bottom line of the insurance unit.

Berkshire also stated in its announcement that "all of our insurance operations are performing very well." The company observed there were no major insured catastrophes during the first half of 2003 and that Berkshire's underwriting results benefited from this "benign environment."

For instance, at GEICO, Berkshire's auto insurance unit, premium volume jumped by more than 16 percent in the past quarter, and the company said this favorable trend would continue in the current quarter.

Berkshire's non-insurance subsidiaries, which include businesses as diverse as Dairy Queen and Fruit of the Loom, posted $515 million in net profit, further bolstering Bershire's bottom line. Overall, the second-quarter profit excluding investment gains was $1.32 billion, a 32 percent jump from $1 billion one year ago.