Berkshire Hathaway Re was the third-largest global reinsurer based on net reinsurance premiums in 2004, according to Standard & Poor's. (See chart, page 13.)

General Re's North American property-casualty operations underwrite predominantly excess reinsurance across all lines of the property-casualty business.

Internationally, property-casualty reinsurance on a direct basis is underwritten through 91 percent-owned Cologne Re, based in Germany.

The Berkshire Hathaway Reinsurance Group underwrites excess-of- loss reinsurance and quota share coverages for insurers and reinsurers around the world.

Cathy Seifert, analyst for Standard & Poor's Equity Research, put a sell order on the stock earlier this month, concerned with reinsurance premiums that fell 20 percent in the second quarter as well as second-quarter underwriting profits that dipped more than twice that amount.

"You have a company here where there are some issues," she said. "I am concerned that the investigations currently underway relating to finite reinsurance are not over, and there may be other shoes to drop," she said.

That so-called "headline risk," along with declining profitability is only exacerbated by Berkshire Hathaway's traditional reluctance "to give investors color as to what is going on," Ms. Seifert said.

In its second-quarter report, Berkshire Hathaway said various state and federal investigations into accounting abuses stemming from the use of finite reinsurance, particularly involving American International Group, are expanding. Two former Gen Re executives have already pled guilty in connection with the investigations.

The executives, John Houldsworth, who worked at Cologne Reinsurance Company (Dublin) Limited, and Richard Napier, formerly a senior vice president with Gen Re, were each terminated after pleading guilty to a federal criminal charge of conspiring with others to misstate AIG's financial statements in June. In May, Berkshire also terminated the consulting services of its former CEO, Ronald Ferguson, after Mr. Ferguson invoked the Fifth Amendment in response to questions from the SEC and Department of Justice.

The investigations could be seen to be taking their toll as the company stated in its 10-Q that the decline in premiums was for the most part caused by a net reduction of business rather than price changes. But the company attributed the decline in business written to maintaining underwriting discipline "as price competition is increasing in most property-casualty markets."

General Re also faces regulators' questions regarding the 2002 collapse of Reciprocal of America that left thousands of doctors and lawyers scrambling to find coverage. Virginia and Tennessee regulators have accused ROA and General Re of hiding the failed insurers deteriorating finances through fraudulent financial transactions.

In a Credit Suisse First Boston research report issued early last month, author Charles Gates expressed concerns about the age of the company principals, Mr. Buffettt, 75, and Charles Munger, who will be 82 on New Year's Day. The lack of a clear management succession plan along with issues of possible overpayment for certain businesses were included with the headline risk of late.

The report noted that the second-quarter decline in earnings of General Re was not an aberration, and problems exist outside the regulatory realm.

"Earned premiums in this unit have fallen in 12 of the last 16 quarters," the report said, attributing the poor numbers to a "significant pruning of the business and continued consideration of the recent past."

"Results have been very difficult at General Re since its December 1998 acquisition, with pre-tax underwriting losses aggregating $7.5 billion in the 1999-2002 period, of which a large portion was attributable to additions to reserves for earlier losses," the report said.

While Berkshire may still not win any transparency awards, Credit Suisse analysts noted that for the first time in 2004, the annual report provided the data to isolate the net equity of the insurance operations. Thus, it could be determined insurance's return-on-equity in 2004 was 8.1 percent, while statutory surplus rose in that year to $48 billion from $41 billion in 2003.

With Buffett Mug:

Warren Buffett's luster as the "sage of Omaha" may have dimmed with probes of the reinsurance units of his Berkshire Hathaway making headlines this year.