A significant marketing strategy followed by all these businesses is the maintenance of extraordinary capital strength. Statutory surplus as regards policyholders of Berkshire's insurance businesses totaled approximately $27.2 billion at December 31, 2001. This superior capital strength creates opportunities, especially with respect to reinsurance activities, to negotiate and enter into contracts of insurance specially designed to meet unique needs of sophisticated insurance and reinsurance buyers. Additional information regarding Berkshire's insurance and reinsurance operations follows.
Since Berkshire's acquisition in 1998, General Re's overall underwriting results have been very poor. Over this period, increases in loss costs accelerated and outpaced pricing corrections. Losses from the September 11th terrorist attack severely impacted the results as General Re recorded aggregate net losses of approximately $1.9 billion related to the terrorist attack. During 2001, it was determined that reserve estimates established for claims arising in prior years with respect to the North American property/casualty business were insufficient. As a result, an $800 million underwriting loss was recorded.
General Re conducts reinsurance business in Argentina through a wholly-owned subsidiary. Currently, Argentina is in the midst of an economic and political crisis. Since the beginning of 2002, the Argentine government has significantly devalued the peso relative to the U.S. dollar. It is still uncertain what effect this and other actions that may be taken will have on the international property/casualty business.
A comparison of revenues and operating profits between 2001, 2000 and 1999 for the non-insurance businesses follows.
Operating income of the finance and financial products group in 2001 decreased $11 million (2.1%) as compared to 2000. Income of BH Finance in 2001 declined $39 million from 2000. In 2001, interest income, net of interest expense, of BH Finance increased significantly, but was more than offset by reduced realized investment gains. Realized gains in 2000 derived from the disposition of a large portfolio of fixed income securities. Under the current market conditions, BH Finance should continue to produce significant operating profits in 2002.
(n) Accounting pronouncements to be adopted subsequent to December 31, 2001 (Continued)
During 2001, Berkshire completed four significant business acquisitions. Information concerning these acquisitions follows.
Condensed consolidated balance sheets of MidAmerican as of December 31, 2001 and 2000 are as follows. Amounts are in millions.
Assets and liabilities of Berkshire's finance and financial products businesses as of December 31, 2001 and 2000 are summarized below (in millions).
GRS is engaged as a dealer in various types of derivative instruments, including interest rate, currency and equity swaps and options, as well as structured finance products. These instruments are carried at their current estimates of fair value, which is a function of underlying interest rates, currency rates, security values, volatilities and the creditworthiness of counterparties. Future changes in these factors or a combination thereof may affect the fair value of these instruments with any resulting adjustment to be included currently in the Consolidated Statements of Earnings. The net fair values of derivative contracts reflect the legal right to net transactions through qualifying master netting arrangements with various counterparties. The carrying values of trading account assets and trading account liabilities reflect a net decrease of $18,129 million at December 31, 2001 and $14,275 million at December 31, 2000 as a result of the netting arrangements.
During the second quarter of 2001, Berkshire filed a shelf registration to issue up to $700 million in new debt securities at a future date. The intended purpose of the future issuance of debt is to fund the repayment of borrowings of certain Berkshire subsidiaries. The timing and amount of the debt to be issued under the shelf registration has not yet been determined.
The estimated fair values of Berkshire's financial instruments as of December 31, 2001 and 2000, are as follows (in millions).