The business segment data (Note 16 to Consolidated Financial Statements) should be read in conjunction with this discussion.
Underwriting results for General Re's International property/casualty segment for 2000 remained very bad. Loss and loss expense ratios for the twelve months of 2000 were 84.4% as compared to 87.1% for 1999 and 72.3% for 1998. The decrease in the loss ratio from 1999 was primarily due to lower levels of catastrophe and other large losses in 2000. The effect of catastrophes and other large property losses represented 5.9 points of the loss and loss expense ratio for 2000, compared to 5.4 points for 1999. The loss and loss expense ratio for 1999 also included approximately 4.0 points related to coverages for the motion picture business, which has since been discontinued. In 1998, catastrophe losses represented 1.3 points. Due to the large amount of property business written in the International property/casualty operations, periodic underwriting results can be volatile.
General Re's Global life/health affiliates reinsure such risks worldwide. Global life/health operations previously reported their results on a one-quarter lag. As previously noted, the Global life/health operations discontinued reporting results on a one-quarter lag during the fourth quarter of 2000. Reported results for 2000 contain fifteen months. The table above shows underwriting results for both the twelve month and fifteen month periods. The analysis that follows excludes this additional quarter, with results for that period discussed separately afterward.
Net underwriting losses from the non-catastrophe reinsurance business were $167 million in 2000, $355 million in 1999 and $86 million in 1998. BHRG incurred a net loss of approximately $186 million from a single aggregate excess contract during the fourth quarter of 2000. In 1999, BHRG had net underwriting losses of $220 million from a similar single excess contract. As with retroactive reinsurance contracts, the premiums established for non-catastrophe reinsurance contracts are based on time-value-of-money concepts because loss payments are expected to occur over lengthy time periods. Loss reserves for this business are established without such time discounting but, unlike retroactive reinsurance contracts, no deferred charges are established. Consequently, significant underwriting losses can result. This business is accepted because of the large amounts of float that is produced. It is anticipated that Berkshire will derive significant economic benefits over the lengthy period of time that the float is available for investment.
This segment includes FlightSafety and Executive Jet. FlightSafety provides high technology training to operators of aircraft and ships. FlightSafety's worldwide clients include corporations, the military and government agencies. Executive Jet is the world's leading provider of fractional ownership programs for general aviation aircraft. Revenues from flight services in 2000 increased $423 million (22.8%) over 1999. Most of the increase in revenues was attributed to Executive Jet, which produced significant increases in revenues from both flight operations and aircraft sales. Revenues from FlightSafety also increased approximately 10% in 2000 as compared to 1999, reflecting both increased training revenues and product sales. Operating profits in 2000 decreased $12 million (5.3%) as compared to 1999. Increased operating profits at FlightSafety were more than offset by reduced operating profits at Executive Jet. Executive Jet's results in 2000 and 1999 reflect operating losses related to expansion into Europe as well as significantly higher operating costs incurred to generate future domestic growth.
The carrying values of investments subject to equity price risks are based on quoted market prices or management's estimates of fair value as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.
Goodwill of acquired businesses represents the difference between purchase cost and the fair value of the net assets of acquired businesses and is being amortized on a straight line basis generally over 40 years. The Company periodically reviews the recoverability of the carrying value of goodwill of acquired businesses to ensure it is appropriately valued. In the event that a condition is identified which may indicate an impairment issue exists, an assessment is performed using a variety of methodologies.
Insurance premiums for prospective property/casualty insurance and reinsurance and health reinsurance policies are earned in proportion to the level of insurance protection provided. In most cases, premiums are recognized as revenues ratably over their terms with unearned premiums computed on a monthly or daily pro rata basis. Premium adjustments on contracts and audit premiums are based on estimates over the contract period. Consideration received for retroactive reinsurance policies, including structured settlements, is recognized as premiums earned at the inception of the contracts. Premiums for life contracts are earned when due. Premiums earned are stated net of amounts ceded to reinsurers.
The accounts of several foreign-based subsidiaries are measured using the local currency as the functional currency. Revenues and expenses of these businesses are translated into U.S. dollars at the average exchange rate for the period. Assets and liabilities are translated at the exchange rate as of the end of the reporting period. Gains or losses from translating the financial statements of foreign-based operations are included in shareholders' equity as a component of other comprehensive income. Gains and losses arising from other transactions denominated in a foreign currency are included in the Consolidated Statements of Earnings.
Effective December 21, 1998, Berkshire acquired all of the outstanding common stock of General Re Corporation ("General Re"). Through its subsidiaries, General Re conducts global reinsurance and related risk management operations. General Re's principal U.S. subsidiary, General Reinsurance Corporation, which together with its affiliates, comprise the largest professional property and casualty reinsurance group domiciled in the United States. General Re also owns a controlling interest in Kolnische Ruckversicherungs-Gesellschaft AG ("Cologne Re"), a major international reinsurer. General Re operates in 28 countries and provides reinsurance coverage in 130 countries around the world.
Assets and liabilities of Berkshire's finance and financial products businesses are summarized below (in millions).