Insurance companies in the Berkshire Hathaway investment group saw a significant improvement in underwriting profit last year as they recovered from earthquake and weather losses in 2011.

“Our insurance operations shot the lights out last year,” Chairman Warren Buffett said in his annual letter to shareholders.

“While giving Berkshire $US73 billion ($71 billion) of free money to invest, they also delivered a $US1.6 billion ($1.57 billion) underwriting gain, the 10th consecutive year of profitable underwriting. This is truly having your cake and eating it too.”

Berkshire Hathaway Reinsurance reported an underwriting gain of $US304 million ($297.8 million), compared with a $US714 million ($699.5 million) loss in 2011.

General Re increased profit to $US355 million ($347.78 million) from $US144 million ($141 million), despite making a loss on its life and health operations.

US auto insurer Geico increased profit by 18% to $US680 million ($666.2 million) and Berkshire Hathaway Primary Group also reported an 18% increase, to $US286 million ($280.17 million), from its insurance companies.

The insurance division reported an after-tax underwriting profit of $US1.05 billion ($1.02 billion) – up from $US154 million ($150.87 million) in 2011 – on earned premiums of $US34.5 billion ($33.79 billion), up 8%.

The division’s investment income fell 4% to $US3.4 billion ($3.3 billion).

Management says the combined group recorded pre-tax losses of $US1.1 billion ($1 billion) from Superstorm Sandy.

Gen Re increased property and casualty (P&C) premiums by 2% to $US2.9 billion ($2.8 billion) and life and health premiums by 3% to $US3 billion ($2.9 billion).

It made a pre-tax profit of $US399 million ($390.9 million) on P&C, up from $US7 million ($6.86 million), while the life and health division made a $US44 million loss ($43.1 million) compared with a $US137 million ($134.2 million) profit previously.

The management says price competition persists in most P&C lines.

The Berkshire Hathaway group recorded a 45% increase in profit to $US14.82 billion ($14.51 billion).

“There are a lot of ways to lose money in insurance, and the industry never ceases searching for new ones,” Mr Buffett told shareholders.