UK-based run-off operator and insurance services group Randall & Quilter (R&Q) announced this morning that it expects pre-tax profits for the first half of the year to be "materially ahead of market expectations". The company said that this was in part because of a better-than-expected profit commission for its management of Lloyd's syndicate 3330. However, R&Q said that all operating divisions had performed either better or in line with expectations. The company said that, although commission on syndicate 3330 was likely to be significantly lower in the second half, R&Q expected the full-year profit to be at the upper end of current market expectations, barring unforeseen events. R&Q has been expanding in the first half, having bought in-run-off France-domiciled reinsurer La Licorne in April (IIN 24, April 23 2010), while in June it said that it was seeking opportunities from developments in Solvency II.

Omaha-based Berkshire Hathaway has posted an operating gain of $5.30bn for the first six months, up from $3.49bn in the same period last year. The bottom line, helped by investment sales and by the absence of last year's one-off write-down on investments, rose to $5.6bn from $1.76bn. Insurance underwriting for the half rose to $688m from $268m, while insurance investment income declined to $2.08bn from $2.27bn. Non-insurance business improved to $2.66bn from $1.1bn. The increase in operating profit stemmed partly from the purchase of Burlington Northern Santa Fe Corp, partly from improved insurance underwriting and partly from a recovery at NetJets, the corporate plane time-share business. Insurance premiums earned were virtually flat year on year at $14.29bn, but losses declined dramatically, down to $8.1bn from $10.1bn. Net cash flow for the first half was $6.86bn, down from $7.50bn in H1 2009. Within the insurance operations, revenue at Geico rose to $7bn from $6.66bn. General Re rose slightly to $2.81bn from $2.8bn. Berkshire Hathaway Reinsurance Group declined to $3.56bn from $4.28bn, while Berkshire Hathaway Primary Group fell to $816m from $911m. Geico reported an operating gain of $628m,up from $259m, while General Re saw income decline to $183m from $260m. Berkshire Hathaway Re returned to a gain of $169m from a loss of $141m in H1 2009. Berkshire Hathaway Primary generated a gain of $81m from $33m.

Robert Benmosche, CEO of New York-based insurer AIG, is in talks with the US government about completely exiting the company from US government ownership. Although the company reported $2.2bn in Q2 operating profit, it would need to continue doing so for at least 60 consecutive quarters if the company were to pay off the US government solely from operating profits. Mr Benmosche therefore admitted that the "independence" strategy "could result in the issuance of a large number of additional shares of AIG common stock" and that this "could result in significant dilution to AIG's current shareholders". One option would be for the US Treasury to convert its preferred equity into common stock, said Mr Benmosche, although it was unclear what impact such a massive stock overhang would have on the share price. Meanwhile, Mr Benmosche told the Financial Times that AIG was currently evaluating bids for its consumer finance unit American General Finance, with a buyer selected within the next few weeks (IIN 24, May 27 2010). AIG said on Friday that it might incur a loss on the sale.

New York-based insurer AIG fears that the new Dodd-Rank Act might force it to raise capital, and limit its options with private equity and hedge fund investments. In a filing on Friday the company said that the new act could "materially and adversely affect AIG businesses". AIG said that the new rules could mean that the Federal Reserve could become its regulator, rather than the Office of Thrift Supervision, and that this could impose "burdensome and costly requirements". If stress tests conducted by the Fed found that AIG did not have the required capital to absorb losses in the face of hypothetical adverse economic conditions, then it could have to raise more. Treasury Secretary Timothy Geithner has specifically stated that the Dodd-Frank Act would ensure that companies bear the costs of risks that they take.