Warren Buffett’s Berkshire Hathaway Inc. posted second-quarter profit that missed analysts’ estimates because of higher claims costs at insurance units including Geico.

Net income dropped 37 percent to $4.01 billion, or $2,442 a share, from $6.4 billion, or $3,889, a year earlier, the Omaha, Nebraska-based company said Friday in a statement. Operating earnings, which exclude some investment results, were $2,367 a share, compared with the average $3,038 estimate of three analysts surveyed by Bloomberg.

Buffett, 84, built Berkshire over the past five decades into a sprawling operation that owns manufacturers, retailers, electric utilities and one of the largest U.S. railroads. While those operating businesses provide a steady stream of earnings, the company’s results can still fluctuate depending on the performance of investments and its core insurance operations.

“The property-and-casualty insurance industry certainly occasionally takes large hits,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. “What matters is how you do over time.”

Berkshire’s insurance units posted a net underwriting loss of $38 million, compared with a gain of $411 million a year earlier, driven by lower profit at auto insurer GEICO and a wider loss at the company’s namesake reinsurance operation,  run by Ajit Jain.

Auto insurer GEICO contributed $53 million to earnings, compared with $393 million a year earlier because of an increase in the frequency and cost of claims. The company reiterated in a regulatory filing that it’s raising premiums to account for the higher losses.

Berkshire Hathaway Reinsurance Group’s (BHRG) loss widened to $411 million from $9 million on storm costs in Australia and foreign currency fluctuations.

The decline in net income was primarily driven by narrower investment gains. Berkshire’s profit soared to a record in last year’s second quarter as the company had a benefit of more than $2 billion from derivatives and investments.

Berkshire’s biggest non-insurance unit, railroad BNSF, contributed $963 million to quarterly earnings, compared with $916 million a year earlier.

Q2 Insurance Results

Underwriting results in the second quarter and first six months of 2015 of GEICO and Berkshire Hathaway Reinsurance Group (BHRG) declined significantly from 2014.

As reported by Berkshire, the following are highlights of property/ casualty insurance results:

GEICO

Auto insurance writer GEICIO’s premiums written in the second quarter and first six months of 2015 increased 11.9 percent and 11.0 percent, respectively, over premiums written in the comparable 2014 periods. Voluntary auto new business sales in the first six months of 2015 exceeded the first six months of 2014 by 2.3 percent, with voluntary auto policies-in-force up by 526,000 policies.

In the second quarter and first six months of 2015, GEICO’s pre-tax underwriting gains were $53 million and $213 million, respectively, representing declines of $340 million and $533 million, respectively, versus the comparable periods in 2014. In its first quarter report, the company indicated it experienced increases in claims frequencies and severities in several of  major coverages. Those trends continued during the second quarter. The loss ratio for the second quarter and first six months of 2015 was 83.6 and 81.9, respectively, as compared to 76.4 and 76.1 in the comparable 2014 periods.

As a result, GEICO said it is implementing premium rate increases as needed.

General Re

General Re  writes property/casualty reinsurance in North America on a direct basis through General Reinsurance Corp. and internationally through Germany-based General Reinsurance AG and other wholly-owned affiliates. Property and casualty reinsurance is also written in broker markets through Faraday in London.

Concerning General Re’s underwriting for property/casualty in the second quarter and first six months of 2015, premiums written declined $139 million (22%) and $361 million (18%), respectively, while premiums earned decreased $93 million (12%) and $151 million (10%), respectively, compared to 2014.  Premium volume declined in both the direct and broker markets worldwide.

“Insurance industry capacity remains high and price competition in most property/casualty reinsurance markets persists,” the Berkshire report states “We continue to decline business when we believe prices are inadequate. However, we remain prepared to write more business when more appropriate prices can be attained relative to the risks assumed.”

In the second quarter and first six months of 2015, its property/casualty reinsurance  business produced aggregate pre-tax underwriting gains of $88 million and $74 million, respectively, compared to gains of $70 million and $171 million in the second quarter and the first six months of 2014, respectively.

The results in both years benefited from reductions of estimated losses for prior years’ exposures. There were no major catastrophe events during the first six months of 2015 or 2014.

In the first six months of 2015 and 2014, the casualty/workers’ compensation business produced pre-tax underwriting losses of $25 million and $27 million, respectively.

Berkshire Hathaway Reinsurance Group

BHRG underwrites excess-of-loss reinsurance and quota-share coverages on property/casualty risks for insurers and reinsurers worldwide, including property catastrophe insurance and reinsurance.  BHRG also writes retroactive reinsurance, which provides indemnification of losses and loss adjustment expenses with respect to past loss events arising under property/casualty coverages.

Berkshire Hathaway Primary Group

The Berkshire Hathaway Primary Group consists of a wide variety of independently managed insurance businesses. These businesses include: Medical Protective Co. and Princeton Insurance Co.,providers of healthcare malpractice insurance coverages; National Indemnity Co.’s primary group, writers of commercial motor vehicle and general liability coverages; U.S. Investment Corp., whose subsidiaries underwrite specialty insurance coverages; a group of companies referred to as Berkshire Hathaway Homestate Companies, providers of commercial multi-line insurance, including workers’ compensation; Berkshire Hathaway Specialty Insurance, which concentrates on large scale insurance programs for commercial property and casualty risks; Applied Underwriters, a provider of workers’ compensation; Berkshire Hathaway GUARD Insurance Companies, providers of workers’ compensation and commercial property/casualty insurance coverage to small and mid-sized businesses; and Central States Indemnity Co., a provider of credit and Medicare Supplement insurance.

Premiums earned by Berkshire Hathaway Primary Group in the first six months of 2015 and 2014 aggregated $2.5 billion and $2.0 billion, respectively. The increase was primarily attributable to volume increases from BH Specialty, NICO Primary, BHHC and GUARD. The BH Primary insurers produced aggregate pre-tax underwriting gains of $378 million in the first six months of 2015 and $236 million in 2014. Loss ratios for this group were 58 percent in the first six months of 2015 and 61 percent in 2014.

Insurance—Investment Income

Pre-tax investment income of insurance proceeds in the second quarter and first six months of 2015 was $1,334 million and $2,421 million, respectively, or decreases of $164 million (11 percent) and $23 million (1 percent) from the same periods in 2014.