Berkshire Hathaway Inc. on Saturday said gains in its stock investments were behind its good first-quarter profit. Better results from its GEICO auto insurer and BNSF railroad units boosted operating results.
The conglomerate’s $21.66-billion overall first quarter profit compared with a year-earlier net loss of $1.14 billion. Operating profit rose 5 percent to $5.56 billion from $5.29 billion a year earlier.
Thanks to private passenger auto insurer GEICO, Berkshire Hathaway’s overall insurance operations generated after-tax earnings from underwriting of $389 million in the first quarter this year compared to $407 million in 2018.
After-tax earnings in the first quarter of 2019 from insurance investments increased 22.2% over 2018, reflecting increased short-term interest rates and dividend income. Investment income for insurance for the quarter topped $1.2 billion.
Berkshire Hathaway insurance and reinsurance businesses include GEICO, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group.
GEICO reported a $770 million underwriting profit compared to $677 million for the same period last year. GEICO’s premiums written and earned in the first quarter of 2019 increased 6.6% and 8.9%, respectively, compared to 2018. These increases reflected voluntary auto policy-in-force growth of 3.6% and increased premiums per auto policy of approximately 4.0% over the past 12 months. The increase in premiums was attributable in part to rate increases from 2018 implemented in response to accelerating losses.
GEICO’s underwriting success was offset by results at Berkshire Hathaway Primary Group (including Berkshire Hathaway Specialty Insurance, GUARD Insurance Cos. and National Indemnity Co.), which reported a $30 million underwriting loss compared to a $99 million gain in the same quarter last year. This group’s premiums written and earned in the first quarter of 2019 increased 8.3% and 12.1%, respectively, compared to 2018. The increases in premiums written were primarily attributable to BH Specialty (19.6%), GUARD (19.0%) and NICO Primary (11.9%). The increase in premiums earned in the first quarter of 2019 also reflected the impact of the MLMIC acquisition.
Berkshire Hathaway Reinsurance Group also reported an underwriting loss ($253 million), almost matching the $258 million loss for the same period in 2018. Property/casualty reinsurance premiums earned in the first quarter of 2019 were approximately $2.3 billion, an increase of $296 million (14.6%) compared to 2018. The increase primarily reflected higher direct and broker markets business.
Shareholders and analysts got a chance to pose questions to Chair Warren Buffett, Vice Chair Charlie Munger and Vice Chair of Insurance Operations Ajit Jain on Saturday at Berkshire’s annual meeting in Omaha, Nebraska. Among the topics Berkshire executives covered: the value of Berkshire’s insurance operations, the competition between GEICO and Progressive, the idea of automakers like Tesla getting into the insurance business, and writing large unconventional insurance contracts.
Meyer Shields and other analysts at KBW contended after the annual meeting that the company does not reveal enough information on its operations, criticizing Berkshire for what it called its “parsimonious and frequently changing disclosures” which they believe impede longer-term trend. The analysts also cautioned investors on an “over-reliance on Mr. Buffett’s public persona” and “fully deserved” reputation of investment prowess which they said is “particularly risky ahead of the inevitable senior management transition.” Buffett defended Berkshire’s practices around disclosure.
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