Berkshire Hathaway’s Insurance Underwriting Profit Fell in Q2

August 5, 2019

Giant conglomerate Berkshire Hathaway saw its total insurance underwriting profit in the second quarter fall 63% to $353 million from $943 million in the second quarter of last year.

Compared to the same period last year, underwriting results were down at Berkshire’s commercial property/casualty unit Berkshire Hathaway Primary Group (a $167 million gain compared to $234 million) and at its GEICO personal auto unit (a $393 million profit versus $673 million in 2018). The reinsurance unit overall reported a $104 million underwriting loss compared to a $297 million gain last year.

Premiums, however, were up overall. Also, interest and other investment income linked to the insurance business in the second quarter increased $178 million (44.6%) as compared to the same period in 2018.

GEICO

GEICO’s premiums written ($8.703 billion) and earned ($8.869 billion) in the second quarter of 2019 increased 5.7% and 7.1%, respectively. The increases reflected voluntary auto policies in-force growth of 4.5% and increased premiums per auto policy of approximately 1.7% over the past twelve months. The increase in voluntary auto policies-in-force primarily resulted from an increase in new business sales of 8.6%. The increase in premiums per policy was attributable to rate increases, coverage changes and changes in state and risk mix. GEICO’s loss ratio in the second quarter increased of 3.5 percentage points to 82.0; its combined loss and expense ratio came in at 95.6 compared to 91.9 for the same period last year.

Reinsurance Group

This unit offer excess-of-loss and quota-share reinsurance coverages through several subsidiaries including National Indemnity Co. and General Reinsurance Corp. The property/casualty reinsurance underwriting results saw premiums written rise 11.4% to $2.327 billion in the quarter. Premiums earned in the second quarter were relatively unchanged while in the first six months of 2019 they increased $301 million (7.0%), versus 2018. The increase in year-to-date premiums earned was primarily attributable to new business, net of non-renewals, and increased participations for renewal business. Losses and loss adjustment expenses in the first six months of 2019 included a net increase in estimated ultimate claim liabilities attributable to prior years’ loss events of approximately $269 million compared to a net decrease of $286 million in 2018. There were no significant catastrophe loss events affecting reinsurance operations during the first six months of 2019 or 2018.

Primary Group

The Berkshire Hathaway Primary Group provides commercial insurance through Berkshire Hathaway Specialty Insurance, Berkshire Hathaway Homestate Cos., MedPro Group, GUARD Insurance Cos. and National Indemnity Co. Other BH Primary insurers include U.S. Liability Insurance Co., Applied Underwriters, Central States Indemnity Co. and MLMIC Insurance Co., which was acquired October 1, 2018. Premiums written in the second quarter rose 12.3% to $2.37 billion and 10.3% for the first six months to $4.71 billion, compared to the same periods in 2018. The comparative year-to-date increase was primarily attributable to BH Specialty (23.8%) and GUARD (23.6%), while aggregate premiums written in 2019 by other BH Primary operations were relatively unchanged from 2018. The increases in premiums earned in 2019 reflected volume increases over the past year, as well as the impact of the MLMIC acquisition. BH Primary produced a pre-tax underwriting gain of $167 million in the quarter compared to $234 million for the same quarter in 2018.

Source: Berkshire Hathaway

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