Warren Buffett’s Berkshire Hathaway Inc. boosted its estimate of the ultimate cost of a deal it made last year to backstop some risks for American International Group Inc.
The company increased its ultimate claim liability for the deal by $1.8 billion in the fourth quarter, Omaha, Neb-based Berkshire said Saturday in its annual report. When the insurers reached the deal in January 2017, Berkshire had estimated $16.4 billion for the unpaid losses and expenses, but has since seen “higher than expected loss payments being reported under the contractual retention.”
Berkshire struck a deal with AIG last year to take on some long-term risks from commercial policies that AIG wrote in prior years. Those types of agreements help Berkshire generate premiums that Buffett can then invest elsewhere.
The company also disclosed Saturday that its General Re unit had $450 million in underwriting losses tied to a long-term-care business that is being wound down. Those policies were thrust into the spotlight earlier this year when General Electric Co. said it would take a $6.2 billion charge related to a long-term-care portfolio.