Berkshire Hathaway’s insurance division produced a mixed performance during the 2021 second quarter. Rate increases generally carried the day, though the conglomerate’s GEICO unit dragged down earnings.
Overall, Berkshire Hathaway’s insurance division produced $376 million in net underwriting earnings during Q2, compared to $806 million in the 2020 second quarter. Beyond the drop in GEICO’s underwriting earnings, some of the insurance result stems from COVID-19-related estimated losses and costs that affected some of its commercial insurance and reinsurance businesses. This included “estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels,” according to Berkshire Hathaway’s quarterly regulatory filing.
Investment income from insurance surpassed $1.2 billion, but it was above $1.36 billion in the 2020 second quarter.
Overall, Berkshire Hathaway generated $28 billion in net earnings for the second quarter, well above $26.3 billion generated in the 2020 second quarter.
GEICO
P/C insurer GEICO had the largest effect on Berkshire Hathway’s insurance underwriting earnings.
GEICO booked $626 million in pre-tax underwriting earnings during the quarter, down from more than $2 billion in Q2 2020. GEICO, which writes private passenger auto insurance, was vulnerable in 2020 and 2021 to changes in average claims frequencies stemming from COVID-19, the company noted in its regulatory filing. They were “significantly below historical levels” during the initial stage of the pandemic in 2020 as lockdowns limited driving, though they were partially offset by premium givebacks and higher average claim severities. In the 2021 second quarter, those average claims frequencies jumped as policyholder driving rebounded to more normal levels, Berkshire Hathaway said.
GEICO’s premiums written jumped 14 percent the second quarter, to $9.2 billion. Berkshire Hathaway pointed out that those gains mostly came in comparison to the premium givebacks in 2020, but also from a 5 percent increase in average premiums per auto policy over the past year. Premiums earned jumped 5.6 percent in Q2, though loss and loss adjustment expenses jumped nearly 36 percent as average claims frequencies and severities grew, partially offset by increased reductions of claim loss estimates for last year’s loss events.
Berkshire Hathaway Primary Group
The Berkshire Hathaway Primary Group, which provides a number of commercial insurance coverages, saw premiums written jump to more than $2.9 billion during the quarter, compared to more than $2.1 billion in the 2020 first quarter. Premiums earned landed above $ 2.7 billion, compared to $2.2 billion last year.
Berkshire Hathaway said its BH Specialty Premiums jumped 44 percent in the second quarter thanks to rate hikes in professional liability, casualty and property lines of business. Commercial auto volumes at NICO Primary and BHHC also expanded compared to a year ago, after seeing adverse pandemic affects in Q2 2020.
The conglomerate noted, however, that its workers compensation business at BH Primary is still facing increased price competition in the marketplace.
Berkshire Hathaway Reinsurance Group
The company’s property/casualty reinsurance results were generally positive, generating $3.4 billion in premiums written during the quarter, up from just under $3 billion a year ago. Premiums earned surpassed $3.3 billion, compared to $2.7 billion last year. Underwriting expenses were at $856 million, compared to $774 million a year ago
Property/casualty reinsurance produced $202 million in pre-tax underwriting earnings during the quarter, versus a $643 million underwriting loss last year.
Source: Berkshire Hathaway