Berkshire Hathaway’s insurance division booked a combined $784 million net underwriting loss during the 2020 third quarter as it faced, in part, fallout from Hurricane Ida and more vehicle crashes.
That compares to a $213 million consolidated underwriting loss the previous year.
While Q3 was an underwriting challenge, Berkshire’s insurance division is still profitable for the year so far. It cited $356 million in underwriting earnings for the first nine months of 2021, though that’s down from $956 million over the same period in 2020.
For the third quarter, every insurance unit reported pre-tax underwriting losses in the red. GEICO booked a $289 million pre-tax underwriting loss, versus $276 million in pre-tax underwriting earnings in the 2020 third quarter. Berkshire Hathaway’s Primary Group reported a $23 million pre-tax underwriting loss, but that is an improvement over negative $126 million last year. The conglomerate’s reinsurance group cited a $708 million pre-tax underwriting loss, up from negative $441 million the year before.
GEICO also dragged down Berkshire Hathaway’s earnings in the 2021 second quarter.
Berkshire pointed out that some of its commercial and reinsurance businesses continued to take hits from the COVID-19 pandemic, “including estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels.”
On the plus side, Berkshire Hathaway’s insurance investment income ticked higher, hitting more than $1.1 billion in the third quarter, up from $1 billion in the same, year-ago quarter.
Also, underwriting revenues climbed across the board as rate hikes continued throughout the insurance industry.
Berkshire Hathaway, a more-than-60-company conglomerate, also produced downbeat results overall, reporting $10.3 billion in net earnings, a drop from more than $30.1 billion in net earnings during the 2020 second quarter. Berkshire also used $7.6 billion to repurchase its shares during the quarter, bringing the nine-month total to $20.2 billion.
Berkshire Hathaway’s overall profit plunged in Q3 as some of the conglomerate’s various divisions dealt with supply chain disruptions spurred by the ongoing COVID-19 pandemic and bad weather. Berkshire subsidiaries, other than insurance and reinsurance, include companies focused on utilities and energy, freight rail transportation, manufacturing, retailing and services.
GEICO
GEIC0 reported $10 billion in premiums written during the third quarter and $9.6 billion in premiums earned, compared to $8.4 billion and $8.5 billion, respectively, in the 2020 third quarter.
Berkshire said last year’s lower numbers stem from claims frequencies significantly below historical levels due to fewer drivers during the COVI19 pandemic, partially offset by premium givebacks. Claims frequencies have rebounded, however, as drivers returned to the road. That, in turn, has led to more claims severities and higher valuation of used vehicles. Those higher vehicle values stem from manufacturing challenges due to supply chain disruptions for new vehicles.
GEICO’s underwriting expenses have been relatively flat so far in 2021, Berkshire said, due to higher technology costs offset by lower advertising and employee-related expenses. The company’s expense ratio dipped 0.7 percentage points through the end of September in 2021 compared to the previous year, due to more premiums earned.
Berkshire Hathaway Primary Group
Berkshire includes a number of commercial insurance companies in this group. Among them: Berkshire Hathaway Specialty Insurance, Berkshire Hathaway GUARD Insurance Companies and National Indemnity Company. They hit areas including healthcare malpractice, workers compensation, auto, general liability and property and specialty coverages for small, medium and large business clients.
This division reported $3.5 billion in premiums written during the quarter, compared to $3 billion in the 2020 third quarter. Premiums earned nearly hit the $3 billion mark, up from just under $2.5 billion the year before.
Much of the premium gains came from a 42 percent year-to-date increase from BHSI in professional liability, casualty and property lines of business, Berkshire noted. As well, other underwriting units in the division saw double digit increases in premiums written, including MedPro Group, and USLI. GUARD premiums written jumped 8 percent. These gains were offset a bit by lower volumes in workers compensation.
BH Primary’s loss ratio dipped 3.8 percent in Q3 and 3.4 percent so far this year through Sept. 30, due largely to more reductions in estimated liabilities for previous years’ loss events.
Losses and loss adjustment expenses in 2021 from significant catastrophe events reached $260 million in the third quarter and $420 million for the first nine months of 2021, mostly due to Hurricane Ida and Winter Storm Uri.
Underwriting expenses in Q3 jumped $107 million over the previous year. But the expense ratio dipped 1.7 percent because of changes in the business mix.
Berkshire Hathaway Reinsurance Group
Berkshire’s property/casualty reinsurance business produced more than $4.1 billion in premiums written during the quarter, compared to just under $4 billion in the 2020 third quarter. It booked $3.6 billion in premiums earned during Q3, compared to $3.4 billion the year before.
Pre-tax underwriting losses were at $247 million during the quarter, versus $99 million in pre-tax underwriting earnings the previous year.
Premium gains reflected net new business, increased participation on renewals, price gains and favorable foreign currency translation effects, Berkshire said.