Berkshire Hathaway, the Warren Buffett-run holding company and conglomerate, has reported a strong quarter of growth for its property and casualty (P&C) reinsurance operations, with premiums written rising by 30% in the period, with the inclusion of TransRe a significant driver of that growth.
However, at the same time, Berkshire Hathaway’s P&C reinsurance losses and loss adjustment expenses for the quarter increased by $1.1 billion over the prior year, resulting in a higher combined ratio at 92.4% for Q1 2023.
Interestingly, Berkshire Hathaway reported that the inclusion of the TransRe group into its P&C reinsurance results added $700 million of the loss gain.
But more notable is the fact, that in the premium growth, $1.3 billion was from the inclusion of TransRe Group, with premiums written otherwise increasing $542 million (12.4%) during the quarter, the company said.
Losses from significant catastrophes during the first quarter were $407 million in 2023 and $315 million in 2022, with Berkshire highlighting the New Zealand floods and cyclone Gabrielle as its biggest impacts of the quarter.
The addition of the TransRe group, which Berkshire Hathaway has acquired as part of its deal to buy Alleghany, has also elevated the expense ratio somewhat, with the company reporting that underwriting expenses in the first quarter of 2023 included $385 million related to TransRe Group.
This drove slightly lower performance for the P&C reinsurance division of Warren Buffett’s re/insurance business, with a pre-tax underwriting profit reported of $390 million for the first-quarter, down slightly from $405 million in the prior year.
The impressive premium growth in the current hard reinsurance market environment shows the ambition to continue scaling Berkshire Hathaway’s P&C reinsurance business and the addition of TransRe to the stable of companies will accelerate that, allowing Buffett’s company to capitalise on market conditions at an even faster pace.
Warren Buffett’s life and health reinsurance business performed much better in Q1 2023, over the prior year, reporting a pre-tax underwriting profit of $137 million for the period, better than the prior year’s $26 million underwriting loss.
Overall, the Berkshire Hathaway reinsurance businesses delivered a Q1 2023 underwriting profit of $231 million, down on the previous year total of $301 million.
This was due to underwriting losses in both retroactive reinsurance and periodic payment annuities at Berkshire Hathaway in the quarter.
Berkshire Hathaway’s primary insurance group also fared better in Q1 2023, with a pre-tax underwriting profit of $268 million a significant increase from the prior year’s $92 million.
With premiums written up more than 18%, growth was also clearly on the agenda for the primary insurance side of Warren Buffett’s re/insurance business in the first-quarter of 2023.
The GEICO auto insurance business was another highlight, reporting an underwriting profit of $703 million for Q1, well up on the prior year period’s loss of $178 million a year ago.
The primary insurance group delivered an improved Q1 underwriting profit of $268 million, well-up on the previous year’s $92 million.
Which gave the entire Berkshire Hathaway insurance and reinsurance business a pre-tax underwriting profit of $1.202 billion for the first-quarter of 2023, significantly better than last year’s $215 million pre-tax underwriting profit.
Finally, Berkshire Hathaway reported that its all-important insurance investment float reached $165 billion at March 31st 2023, up slightly from $164 billion at December 31st 2022.
But, importantly, with the combined Berkshire Hathaway re/insurance operations delivering pre-tax underwriting gains of just over $1.2 billion in the first-quarter of 2023, the company said that the average cost of float was negative.