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Berkshire Hathaway underwriting & investment profit both up in Q1

7th May 2018 - Author: Steve Evans

Warren Buffett’s insurance and reinsurance businesses at Berkshire Hathaway recorded positive performance for the first-quarter of 2018, with both underwriting and investment sides of the business delivering higher profits.

Berkshire Hathaway logoBerkshire Hathaway reported $407 million of underwriting profit for Q1 2018, up from a loss of -$267 million in the prior year.

On the all-important investing side of Buffett’s re/insurance businesses, Berkshire Hathaway reported $1.012 billion of insurance investment income for the first-quarter of 2018, up from $908 million in the prior year.

During the quarter, Buffett’s insurance and reinsurance businesses added another $2 billion of premium float, taking the total pot at Berkshire Hathaway to a new high of $116 billion.

Property & casualty and life & health reinsurance at Berkshire Hathaway Reinsurance Group both made a good start to the year, with over $2 billion of premiums earned in P&C reinsurance, up from $1.74 billion in the prior year, and $1.234 billion earned in life & health reinsurance, up from $1.085 billion in the prior year.

With lower losses, this P&C reinsurance business at Berkshire recorded an underwriting gain for the quarter of $130 million, compared to a loss of -$410 million in the prior year. While the life & health reinsurance business made an underwriting gain of $96 million, compared to $73 million in the prior year.

The GEICO auto insurance business made an underwriting gain of $677 million for the first-quarter, much better than the prior years $175 million, which was driven by over a billion dollars more risk written and premium earned in the period.

General Re (GenRe) also managed a profit, with growth in premiums earned helping the reinsurer to an underwriting profit of $130 million, compared to its loss of -$141 million in the prior year.

NICO actually earned slightly fewer premiums in the period, but generated an underwriting profit thanks to more stable performance, reporting a gain of $23 million, much better than the -$269 million underwriting loss of the prior year.

Life & health reinsurance made an underwriting profit of $96 million for the quarter, up on the $73 million of the prior year.

The Berkshire Hathaway primary insurance group underwrote more in the way of premiums, but higher claims volatility and expenses meant the underwriting gain fell to $99 million in Q1 2018, down from $189 million in the prior year period.

In reinsurance, particularly P&C, it doesn’t look like Berkshire Hathaway has gone for the growth in premiums written that some other major players have achieved, which is reflected in Warren Buffett’s commentary this weekend at the annual meeting, where he said while reinsurance would be part of his business for decades to come, he still doesn’t feel the returns always properly compensate the risk takers.

Buffett also highlighted cyber insurance and reinsurance this weekend, saying that he doesn’t want Berkshire Hathaway to be a leader in that emerging class of business, as it’s not always understood.

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