Berkshire Hathaway, the Warren Buffett-run holding company and conglomerate, has reported net underwriting earnings across its re/insurance operations of $5.4 billion for the full year 2023 compared with a loss a year earlier.
The positive return of $5.4 billion compares with a loss of $30 million in 2022 and a gain of $870 million in 2021, as all of the firm’s re/insurance businesses performed well in 2023.
Starting with Berkshire Hathaway Reinsurance Group, the underwriting result improved from almost $1.5 billion in 2022 to $1.9 billion in 2023, driven by a strong result in the P&C and L&H reinsurance segments.
The P&C reinsurance underwriting result strengthened from $2.2 billion in 2022 to $3.5 billion in 2023, while the L&H reinsurance result rose from $109 million to $354 million. This more than offset a decline to -$1.5 billion in retroactive reinsurance, and a slight dip to $650 million in the unit’s periodic payment annuity.
Berkshire explains that the retrospective adoption of ASU 2018-12 increased the reinsurance arm’s pre-tax underwriting earnings $76 million in 2022 and reduced pre-tax underwriting losses $175 million in 2021 from the amounts previously reported.
In terms of premiums, reinsurance premiums earned grew from $21.8 billion in 2022 to more than $27 billion in 2023, with growth from $16 billion to $22 billion in P&C, and a slight reduction in L&H to $5.1 billion compared with $5.2 billion in 2022.
Within P&C, premiums written in 2023 increased 31.8% over 2022 to $22.4 billion, of which $5.3 billion relates to TransRe Group. The firm attributes the rise in premiums written to net increases in new property business and higher rates.
“We have written considerable levels of property business in recent years and we generally do not retrocede the risks we assume. Our periodic underwriting earnings are subject to considerable volatility from significant catastrophe loss events,” says the firm.
Year-on-year, losses and loss adjustment expenses increased $2.1 billion in 2023 to $12.7 billion, with losses of $3.2 billion from TransRe. Losses incurred from significant current year catastrophes were $900 million in 2023, compared with $2 billion in 2022. The reductions in estimated ultimate liabilities for losses occurring in prior accident years were $1.4 billion in 2023, compared with $1.6 billion in 2022.
Turning to Berkshire Hathaway Primary Group, which consists of several independently managed businesses that provide a variety of primarily commercial insurance solutions, underwriting earnings increased from $393 million in 2022 to $1.4 billion in 2023.
Premiums written increased 24.1% year-on-year to $18.1 billion and premiums earned moved from $13.7 billion in 2022 to $17.1 billion in 2023. Berkshire attributes the growth to increases at BHSI (16%), USLI (16%), BHHC (15%) and MedPro Group (10%) across a variety of coverages and in several markets, and from the acquisition of RSUI and CapSpecialty.
Losses and loss adjustment expenses increased 13.5% year-on-year to $11.2 billion, although losses from significant catastrophes were $37 million in 2023 compared with $641 million in 2022. The loss ratio decreased 6.4 percentage points in 2023 compared to 2022, reflecting lower incurred losses from current year catastrophes and changes in business mix, including the impact of RSUI and CapSpecialty.
At GEICO, primarily a writer of private passenger automobile insurance, underwriting earnings hit $3.6 billion in 2023 compared with a loss of $1.9 billion in 2022, reflecting higher average premiums per auto policy, lower claims frequencies, reductions in prior accident years’ claims estimates, and a reduction in advertising costs.
Despite this, the firm notes that average claims severities continued to rise in 2023 due to higher auto repair parts prices, labor costs, and medical inflation.
Within GEICO, premiums written increased $730 million to $39.8 billion in 2023, while premiums earned increased slightly to $39.3 billion.
At the same time, losses and loss adjustment expenses decreased $4.5 billion, or 12.4% to $31.8 billion in 2023, while the loss ratio came down 12.1 percentage points to 81%, reflecting the impact of higher average premiums per auto policy, lower claims frequencies and increased favorable development of prior accident years’ claims estimates, partially offset by increases in average claims severities.
Across its re/insurance operations, Berkshire has revealed that as at December 31st, 2023, float was approximately $169 billion, up from $164 billion at the end of 2022 and $147 billion at the end of 2021.
“Our combined insurance operations generated pre-tax underwriting gains in 2023 and 2021, and the average cost of float was negative in those years. Our pre-tax underwriting losses in 2022 were $22 million and the cost of float was nominal,” explains the firm.
