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Berkshire Hathaway’s reinsurance arm falls to Q2 loss, but P&C result improves

9th August 2021 - Author: Luke Gallin

Berkshire Hathaway has reported a dip in net underwriting profit for the second quarter of 2021, as earnings at GEICO and Berkshire Hathaway Primary Group more than offset an underwriting loss at its reinsurance division.

berkshire-hathaway-reinsurance-logoAcross the Group, underwriting income fell by more than 53%, year-on-year, from $806 million to $376 million for Q2 2021.

At Berkshire Hathaway Reinsurance Group (BHRG), the company has again reported an underwriting loss for the quarter, of $327 million, which is actually an improvement on the $1.1 billion loss reported a year earlier.

The company’s reinsurance business provides excess of loss and quota share reinsurance coverages on property and casualty (P&C) risks, and also offers life and health (L&H) reinsurance.

Within P&C reinsurance, premiums earned increased to more than $3.5 billion in Q2, while underwriting earnings reached $202 million, compared with an underwriting loss of $643 million for the prior year period.

RMS

P&C premiums written increased by 14.4% in the quarter to $3.4 billion, reflecting net new business, increased participations on renewals, improved pricing, and favourable foreign currency translation effects.

Losses and loss adjustment expenses (LAE) declined by almost 11% for Q2 2021 and remained flat for H1, as the loss ratio fell by 26.7 percentage points in the quarter and by 16.8 points in the half year.

For the first six months of 2021, losses and LAE included estimated impacts from Winter Storm Uri of $48 million, and a net increase in estimated ultimate liabilities for prior years’ loss events of $35 million.

While the P&C reinsurance business returned to underwriting profitability in the quarter, Berkshire Hathaway’s L&H reinsurance arm fell to an underwriting loss of $169 million for Q2 2021, compared with a gain of $41 million a year earlier.

Within L&H reinsurance, premiums written declined by 8.6% in Q2 2021 to $1.3 billion, as premiums earned fell to approximately $1.3 billion.

Underwriting earnings at L&H were negatively impacted throughout 2021 by significant increases in mortality in the U.S., South Africa, India, and Latin America, partially offset by lower underwriting expenses.

Overall, BHRG division fell to an underwriting loss for both the second quarter and first half of 2021. However, quarterly underwriting earnings of $626 million at GEICO and of $166 million at Berkshire Hathaway Primary Group, helped the Group’s re/insurance underwriting hit $376 million for the quarter, and $1.14 billion for H1 2021.

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