Berkshire Hathaway’s global reinsurance business continued to feel the effects of the COVID-19 coronavirus pandemic during the first-quarter of the year, with mortality claims driving the life reinsurance business to a loss.
At the same time, Berkshire Hathaway’s property and casualty reinsurance division delivered a profitable quarter’s underwriting, despite a $310 million estimated loss from winter storm Uri’s freezing impacts in the United States.
Overall, the Berkshire Hathaway insurance and reinsurance related businesses delivered a profit, but this was largely driven by its GEICO auto insurance division in the first-quarter of 2021.
Lower claims frequencies, particularly in auto property damage and bodily injury coverages continued to help GEICO year-on-year and the auto insurer delivered just over $1 billion of pre-tax underwriting earnings for Q1 2021, up on 2020’s $984 million.
Berkshire Hathaway’s primary insurance business also profited, delivering $206 million in the quarter as well as an 18.5% increase in premiums written during the period.
The primary division reported a $150 million hit from winter storm Uri and the freezing February weather in the United States, taking the total hit across Berkshire’s insurance and reinsurance units to an estimated $460 million.
The Berkshire Hathaway primary insurance unit also benefited from a net reduction in estimated ultimate liabilities for prior years’ loss events of $178 million this year, and also cited “not significant” new losses related to the global pandemic, all of which helped it to profit and a 92.2% combined ratio (much better that Q1 2020’s 101.4%).
The Berkshire Hathaway Reinsurance Group saw mixed results, with the P&C reinsurance division reporting a $166 million underwriting profit, the life and health unit a $172 million underwriting loss on elevated mortality claims from the pandemic and the retroactive reinsurance division a $242 million underwriting loss.
P&C reinsurance premiums were up 8.1% at Berkshire Hathaway in Q1 2021, but the result was dented by the $310 million of winter storm Uri losses and increases in estimated ultimate liabilities for prior years’ loss events of $53 million.
The life and health reinsurance side of Berkshire Hathaway’s business was negatively affected by “significant increases in mortality” in the U.S., Africa and Latin America, which is related to COVID-19.
This ultimately drove the unit to a $172 million underwriting loss, despite a decline in underwriting expenses.
Overall though, Berkshire Hathaway’s large and diversified re/insurance business delivered almost $2.4 billion of net income, with just over $1.4 billion of insurance related investment income continuing to drive home the importance of Warren Buffet’s growing float investment pile.
Berkshire Hathaway’s insurance float rose to $140 billion at March 31st 2021, up by $2 billion since the end of 2020.