California wildfire losses of $1.1 billion hit Berkshire Hathaway underwriting results

By David Bull

May 3 - (The Insurer) - California wildfire losses of $770 million in Berkshire Hathaway’s reinsurance operations and $300 million in its insurance operations were a main driver of its overall pre-tax insurance underwriting gain almost halving to $1.72 billion in the first quarter from $3.33 billion in the prior-year period.

In quarterly earnings filed on Saturday, underwriting losses reported in the two divisions contrasted with continued strong performance at personal lines insurer Geico, where pre-tax underwriting earnings increased from $1.93 billion to $2.17 billion.

The Southern California wildfires in the quarter of $1.1 billion before tax compared to no significant cat events in Q1 2024.

Net insurance underwriting earnings at Berkshire Hathaway were down from $2.60 billion to $1.34 billion, but investment income climbed from $2.60 billion to $2.89 billion.

Operating earnings at the parent company were down from $11.22 billion to $9.64 billion, reflecting the drop-off in the contribution from its insurance operations.

Berkshire Hathaway Primary Group results were also affected by reserve charges of $212 million, with increases in estimated ultimate losses for prior accident years’ claims related to liability coverages only partially offset by releases from property and medical liability reserves.

Berkshire Hathaway Primary Group fell to a pre-tax underwriting loss of $144 million for the quarter, compared to a gain of $486 million in Q1 2024.

The division – which houses Berkshire Hathaway Specialty Insurance, E&S specialist RSUI, CapSpecialty, Guard Insurance, National Indemnity Company, and others – reported a combined ratio that increased from 89.3% in Q1 2024 to 103.1% in the current reporting period.

Premiums written were broadly consistent with the prior-year period at $4.42 billion (Q1 2024: $4.49 billion), as were premiums earned of $4.58 billion (Q1 2024: $4.54 billion).

Guard premiums written were down 34% in the period, however, as a result of exiting certain unprofitable lines and “tightened” overall underwriting standards, said Berkshire Hathaway.

The Insurer reported in early April that Guard’s Azguard subsidiary is exiting writing E&S homeowners business in California, in the latest example of retrenchment.

P&C REINSURANCE TURNS UW PROFIT DESPITE WILDFIRES

Berkshire Hathaway Reinsurance Group fell to a pre-tax underwriting loss of $307 million in the quarter from a profit of $912 million in the same period last year.

Despite the wildfire losses, its P&C division made a pre-tax underwriting profit of $68 million, albeit at a fraction of the $1.01 billion gain generated in the prior-year period.

The division – which includes Gen Re as well as TransRe – generated a combined ratio of 98.7%, up from 81.5% in the prior-year period.

The $770 million of wildfire losses were partially offset by net reserve releases of $330 million from prior accident years, largely from lower-than-expected property losses, said the company.

Premiums written in P&C were down from $6.46 billion to $6.14 billion, and from $5.44 billion to $5.24 billion on an earned basis.

Life/health was also profitable at a $70 million pre-tax gain, down from $108 million in Q1 2024.

The losses came in retroactive reinsurance with a $209 million deficit, and the reinsurance operation’s annuity business, with a $199 million loss in periodic payment annuity and $37 million in variable annuity.

Geico’s increased underwriting profits were driven by top line growth and its continued improved loss ratio, which was down from 72.5% to 69.0%, helping the combined ratio improve from 81.2% to 79.8%.

The company said that private passenger auto claims frequencies declined in the quarter for property damage and collision, with bodily injury coverage down slightly. But average auto claims severity increased for property damage and collision coverages.

Premiums written were up from $10.80 billion to $11.51 billion reflecting increased policies-in-force and higher average premiums per policy, with premiums earned up from $10.23 billion to $10.75 billion.

Interest and other investment income from Berkshire Hathaway’s insurance operations was up 30.5% to $2.52 billion, with net investment income – after taxes and including dividend income – increasing from $2.60 billion to $2.89 billion.