Berkshire Hathaway’s P&C reinsurance returns to profit in 2021

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The property and casualty reinsurance business of Warren Buffett-led Berkshire Hathaway holding company returned to profit in 2021, generating positive revenue thanks to a combined ratio of 95.1%, despite the impacts of 2.1 billion dollars in major disaster losses.

A year ago, Berkshire Hathaway’s property and casualty reinsurance division, which includes Gen Re, fell to a pretax underwriting loss of -$799 million for the full year 2020, largely due major disasters and pandemic losses, which resulted in a strong combined ratio of 106.5%.

For 2021 as a whole, Warren Buffett’s property and casualty reinsurance division fared much better, although 2021 was another big year for catastrophe claims, one of the top five.

The property and casualty reinsurance unit reported a pre-tax underwriting profit of $667 million for 2021 as the loss ratio fell to just under 72% and the combined ratio stood at 95.1%.

Berkshire’s property and casualty reinsurance business also expanded in 2021, with written premiums rising more than 6.4% to $14.15 billion.

More notable, however, is the growth that Warren Buffett’s property and casualty reinsurance division has achieved over the past two years, with premiums now 36% higher than they were in 2019.

It’s a clear sign that Berkshire Hathaway was able to take advantage of the tightening reinsurance market, which will help the division achieve much bigger profits in a normal disastrous year.

The company said the premium growth was driven primarily by net new business, higher dividends and improved renewal prices, with property coverages being the main source of growth.

Interestingly, Berkshire Hathaway’s P&C reinsurance unit benefited from significant reserve releases from prior years, with reductions in estimated ultimate liabilities for losses incurred in prior years amounting to $718 million.

On the life and health reinsurance side of Berkshire Hathaway’s business, the pandemic continued to weigh on 2021.

The company reported “significant increases in mortality in the United States, South Africa, India and Latin America attributable to the pandemic”, which weighed on the life and health underwriting result.

In fact, Berkshire Hathaway’s life and health reinsurance arm fell to a loss of -$421 million for the year 2021, due to the continued effects of the Covid-19 pandemic on mortality.

In addition to this, technical losses of -782 million dollars in the retroactive reinsurance segment and -508 million dollars in the periodic payment annuity business weighed on the overall reinsurance result.

In fact, Berkshire Hathaway Reinsurance Group’s overall result for 2021 was an underwriting loss of -$930 million, which was still much better than the previous year’s -$2.7 billion.

The GEICO auto insurance arm generated an underwriting profit of $1.259 billion, and the primary group was profitable at $607 million, so reinsurance was the outlier with a loss.

Comprehensive insurance and reinsurance net underwriting income reached $728 million for 2021, compared to $657 million in 2020.

Insurance investment income fell to $4.807 billion for the year 2021, down slightly from $5.039 billion in 2020.

But the return on investment coupled with expansive premium growth has led to a healthy increase in Berkshire Hathaway’s all-important insurance float, which hit $147 billion at the end of 2021, from $138 billion a year earlier. , leading to a further increase in Warren Buffett’s investment firepower for 2022. .

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