Berkshire Hathaway’s underwriting negative on $2.2bn Q3 incurred losses

Warren Buffett’s conglomerate and re/insurance company Berkshire Hathaway has again demonstrated its significant exposure to major natural catastrophe and severe weather events, reporting $2.2 billion incurred loss hit in the third-quarter, the majority of which was from hurricane Ida.

As ever, when looking for where industry losses fall, Berkshire Hathaway takes its usually significant share and retains the vast majority of it.

Accident year losses for Berkshire Hathaway’s insurance and reinsurance businesses reached $2.7 billion after Q3, but the majority came due to hurricane Ida in that quarter, with $2.2 billion of incurred losses added across the group’s activities during the period.

Of the $2.2 billion, $1.7 billion was from natural catastrophes and severe weather, with Ida the main cause.

The flooding in Europe also drive losses in the period, but not as significant.

Overall, insurance and reinsurance underwriting fell to a net loss of $784 million for Berkshire Hathaway, with the catastrophes the major driver.

On the other side of Buffett’s playbook, the insurance related investment income, or float, generated $1.161 billion of positive income in the quarter, so more than balanced out the negative underwriting result.

Berkshire Hathaway’s reinsurance businesses were the worst affected by the catastrophe losses, driving that division to a $708 million underwriting loss, while the GEICO auto insurance business also felt the impacts of hurricane Ida and reported a $289 million underwriting loss and the Primary Group business fell to a $23 million underwriting loss as well.

GEICO suffered $400 million of pre-tax losses from hurricane Ida, a significant hit for an auto insurer, while the Primary insurance arm’s Q3 catastrophe losses were $260 million, largely from Ida, and the Reinsurance group was $1.5 billion in Q3, mainly from Ida and the European floods.

The P&C reinsurance business fell to a $247 million loss for the quarter, with Ida and the floods the main drivers and its combined ratio spiking towards 107% as a result.

On the positive side, Berkshire Hathaway continued to expand its P&C reinsurance business in the third-quarter of 2021, growing premiums written to $4.115 billion, up from $3.96 billion in the prior year.

For the first nine-months of 2021, premiums written by Berkshire Hathaway’s P&C reinsurance unit are now up 8% year-on-year, as it finds more underwriting business appealing in the better priced marketplace.

Berkshire Hathaway also felt the effects of pandemic related mortality during the third-quarter, with significant increases in mortality in the U.S., South Africa, India and Latin America experienced due to COVID-19, the company said.