Berkshire’s P&C reinsurance premiums leap 63%, but cats & COVID dent result

Warren Buffett’s conglomerate and re/insurance company Berkshire Hathaway continues to make its surging appetite for property and casualty reinsurance evident, with the company reporting a 63% increase in P&C reinsurance premiums written during the third-quarter of 2020.

That takes the premium growth rate for this year so far to almost 33%, as Berkshire’s reinsurance appetite accelerated dramatically from the 29% growth it reported for the second-quarter of 2020.

But at the same time the underwriting portfolio in Berkshire Hathaway’s P&C reinsurance division has been impacted by the major catastrophe losses and impacts from the COVID-19 pandemic dented its results.

Berkshire Hathaway has reported an underwriting profit for its P&C reinsurance division of $99 million, well down on Q3 2019’s $314 million.

But P&C, despite facing losses and a decline in profitability, was actually one of the brighter spots across Berkshire Hathaway’s insurance and reinsurance operations, as its reinsurance group as a whole posted a $441 million loss for the quarter and its primary insurance arm a $126 million loss.

Overall, insurance and reinsurance underwriting fell to a $213 million loss for Berkshire Hathaway in Q3 2020, while insurance related investment income was $1.015 billion, also down on the prior year.

But the growth is the real story at Berkshire Hathaway, as losses are not outsized at all for the scale of its re/insurance businesses.

63% growth in P&C reinsurance premiums written for Q3 is significant and aligns with the reports we had been hearing that Berkshire Hathaway has been much more active in quoting and binding risks at reinsurance renewals this year.

Berkshire attributes the growth to new property and casualty reinsurance contracts written, as well as increased participations on renewals.

We are already hearing that Berkshire Hathaway is likely to make its weight felt at the January renewals, as the company is expected to seek out further reinsurance growth in the hardening market environment.

The company has significant influence when it comes to renewals, given its large capital base and ability to redeploy funds to support underwriting expansion into a hardening marketplace.

Berkshire has updated the market on its losses from the COVID-19 pandemic, attributing $113 million to its P&C reinsurance business for Q3 2020 and $688 million for the year so far.

The company also broke out its largest catastrophe losses from the last quarter, revealing a $308 million hit from Hurricanes Laura and Sally.

Overall though, Berkshire Hathaway’s insurance and reinsurance operations delivered a small increase in revenues for the quarter, reporting almost $17.14 billion, up on Q3 2019’s $17.1 billion and for the first nine months of 2020 revenues of over $51.7 billion, up on the prior year’s $49.4 billion.