Berkshire Hathaway Posts 33% Jump in 1Q Net on Strength of Insurance Operations
May 9, 2013 by Jeff Jeffrey
Berkshire Hathaway Inc. saw its first-quarter profit increase 33%, driven by a strong showing in its insurance and investment income, the company said in a statement. The company earned $4.9 billion.
Berkshire Hathaway’s insurance underwriting gain made a dramatic jump to $901 million, from $54 million in 2012.
The company’s first-quarter earnings filing said its insurance businesses were particularly strong on the lack of significant catastrophe losses.
Berkshire Hathaway reinsurance group’s underwriting results included pretax gains of $223 million in the first quarter of 2013 and pretax losses of $146 million in the first quarter of 2012.
Berkhshire Hathaway’s statutory surplus for its insurance businesses was about $106 billion at Dec. 31, 2012. “This superior capital strength creates opportunities, especially with respect to reinsurance activities, to negotiate and enter into insurance and reinsurance contracts specially designed to meet the unique needs of insurance and reinsurance buyers,” the company said.
General Re posted a net underwriting gain of $95 million, up from $81 million; and General Re’s property/casualty operation posted a 3.1% jump to $758 million. The life/health operations produced an underwriting loss of $1 million, compared to an underwriting gain of $35 million in 2012.
Geico posted an underwriting gain of $266 million, more than double the previous year’s.
Geico’s loss ratio was 76.2% compared to 73% in 2012. In the first quarter of 2013, claims frequencies for property damage and collision coverages increased by between 2% and 3% compared to the first quarter of 2012. The company attributed the jump to more severe winter weather.
Premiums earned in the first quarter by Berkshire Hathaway’s primary group rose to $713 million in 2013 from $507 million. The increase was partly due to the inclusion of Guard Insurance Group, which the company acquired in December. In January, A.M. Best upgraded several of Guard Insurance Group’s subsidiaries from A- (Excellent) to A+ (Superior), partly because of “the implicit and explicit financial support” provided by Berkshire Hathaway Inc. (Best’s News Service, Jan. 25, 2013).
Berkshire Hathaway also saw some high-profile personnel additions last month. Four senior American International Group Inc. executives resigned April 25 to join Berkshire Hathaway.
The executives that left AIG were: Peter Eastwood, president and chief executive officer of AIG Property/Casualty for the Americas; David J. Bresnahan, president of Lexington Insurance Co.; David Fields, AIG’s global head of casualty insurance; and Sanjay Godhwani, president of AIG property/casualty for Latin America and the Caribbean (Best’s News Service, April 26, 2013).
Most Berkshire Hathaway companies currently have an A++ (Superior) Best’s Financial Strength Rating. Shares of Berkshire Hathaway Inc. (NYSE: BRK.A) closed at $162,904.00 on May 3, up 1.27% from the previous close.
(By Jeff Jeffrey, Washington Bureau Manager: jeff.jeffrey@ambest.com)
