Berkshire Hathaway underwriting earnings rise

15 August 2022

Berkshire Hathaway underwriting earnings rose in the second quarter as reinsurance and commercial businesses offset a loss in the Geico direct motor division.

Underwriting earnings after tax increased to $US581 million ($818 million) from $US376 million ($530 million) in the quarter, while the result for the June half fell about 54% to $US628 million ($885 million).

Geico’s pre-tax underwriting loss of $US487 million ($686 million) in the quarter followed increased claims severities, mainly due to significant cost inflation in auto markets, which began to accelerate in the December half.

“Increases in used car prices are producing increased claims severities on total losses and shortages of car parts are contributing to increased claims severities on partial losses,” Berkshire Hathaway says. “In addition, injury claims severities continue to trend higher than general inflation rates.”

Commercial primary insurance earnings rose to $US242 million ($341 million) from $US166 million ($234 million) in the quarter, supported by increased premium written. The division includes Berkshire Hathaway Specialty Insurance and other insurers.

The reinsurance division benefitted from rate rises and new property business, partially offset by unfavourable foreign currency moves with the business reporting earnings of $US967 million ($1.36 billion) for the quarter, compared to a year-earlier loss of $US327 million ($461 million).

Insurance investment income for the quarter rose 56% to $US1.91 billion ($2.7 billion), while for the half it increased 27% to $US3.08 billion ($4.34 billion).