Berkshire writes $1bn of incremental P&C Re premium – “considerable volatility”

The property and casualty reinsurance business of Warren Buffett’s Berkshire Hathaway wrote an additional $1 billion of written premium in the first-half of 2023, with property exposure and higher rates the main driver.

This is on top of the premiums added through the acquisition of reinsurer TransRe, which came to Berkshire Hathaway through the Alleghany deal.

Overall, Berkshire’s first-half 2023 P&C reinsurance premiums written reached over $12.1 billion in the first-half of this year, as the incremental writings largely in property risks and the assumption of the TransRe business ballooned P&C reinsurance premiums by some 42%.

Of course, a big chunk of the incremental premium has come from Warren Buffett’s bet on Florida’s property insurance market, as the reinsurer took a $1 billion limit slice of the Florida Citizens reinsurance renewal this year.

Berkshire Hathaway is aware of the significant property catastrophe risk it has added to the business, recently its reinsurance chief Ajit Jain had acknowledged the firm’s property catastrophe reinsurance book was “very unbalanced” and still significantly exposed to Florida hurricanes.

That was before the Citizens line was assumed, or any other mid-year writings.

Today, Berkshire Hathaway said, “Given the levels of property lines written and that we generally do not retrocede the risks we assume, our periodic underwriting earnings are subject to considerable volatility from significant catastrophe events.”

P&C reinsurance underwriting earnings rose in the first-half of this year though, reaching over $1.5 billion, up from the previous year’s $1.38 billion.

The firm’s loss ratio fell, helping this result, to 59% for the first-half, down from 63.1% a year ago.

But higher expenses and acquisition costs drove the loss and expense ratio for H1 2023 to 85.5%, up from 80.1%.

Lower major catastrophe losses helped, at $528 million for H1 2023, compared to $629 million a year earlier, despite the inclusion of TransRe.

It was the better performance of the Berkshire Hathaway P&C reinsurance group and a bounce-back to form for auto insurer Geico that have driven an overall insurance profit for the conglomerate this first-half.

Net underwriting earnings across the Berkshire Hathaway insurance and reinsurance businesses reached $2.158 billion for H1 2023, far higher than the $882 million earned a year earlier.

Of course, while Berkshire Hathaway has added considerable volatility through the expansion of its property reinsurance book in 2023, the conglomerate wide performance can help to counter the effects of significant catastrophe events, with this diversified approach to multiple business segments helping to stabilise performance.