Primary insurance growth fuels better earnings

The insurance operations of Berkshire Hathaway made a collective net underwriting profit of $887m for the first nine months of 2010, up 44% on the $614m it made in the same period of 2009.

Pre-tax underwriting income for the four-strong division, which comprises motor insurer Geico, General Re, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group, was $1.37bn, up from $945m in the first nine months of 2009.

The increase was attributable to Berkshire’s insurance operations. Geico’s underwriting profits doubled to $917m from $459m. This followed a 5% increase in earned premiums to $10.6bn from $10.1bn. Berkshire Hathaway Primary’s profit increased 233% to $133m from $40m.

However, the two reinsurance divisions provide a drag on performance. Underwriting gains at General Re slipped 14% to $384m in the first nine months of 2010 from $446m in the same period last year, while Berkshire Hathaway Reinsurance made a loss of $68m compared with a break-even result in the first nine months of 2009.

General Re’s property results included $304m of catastrophe losses, primarily from the Chilean and New Zealand earthquakes and weather-related losses in Europe, Australia and New England.

Berkshire Hathaway Reinsurance’s underwriting loss was driven by a $313m underwriting loss in the retroactive reinsurance business and a $163m underwriting loss in the life and annuity business. These losses were offset by a $290m underwriting gain in the catastrophe and individual risk business and a $118m underwriting gain in its ‘other multiline’ segment.