UK (Commonwealth) _ The Berkshire Hathaway, led by Warren Buffett, announced net underwriting earnings of $5.4 billion for the full year 2023, up from a loss the previous year across its re/insurance activities.
The firm’s re/insurance companies all fared well in 2023, although the positive return of $5.4 billion contrasts with a loss of $30 million in 2022 and a gain of $870 million in 2021. Starting with Berkshire Hathaway Reinsurance Group, the segment’s performance in P&C and L&H reinsurance helped the underwriting result increase from about $1.5 billion in 2022 to $1.9 billion in 2023.
While the L&H reinsurance result increased from $109 million to $354 million, the P&C reinsurance underwriting result improved from $2.2 billion in 2022 to $3.5 billion in 2023. This more than balanced out a reduction in retroactive reinsurance to -$1.5 billion and a little decrease in the unit’s monthly payout annuity to $650 million.
According to Berkshire, the pre-tax underwriting profits of the reinsurance arm grew by $76 million in 2022 and the pre-tax underwriting losses decreased by $175 million in 2021 as a result of the retroactive implementation of ASU 2018-12. Reinsurance premiums earned increased in value from $21.8 billion in 2022 to over $27 billion in 2023. P&C saw a rise in premiums from $16 billion to $22 billion, and a little drop in L&H from $5.2 billion in 2022 to $5.1 billion.
In P&C, premiums issued in 2023 climbed to $22.4 billion from 2022, a 31.8% rise. Of that amount, $5.3 billion is related to TransRe Group. The company credits increased rates and net gains in new property cover for the boost in premiums issued. In recent years, we have written a sizable amount of real estate business, and we typically do not retrocede the risks we take. Significant catastrophe loss occurrences might cause significant fluctuation in our periodic underwriting results, according to the business.
With $3.2 billion in losses from TransRe, losses and loss adjustment costs rose $2.1 billion to $12.7 billion in 2023 on an annual basis. In 2023, in 2023, losses from major current-year disasters were $900 million, as opposed to $2 billion in 2022. In comparison to 2022, when the expected final liabilities for losses incurred in previous accident years were $1.6 billion, in 2023 they were reduced to $1.4 billion.
Using the Berkshire Hathaway Primary Group as an example, underwriting earnings climbed from $393 million in 2022 to $1.4 billion in 2023. The group is made up of many separately managed companies that offer a range of insurance solutions, most of which are commercial.
The amount of written premiums rose by 24.1% annually to $18.1 billion, while the amount of earned premiums climbed from $13.7 billion in 2022 to $17.1 billion in 2023. Increases at BHSI (16%), USLI (16%), BHHC (15%), and MedPro Group (10%) across a range of coverages and in many markets are credited by Berkshire with the rise. Damages and loss adjustment costs rose to $11.2 billion in 2023, a 13.5% annual rise from the previous year. However, losses from major disasters decreased to $37 million in 2023 from $641 million in 2022. As a result of changes in the business mix, including the effect of RSUI and CapSpecialty, and reduced losses from current year catastrophes, the loss ratio fell by 6.4 percentage points in 2023 compared to 2022.
Underwriting earnings at GEICO, which specializes in writing private passenger automobile insurance, increased to $3.6 billion in 2023 from a $1.9 billion loss in 2022. This was due to a number of factors, including higher average premiums per auto policy, fewer claims, lower estimates of claims from prior accident years, and lower advertising costs.
Despite this, the company reports that increased labor expenses, medical inflation, and the cost of vehicle repair components all contributed to an increase in average claims severities in 2023. In 2023, GEICO had a $730 million rise in premiums issued to $39.8 billion, while premiums generated saw a modest increase to $39.3 billion.
The loss ratio dropped 12.1 percentage points to 81% at the same time as losses and loss adjustment expenses decreased $4.5 billion, or 12.4%, to $31.8 billion in 2023. This decline was primarily due to higher average premiums per auto policy, fewer claims, and more favorable development of prior accident years’ claims estimates, which were partially offset by increases in average claims severities.
Berkshire disclosed that as of December 31, 2023, float was around $169 billion across its re/insurance companies, up from $164 billion at the end of 2022 and $147 billion at the end of 2021. In 2023 and 2021, our combined insurance businesses produced pre-tax underwriting gains, and in both years, the average cost of float was negative. The company states, “Our pre-tax underwriting deficits in 2022 were $22 million, and the cost of floating was nominal.”
