Berkshire Hathaway reinsurance reports significant losses in Q2 and H1 2019 results

Total net earnings for Berkshire Hathaway Inc were up in the second quarter of 2019 and in the half year compared to 2018 but the firm’s reinsurance group reported significant pre-tax underwriting losses.

The company reported net earnings in the second quarter of 2019 of $14.07 billion up from $12.01 billion for the same quarter a year earlier. While net earnings for the first half of 2019 rose to $35.73 billion from $10.87 billion in the first six months of 2018.

However, Berkshire’s operating net earnings for insurance underwriting fell to $353 million in Q2 2019 from $943 million for Q2 2018, while the H1 figure for 2019 had dropped to $742 million from $1.35 billion in the first half of 2018.

Losses at Berkshire Hathaway Reinsurance Group were over $100 million accounting, in part, for the drop in insurance overall. For this group, the company reported pre-tax underwriting losses of $104 million in the second quarter of 2019 compared to gains of $297 million in the same period a year before. While the reinsurance half year results told a similar story with losses of $357 million in 2019 down from gains of $39 million in H1 2018.

The report said: “The timing and amount of catastrophe losses can produce significant volatility in our periodic underwriting results, particularly with respect to our reinsurance businesses. Generally, we consider pre-tax losses in excess of $100 million from a current year event as significant.”

The firm’s private passenger automobile insurance service GEICO reported $393 million gains in pre-tax underwriting in Q2 2019 down from $673 million for the same three months the year previously. H1 2019 results were also lower at $1.16 billion compared with $1.35 billion in H1 2018.

Berkshire Hathaway Primary Group reported a fall in its pre-tax underwriting gains to $167 million in Q2 2019 from $234 million for the same period in 2018, while the six month figures showed $137 million for 2019 down from $333 million in 2018.

The firm’s operating net earnings insurance investment income had increased to $1.36 billion in Q2 2019 from $1.14 billion Q2 2018, and the H1 figures also showed an increase to $2.6 billion in 2019 from $2.15 billion in the same period a year before.

The report said: “Our insurance businesses generated after-tax earnings from underwriting of $353 million in the second quarter and $742 million in the first six months of 2019. In 2019, insurance underwriting included gains from primary insurance and losses from reinsurance. Earnings from insurance underwriting in 2019 included lower gains from reductions of claim liability estimates for prior years’ property/casualty loss events than in 2018. After-tax earnings from insurance investments increased 19.6 percent in the second quarter and 20.8 percent in the first six months of 2019 over the same periods in 2018. These increases reflected higher average short-term interest rates and increased dividend income.”

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