Insurance company results drop at Berkshire Hathaway in Q1

Warren Buffett Berkshire Hathaway Insurance industry
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The property and casualty business is sliding when compared to last year’s figures.

Warren Buffett Berkshire Hathaway Insurance CompanyIn the first quarter of this year, the primary property and casualty Berkshire Hathaway insurance company operations have managed to record gains in the double digits for their pre-tax earnings, but this isn’t all good news.

The reinsurance results have led to an operating earnings drop of 6.6 percent overall for the conglomerate.

When Berkshire Hathaway Reinsurance Group’s first quarter figures are compared to the earnings from the first quarter of 2013, the situation looks even worse. The reason is that if the life and P&C insurance company operations are considered together, this leads to a pre-tax underwriting earning results drop of a massive 48.5 percent.

When looking exclusively at the P&C insurance company results, there is a notable dip, though not quite as large.

From the side of the property and casualty underwriting, alone, the earnings fell by 27 percent, to reach a pre-tax total of $786 million. However, when looking only at P&C operations, there decline is explained when the Berkshire Hathaway Reinsurance Group’s performance is taken into account. The primary operations saw an underwriting profit spike of 41 percent, and General Reinsurance didn’t experience any underwriting results changes when compared to the same time in 2013.

Of the P&C drop of $423 million at Berkshire Hathaway Reinsurance Group, about half can be explained by foreign exchange rate changes that were used for the valuing of reinsurance liabilities. The total slide was from $661 million to $238 million, which was a plummet of 64 percent.

Furthermore, Berkshire Hathaway Reinsurance Group saw a $235 million net gain in last year’s first quarter on a Swiss Re quota-share. That the first quarter of this year did not see any similar gain helps to provide an explanation for the remainder of the fall in the P&C insurance company earnings. Within the earnings report from Q1 2013, it was noted that of the $235 million gain, $210 million was linked to a drop in the prior year’s estimated liabilities losses. The contract for the 20 percent quota-share was not renewed by Swiss Re for almost all of its P&C risk occurring from the beginning of 2008 to the end of 2012, and that contract is currently in runoff.

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