Dropping insurance underwriting in Q4 2019 struck Berkshire Hathaway where it hurts

Insurance underwriting - Warren Buffett
Mogix UV Light Sale

Warren Buffett’s company was able to recover last year despite those dragging results.

Berkshire Hathaway was able to see substantial recovery in the last quarter of 2019, but that was in spite of the group’s lagging insurance underwriting result.

The recovery was an important one as the same quarter in 2018 saw a significant loss overall.

Warren Buffett’s multinational conglomerate issued a release last weekend. In it, they revealed that their insurance underwriting brought in a $857 million operating loss. Berkshire Hathaway’s income through insurance investing, utilities, railroad and energy, and other businesses all posted earnings within last year’s Q4. This was enough to offset the underwriting losses.

For the year in its entirety, the insurance underwriting operations posted an operating income of $325 million. That was substantially lower than the figure from 2018, which had been $1.6 billion. Across the group, there was $4.4 billion in operating earnings during Q4, which was a $5.7 billion drop compared to the same quarter a year before. Last year’s overall operating earnings slid slightly to $24 billion after having been $24.8 billion in 2018.

The insurance underwriting losses were a clear low point in the company’s overall performance.

At the same time, the full-year results were worth $81.4 billion in net earnings. That was a dramatic improvement over the $4 billion figure Berkshire saw in 2018.

“Due to a change in Generally Accepted Accounting Principles (GAAP) in 2018, we are required to include the changes in unrealized gains/losses of our equity security investments as a component of investment gains/losses in our earnings statements,” said the company in its recently published release.

Buffett issued a letter to shareholders at the start of the weekend. Within it, he explained how new GAAP rules had impacted the company. He also encouraged those looking at the results to place their primary focus on the operating earnings.

The letter, which was 12 pages in length, stated that the majority of investor funds were “deployed in controlled businesses that achieve good-to-excellent returns” He also underscored that “Our insurance business has been the superstar.” Though the insurance underwriting may have drooped, the C.E.O. continued to hold to his believe that Insurance underwriting - Warren Buffettproperty/casualty business continues to carry the company and propel its growth forward as it has “since 1967”.

Related posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.