The company’s income was black, even when its P/C reinsurance experience notable losses.
Berkshire Hathaway recently reported that despite the widespread losses it saw in insurance on the whole, it managed to see property/casualty underwriting profit last year due to GEICO’s performance.
The number two insurer in the United States managed to more than double its profits from 2019.
The results GEICO brought Berkshire Hathaway brought its full-year property/casualty income into the black, despite having seen underwriting losses in P/C reinsurance in both 2019 and 2020. All tolled, GEICO brought in $3.4 billion in pre-tax underwriting profit, combined with $110 million from Berkshire’s operations in commercial primary insurance, were more than enough to offset the pre-tax losses of about $2 billion that the conglomerate’s reinsurance group experienced.
The P/C insurance and reinsurance operations brought in a total underwriting profit of $1.5 billion last year, when compared to $640 million the year before. The auto insurance company managed to be profitable, even within the six-month span of time that it issued a total of $2.9 billion in pandemic-related premiums reductions. That premiums giveback program was in recognition of the fewer cars on the roads. As fewer people were driving in the pandemic, the risk of collision also decreased.
Berkshire’s underwriting profit was solidified by the auto insurer even with the giveback program.
The personal auto insurance company’s overall written premiums were only down by about $1 billion last year when compared to the year before. This includes the reductions that were issued to auto insurance policyholders across the United States for half the year. Throughout that year, GEICO’s earned premiums fell by under $0.5 billion. Moreover, the reduced claims frequencies dropped the insurer’s combined ratio down from 2019’s figure by about 5.5 points to 90.2, according to a Forbes report.
Though GEICO experienced a reduction in incurred losses last year due to the shutdowns and lockdowns during the pandemic, helping to explain its underwriting profit strength, Berkshire’s P/C reinsurance options experienced $964 million in losses due to COVID-19’s impact. Another $667 million in losses was added to that total due to wildfires and hurricanes.