Berkshire Hathaway’s reinsurance units shrink in Q3

Both of Berkshire Hathaway’s reinsurance units shrank in the third quarter of 2016, a reflection of the competitive market conditions as the company stressed it is declining business where it believes the price is inadequate.

General Re’s revenues dropped to $1.38 billion compared with £1.4 billion in the same period a year earlier; revenues generated by Berkshire Hathaway Reinsurance Group fell slightly to $1.87 billion compared with $1.89 billion the year before.

Overall premiums earned by Gen Re’s property/casualty businesses decreased to $643 million compared with $683 million the year before.

“In the third quarter of 2016, property/casualty premiums written were relatively unchanged from 2015, reflecting a modest increase in North America, offset by modestly lower volume in international markets.

“In the first nine months, property/casualty premiums written in 2016 declined $215 million (9%) compared to 2015, primarily due to lower volume in international treaty and broker market business, and to a lesser degree, to unfavorable foreign currency exchange rate changes,” the company said in its 10K.

“In 2016, premiums earned decreased $40 million (6%) in the third quarter and $200 million (9%) in the first nine months as compared to the same periods in 2015. The declines in earned premiums reflected lower volume and unfavorable changes in foreign currency exchange rates.

“Insurance industry capacity remains high and price competition in most property/casualty reinsurance markets persists. We continue to decline business when we believe prices are inadequate. However, we remain prepared to write substantially more business when more appropriate prices can be attained,”

Its insurance units enjoyed some growth, however, with GEICO’s revenues increasing to $6.4 billion in the period compared with $5.7 billion a year earlier; revenues in the Berkshire Hathaway Primary Group increased to $1.6 billion compared with $1.4 billion a year earlier.

Earnings generated by its insurance operations also fell in the third quarter to $272 million in the third quarter compared with $414 million a year earlier.

“Earnings of our insurance underwriting operations were lower in the third quarter and first nine months of 2016 as compared to 2015. In the first nine months of 2016, the Berkshire Hathaway Reinsurance and Primary Groups generated lower net underwriting earnings while GEICO and General Re had earnings increases,” the company said.