Berkshire Hathaway sees bullish Q3 growth but reinsurance drives hefty underwriting loss

Berkshire Hathaway suffered a notable downturn in its third quarter group profits, which fell to $10.3 billion, chiefly a result of a decline in investment earnings, Q3 statements published over the weekend (Nov 6) indicated.

Its operating earnings, however, cleared of select investment and showing a greater focus on insurance and other stable investment holdings, were up 18 percent year-on-year despite a decline in underwriting income in its insurance wing.

For the group, Berkshire Hathaway posted an underwriting loss of $784 million in the third quarter, compared with a prior period underwriting loss of $203 million. The vast majority of that loss ($708 million) was incurred by its reinsurance segment.

It enjoyed strong growth but claims outpaced premiums for the group. Premiums earned of $17.7 billion were up 11.4 percent year-on-year in the third quarter. Insurance claims outside life, annuity and health benefits were up 19 percent to reach $13.9 billion.

Significant cat events brought after-tax incurred losses of approximately $1.7 billion in the third quarter and $2.2 billion in the first nine months of 2021, partly offset by reductions in incurred losses for prior accident years’ loss events, management said.

Loss costs were further driven by higher private passenger auto claims frequencies and higher losses in the life reinsurance business, management said.

Q3 figures brought the 9M YTD underwriting income to a positive $356 million, down from $956 million gain in the prior year period.

Investments remain the mainstay of the larger Berkshire story, with third quarter investment income on insurance funds rising 14 percent year on year to $1.16 billion. The additional railroad, utilities and energy sector stock portfolio brought $3.03 billion in Q3 gains, a 10.6 percent gain on the prior year take.

The war chest is enormous, should Berkshire Hathaway decide to make good on acquisition promises. Cash and short-term treasuries are now at $149.2 billion.

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