Berkshire Hathaway Reports Significant Growth in Insurance Underwriting Earnings for 2024
Berkshire Hathaway, led by the renowned investor Warren Buffett, has announced a remarkable 66% year-on-year increase in net underwriting earnings from its insurance and reinsurance divisions for the year 2024, totaling $9.02 billion. This impressive performance underscores another strong year for Berkshire’s reinsurance operations, where the underwriting results from both the Berkshire Hathaway Reinsurance Group and GEICO more than compensated for a decline observed in the primary insurance segment.
Despite facing estimated claims of $1.2 billion attributed to Hurricanes Helene and Milton across its reinsurance businesses, the overall underwriting results remained robust. Looking ahead, Berkshire anticipates that its Q1 2025 results will reflect losses associated with the January wildfires in Los Angeles, with current estimates suggesting pre-tax losses of approximately $1.3 billion for its insurance group.
Detailed Analysis of 2024 Financial Results
In examining the 2024 results more closely, Berkshire’s reinsurance arm recorded net underwriting earnings of $2.7 billion, a significant increase from $1.9 billion in the previous year. This growth was primarily fueled by a 9% improvement in the property and casualty (P&C) results, which reached $3.8 billion. However, the life and health segment experienced a decline, contributing $223 million to the total.
The retroactive reinsurance segment reported a loss of $846 million for 2024, alongside a periodic payment annuity loss of $597 million, both of which were lower than their 2023 figures of $1.5 billion and $650 million, respectively. P&C premiums written decreased by 2.1% year-on-year to $21.9 billion, a decline attributed to reduced property volumes. However, this was partially mitigated by generally higher rates, new business opportunities, and increased participation in certain casualty lines. Premiums earned saw a modest increase of 1.4%, rising to $22.2 billion in 2024.
Loss and loss adjustment expenses fell by 3.3% year-on-year to $12.2 billion, with substantial catastrophe-related losses of $800 million reported in 2024, a decrease from $900 million in 2023. Berkshire noted a reduction of $1.7 billion in estimated ultimate liabilities for losses from prior accident years, largely due to lower-than-expected losses in the property line of business. The P&C reinsurance underwriting expenses experienced a slight uptick, resulting in a ratio of 27.8% compared to 26.3% in 2023. Overall, the P&C combined ratio improved to 82.9% for 2024, compared to 84% in the previous year.
Performance of the Life and Health Segment
In the life and health reinsurance sector, premiums written remained stable at $5 billion in 2024, while premiums earned saw a slight decrease to $4.99 billion. This decline was influenced by a reduction of $161 million related to the commutation of several U.S. life contracts in Q1 2023. Underwriting earnings for this segment decreased by $131 million year-on-year, totaling $4.8 billion, which included gains from life contract commutations of $53 million.
The Berkshire Hathaway Primary Group, the entity responsible for the company’s primary insurance activities, reported pre-tax underwriting earnings of $855 million in 2024, down from $1.4 billion in 2023. This decline was attributed to an increase in loss and loss adjustment expenses, which rose by $1.4 billion year-on-year to $12.7 billion. Berkshire clarified that losses incurred included reductions in estimated ultimate losses for claims from previous accident years, amounting to $52 million in 2024 compared to $537 million in 2023. This decline reflected a significant rise in loss estimates at GUARD and lower reductions in estimated losses across several other businesses writing medical professional liability and commercial liability coverages. Conversely, there were increased reductions in property loss estimates.
In 2024, premiums written at the primary insurance arm increased to $18.8 billion from $18.1 billion in 2023, largely due to growth at NICO Primary, BH Direct, and BHHC, although this was partly offset by a 16.3% reduction at GUARD. Premiums earned also rose to $18.7 billion in 2024, up from $17.1 billion the previous year.
GEICO’s Performance and Future Outlook
At GEICO, a prominent provider of property and casualty insurance, particularly for private passenger automobiles, pre-tax underwriting earnings soared to $7.8 billion in 2024, a significant increase from $3.6 billion in 2023. This surge was driven by higher average premiums per auto policy, reduced claims frequencies, and enhanced operational efficiencies. Premiums written rose by $3.1 billion to $42.9 billion, while premiums earned increased to $42.2 billion, up from $39.2 billion.
Loss and loss adjustment expenses for GEICO decreased by 4.7% year-on-year to $30.3 billion, which included $360 million in losses from Hurricanes Helene and Milton. Furthermore, the reductions in ultimate loss estimates for prior accident years’ claims amounted to $550 million in 2024, compared to $1.5 billion in 2023.
Overall, Berkshire’s insurance investment income rose to $13.7 billion in 2024, up from $9.6 billion in 2023. On a consolidated basis, the company’s float has increased from approximately $129 billion at the end of 2019 to around $171 billion by the end of 2024.
Buffett’s Insights on the Insurance Business
In his annual letter to shareholders, Warren Buffett reflected on the performance of the insurance and reinsurance sectors, stating, “Our insurance business also delivered a major increase in earnings, led by the performance of GEICO. In five years, Todd Combs has reshaped GEICO in a major way, increasing efficiency and bringing underwriting practices up to date. GEICO was a long-held gem that needed major repolishing, and Todd has worked tirelessly in getting the job done. Though not yet complete, the 2024 improvement was spectacular.”
Buffett further noted, “In general, property-casualty (P/C) insurance pricing strengthened during 2024, reflecting a significant increase in damages from convective storms. Climate change may have been announcing its arrival. However, no ‘monster’ event occurred during 2024. Someday, any day, a truly staggering insurance loss will occur – and there is no guarantee that there will be only one per annum.”
Source: Reinsurance News
