Berkshire Hathaway Reinsurance Group: Q1 2023 Results

Berkshire Hathaway Reinsurance Group (BHRG) reported Q1 2023 premiums earned of $6.2bn, up from $4.8bn in Q1 2022, driven by expansion efforts and the inclusion of TransRe Group. However, pre-tax underwriting earnings declined to $231m in Q1 2023 from $301m in Q1 2022. BHRG also reported a substantial increase in property/casualty premiums written to $6.3bn, including $1.3bn from the inclusion of TransRe Group. Losses and loss adjustment expenses increased by $1.1bn in Q1 2023 compared to Q1 2022. The article suggests that diversification in the reinsurance business is key to weathering market fluctuations.

Introduction

Berkshire Hathaway Reinsurance Group (BHRG) is a key component of Berkshire Hathaway's diversified portfolio of businesses ↗. Offering excess-of-loss and quota-share reinsurance coverages on property and casualty risks to insurers and reinsurers worldwide, BHRG plays a crucial role in the global insurance market. In addition to these core services, BHRG also writes life and health reinsurance coverages and assumes property and casualty risks under retroactive reinsurance contracts¹.

The Q1 2023 results for BHRG are of particular interest to shareholders, as they provide insights into the company's performance and strategic direction. By examining these results in comparison to Q1 2022, we can gain a better understanding of how BHRG is adapting to changes in the market and the impact of recent acquisitions, such as the inclusion of TransRe Group. This comprehensive analysis will delve into the key aspects of BHRG's Q1 2023 results, including premiums earned, underwriting earnings, property/casualty premiums, losses, expense ratio, and annuity business results.

Premiums Earned and Underwriting Earnings

In Q1 2023, BHRG reported premiums earned of $6.2 billion, a significant increase from the $4.8 billion earned in Q1 2022¹. This growth can be attributed to various factors, including the company's ongoing expansion efforts and the inclusion of TransRe Group. However, despite the increase in premiums earned, pre-tax underwriting earnings in Q1 2023 were $231 million, compared to $301 million in Q1 2022¹. This decline in underwriting earnings can be attributed to several factors, which will be discussed in further detail in the following sections.

It is important to note that while underwriting earnings have decreased, the overall growth in premiums earned is a positive sign for BHRG. This growth indicates that the company is successfully expanding its market share and diversifying its portfolio of insurance and reinsurance products. Additionally, the inclusion of TransRe Group has contributed to this growth, as it has allowed BHRG to access new markets and offer a wider range of reinsurance solutions.

Property/Casualty Premiums and Losses

In Q1 2023, BHRG reported property/casualty premiums written of $6.3 billion, including $1.3 billion from the inclusion of TransRe Group¹. This represents a substantial increase compared to Q1 2022, demonstrating the company's continued growth in this segment. The acquisition of TransRe Group has played a significant role in this growth, as it has enabled BHRG to expand its product offerings and reach new clients.

However, along with the increase in property/casualty premiums, BHRG also experienced a rise in losses and loss adjustment expenses, which increased by $1.1 billion in Q1 2023 compared to Q1 2022¹. This increase can be primarily attributed to the inclusion of TransRe Group, as well as other factors such as changes in the business mix and foreign currency exchange rate effects. While these losses may be concerning to shareholders, it is important to remember that higher losses are often a natural consequence of growth in the insurance and reinsurance industry, as companies take on more risk in order to expand their market share.

Expense Ratio and Business Mix

BHRG's expense ratio increased by 6.4 percentage points in Q1 2023 compared to Q1 2022¹. This increase can be primarily attributed to foreign currency exchange rate effects and changes in the business mix, including the impact of TransRe Group. The acquisition of TransRe Group has not only contributed to the growth in premiums earned and property/casualty premiums written but has also affected the company's expense ratio.

While an increase in the expense ratio may be concerning, it is essential to consider the context of this change. The inclusion of TransRe Group has allowed BHRG to diversify its portfolio and access new markets, which can ultimately lead to long-term growth and stability. Additionally, fluctuations in foreign currency exchange rates are a common challenge faced by multinational companies, and BHRG's management team is likely taking steps to mitigate these risks.

Annuity Business Results

In Q1 2023, BHRG reported pre-tax underwriting losses for periodic payment annuity business of $145 million, compared to $142 million in Q1 2022¹. This slight increase in losses can be attributed to various factors, such as changes in the market environment and the performance of the underlying investments. On the other hand, pre-tax gains for variable annuity guarantee reinsurance contracts were $63 million in Q1 2023, compared to $231 million in Q1 2022¹. This decline in gains can be attributed to market volatility and fluctuations in interest rates, which can impact the performance of variable annuity products.

While these results may be disappointing to shareholders, it is important to remember that the annuity business is just one aspect of BHRG's diverse portfolio. The company's overall growth in premiums earned and property/casualty premiums written demonstrates its ability to adapt to market conditions and capitalize on new opportunities.

Conclusion for Shareholders of Berkshire Hathaway

The Q1 2023 results for BHRG reveal both challenges and opportunities for the company ↗ ↗. While underwriting earnings have decreased and losses have increased, the growth in premiums earned and property/casualty premiums written demonstrates the company's ability to expand its market share and diversify its product offerings. The inclusion of TransRe Group has played a significant role in this growth, allowing BHRG to access new markets and offer a wider range of reinsurance solutions.

For shareholders of Berkshire Hathaway, these results highlight the importance of diversification in the reinsurance business. BHRG's diverse portfolio of insurance and reinsurance products enables the company to weather market fluctuations and capitalize on new opportunities. As the company continues to grow and adapt to the ever-changing insurance landscape, shareholders can remain confident in BHRG's long-term prospects and its ability to contribute to Berkshire Hathaway's overall success.

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