Tianjin explosions cost Berkshire Hathaway $130 million in reinsurance losses

Berkshire Hathaway Inc. reported Friday its estimated losses from the Tianjin, China explosions last August were $130 million, though the Q3 underwriting gain for the Berkshire Hathaway Primary Group increased 31% year over year.

“In the third quarter of 2015, we recorded estimated losses of $130 million in connection with a property loss event in China,” Omaha, Neb.-based Berkshire Hathaway stated Friday when it reported its financial results for the quarter ending Sept. 30. All figures are in United States dollars.

On Aug. 12, explosions in Tianjin originated from a warehouse storing 700 tons of sodium cyanide, which can form a flammable gas on contact with water, the Associated Press reported at the time. As of Sept. 11, AP reported 173 were dead and eight persons were still unaccounted for. Guy Carpenter & Company LLC said at the time that the blast damaged shipping containers and vehicles, while windows several kilometres away were blown out.

Across its insurance units, Berkshire Hathaway reported Friday its net underwriting gain was $414 million in the third quarter of 2015, down 34% from $629 million during Q3 2014.

Total revenues from insurance were $10.51 billion in the latest quarter, compared to $12.717 billion in the same period in 2014. For the first nine months of the year, total revenues from insurance were $30.454 billion, compared to $31.456 billion in Q3 2014. Total Q3 revenues for Berkshire Hathaway (including railways, utilities and financial products) were $60 billion. Berkshire Hathaway, led by Warren Buffet, has ownership stakes in a variety of firms, including BNSF Railway.

Berkshire Hathaway’s insurance operations include General Re, which writes P&C reinsurance in North America on a direct basis through General Reinsurance Corporation and internationally through affiliates.

General Re had a $2-million underwriting loss in the latest quarter, compared to an underwriting gain of $126 million in Q3 2014.

“The property results in 2015 included estimated incurred losses of $44 million from an explosion in Tianjin, China during the third quarter,” Berkshire Hathaway stated of General Re in its SEC filing.

The underwriting gain for Berkshire Hathaway Reinsurance Group dropped 55%, from $443 million in Q3 2014 to $199 million in the most recent quarter, when the group incurred losses of $86 million from the Tianjin tragedy.

Through BHRG, the firm underwrites excess-of-loss reinsurance and quota-share coverages on P&C risks, including property catastrophe insurance and reinsurance. BHRG also offers retroactive reinsurance, plus life reinsurance and annuity insurance and reinsurance contracts.

The underwriting gain increased 31% for the Berkshire Hathaway Primary Group, from $143 million in Q3 2014 to $188 million in the latest quarter.

The primary group’s operations include Berkshire Hathaway Specialty Insurance, which writes commercial P&C and has a branch in Toronto. They also include National Indemnity Company.

“Overall, the claim environment in recent years has been favourable,” Berkshire Hathaway stated of its primary group.

Berkshire Hathaway reports the results of its direct auto writer – Government Employees Insurance Company (GEICO) – separately from its primary group.

GEICO had an underwriting gain of $258 million in the latest quarter, down from $264 million in 2014.

Berkshire Hathaway Reinsurance Group reported premiums written, in P&C, of $1.883 billion in the most recent quarter, up 96% from $961 million in Q3 2014.

In retroactive reinsurance, Berkshire Hathaway Reinsurance Group reported premiums written of $2 million, compared to $3 billion in Q3 2014, when the firm has a single contract, of $3 billion, with Liberty Mutual Insurance Company.

Total premiums written for the group dropped 49%, from $4.7 billion (including $741 million in life and annuity) in Q3 2014 to $2.4 billion (including $550 million in life and annuity) in the latest quarter.

“Our premium volume is generally constrained for most property/casualty coverages, and for property catastrophe coverages in particular, as rates, in our view, are generally inadequate,” Berkshire Hathaway stated of its reinsurance group. “However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.”

General Re reported $1.35 billion in premiums written in the latest quarter ($628 million in P&C) compared to $1.526 billion ($746 million on PC&) in Q3 2014.

GEICO reported $6.141 billion in premiums written in the latest quarter, up from $5.511 billion in Q3 2014.