BRKA and Warren Buffett, Hi Tim, I had not seen that article thank you for mentioning it. I know you are right that the reinsurers ended up taking on business they should not have.
It is an interesting environment now that they have much greater pricing power and have also just gone through a kitchen sink Quarter, of writing down everything that they can.
what are some of the big reinsurers that might be of potential interest, and what about some of the big European ones, Like Swiss Re, AXA etc?
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February 6, 2002
EARNINGS
February 6, 2002
Berkshire Hathaway's Earnings
To Include Loss at General Re
By PATRICIA CALLAHAN and CHRISTOPHER OSTER
Staff Reporters of THE WALL STREET JOURNAL
COPING WITH LOSSES
• Buffett Admits Insurers Made 'Huge Mistake'3
11/12/01
Berkshire Hathaway Inc. said its fourth-quarter earnings will include a pretax underwriting loss of about $1.27 billion resulting from operations at its General Re global reinsurance unit.
Berkshire said its other insurance units had a fourth-quarter underwriting profit that reduced the total underwriting loss to about $1 billion.
The conglomerate run by billionaire investor Warren E. Buffett said about $570 million of General Re's fourth-quarter loss resulted from insufficient reserves taken in 2000 and prior years in its North American property casualty reinsurance operation. These prior-year loss estimates already had been increased by $206 million during the first nine months of 2001. "This under-reserving occurred in almost all areas of General Re's casualty business," the company said.
bulk of the losses are unrelated to the Sept. 11 terrorist attacks.
Analysts saw the disclosure of the loss -- released after the close of trading on the New York Stock Exchange -- as a housecleaning move after executive changes made last year. Joseph Brandon became chief executive officer of General Re Oct. 1, succeeding Ronald E. Ferguson. Mr. Brandon had been Gen Re's executive vice president.
"I attribute this to a cleaning up of errors that were made prior to the management change," said Alice Schroeder, an insurance analyst at Morgan Stanley Dean Witter. The new management, Ms. Schroeder says, is trying "to get the balance sheet right."
In a letter to shareholders in November, Mr. Buffett said General Re wasworking its underwriting practices "with a new urgency," uding avoiding business that involved moral risks or dealing with dishonorable or unethical clients. He also said an insurer should confine its underwriting to businesses that could withstand a significant loss and still report a profit, and it should limit the business it accepts to avoid numerous losses from a single event that could threaten the company's solvency. "All those rules were broken at General Re," Mr. Buffett said in the letter.
The company said the fourth-quarter underwriting loss also included an increase of $170 million to the estimated World Trade Center losses reported in the third quarter and an extra $100 million related to other losses reported during the first nine months of 2001. An additional $46 million in losses comes from Enron-related coverage and $143 million from a large property loss in its international division.
Ms. Schroeder has called the current reporting period kitchen sink" quarter for the industry because several insurers have reported losses that "a public company might be reluctant to make in a more normal quarter when investors would be less tolerant of misses."
But Berkshire said that its just-announced underwriting loss "does not fall in this category but rather reflects information that General Re's management and actuaries have learned during the quarter that leads them to believe new reserve levels are required" to estimate its reinsurance liabilities as of Dec. 31, 2001.
Since Sept. 11, investors have been forgiving of big losses and reserve increases reported by insurers, and have used more on premium-rate increases that are averaging nearly 30% in property and casualty insurance lines.se rate increases come er a decade-long price war in the industry that helped create the types of underwriting es Berkshire now faces.
A smaller insurer, W.R. Berkley Corp. of Greenwich, Conn., said Tuesday that it would increase loss reserves by $55 million in the fourth quarter and that it expected to have a loss of $2.05 a share in the fourth quarter. Berkley said it will release its full earnings next week. Despite the announcement, in 4 p.m. New York Stock Exchange composite trading Tuesday, Berkley shares were up 22 cents to $50.82. |
