Warren Buffett’s Berkshire takes a beating on auto insurance
NEW YORK: Warren Buffett, who has long reiterated his love for insurance companies, took a painful hit on Berkshire Hathaway Inc.’s underwriting businesses as inflation continues to weigh on the company’s operating units.
Auto-insurer Geico took the biggest hit among its insurance businesses, with a pre-tax loss of US$759mil (RM3.6bil). The unit hasn’t turned a quarterly profit since the second quarter last year.
Auto insurers have struggled to keep pace with elevated used-car prices, worsening frequency and severity of accidents, and higher costs tied to medical claims and litigation related to accidents.
The broader insurance industry has also had to grapple with the aftermath of Hurricane Ian, which slammed into southwest Florida in late September causing billions of dollars in damage.
Claims frequencies in the first nine months of this year were higher across the board, Berkshire said, including property damage, injury and collision.
“Geico is definitely a pressure point to watch at Berkshire,” said Cathy Seifert, an analyst with CFRA Research, noting that a measure of future revenue was weaker than levels reported by peers. “It looks like Geico is losing market share as well.”
Still, Berkshire’s other operating units, which include railway BNSF alongside utilities and energy operations, were otherwise profitable, though revenue for railroad declined from last year as rising inflation took its toll on the Omaha, Nebraska-based company.
“While customer demand for products and services was relatively good in 2022, demand began to weaken in the third quarter at certain of our businesses,” Berkshire said in a regulatory filing. — Bloomberg
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