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Berkshire's E&SL Premiums Dropped 32%

Source: Bloomberg

Posted on 14 Jul 2010

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Warren Buffett's Berkshire Hathaway Inc. scaled back sales of the most unusual and riskiest U.S. insurance policies as prices declined and the company guarded capital for its biggest acquisition.

Berkshire's premiums from companies insured through excess and surplus policies plummeted 32% to $473.9 million in the 12 months ended March 31, SNL Financial said in a report distributed Wednesday by e-mail. That was the biggest drop among the top 30 carriers, pushing Omaha, Neb.-based Berkshire to No. 12 from No. 8 among excess and surplus insurance writers.

“Their premium decline is quite a bit more than other insurance companies,” Andrew Schukman, the SNL analyst who wrote the report, said in an interview. “That's probably an indicator that they're pulling back a bit.”

Insurers are facing price declines as they compete for business in a contracting market. Mr. Buffett, 79, Berkshire's CEO, has reduced his firm's reliance on insurance over the last decade by acquiring energy and freight businesses. Last year, he curbed Berkshire's coverage of natural-disaster risks, and in February he spent $27 billion buying railroad Burlington Northern Santa Fe Corp., his biggest acquisition.

Rates in the excess and surplus market, which includes unusual policies like “fire insurance to a fireworks factory,” have slipped for at least three years, said Mr. Schukman. American International Group Inc. posted an 11% premium decline and remained at the top of the rankings, according to SNL. Industrywide, premiums fell 5.5% to about $23 billion.

Berkshire's move

“I can't say definitively if Berkshire is moving out or if they're doing a temporary pullback,” Mr. Schukman said. “It could be that they're not getting the rates that they want and they're willing to pull back further than other companies are.”

Mr. Buffett didn't respond a request for comment sent in an e-mail to an assistant.

QBE Insurance Group Ltd., based in Sydney, was the only insurer in the top 10 to post a premium increase, more than doubling sales to $551 million. Allianz S.E., Germany's biggest insurer, slipped to 21st from 14th after posting the second- biggest premium decline, a 23% slide.

Sales in the broader U.S. property/casualty market dropped the most in five decades last year. Policy sales fell 3.7% to $419 billion, a third straight annual decline, according to an April statement from the Property Casualty Insurers Assn. of America.