However, Berkshire Chairman Warren Buffett tells investors to watch operating earnings to see how the more than 90 companies his company owns are actually doing, the AP reports. 

By that measure, Berkshire’s operating earnings grew 6.6%, to more than $10 billion, or $6,928.40 per Class A share. That’s up from $9.4 billion, or $6,403.61 per Class A share, in 2022.

In March, Berkshire reported that GEICO had lost nearly $1.2 billion in currency losses and, specifically in car insurance, experienced its sixth straight underwriting loss despite increasing premiums.

In its Q1 results, Berkshire said that GEICO’s average auto policy premiums were higher, effectively increasing profit by $72 million “as average premiums per auto policy increased 15.2% due to rate increases, offset by a decrease in policies-in-force of 2.4 million (13%) since March 31, 2022.”

At the same time, advertising costs were cut back and premiums written decreased by $205 million compared to Q1 2022. The carrier’s losses and loss adjustment expenses also decreased during Q1 by $552 million, or 6.5%.

During Q2, the lion’s share of Berkshire’s revenue increase came from its acquisition of Pilot Travel Centers, which supplied nearly $15 billion during the quarter.

CFRA Research analyst Cathy Seifert told the AP that Berkshire will have a hard time keeping up that level of growth without additional acquisitions, which Buffett seems reluctant to make at current prices.

“I think the question that should be or will be on investors’ minds is, ‘How do you sustain this level of growth when many of your underlying businesses are not putting up this level of growth?’” Seifert said.

Underwriting profits at GEICO rebounded to $514 million as it raised premiums on its auto insurance customers by an average of 16% and continued to cut back on its gecko ads and paying out fewer claims, the AP reports. A year ago, GEICO reported a $487 million pretax underwriting loss. The number of policies GEICO wrote also fell by 14%

In its 2022 annual report, Berkshire included a letter from Buffett who wrote that it had been “a good year” with operating earnings, exclusive of capital gains or losses from equity holdings, set a record at $30.8 billion.

In a quarterly report released Aug. 3, the Insurance Information Institute (Triple-I) says the overall P&C industry is forecast to finish 2023 with a net combined ratio at 102.2, nearly identical to the final 2022 result of 102.4 with poor personal lines underwriting performance serving as the key driver in both years. Personal auto is forecast at 109.5 this year, according to the latest underwriting projections by Triple-I and Milliman actuaries.

Triple-I thinks P&C underlying growth could catch up on overall U.S. GDP growth going into 2024. Triple-I Chief Economist and Data Scientist Michel Léonard said the U.S. GDP will likely decrease quarterly in the second half of the year, possibly avoiding a technical recession in 2023.

“U.S. CPI will likely stay in the mid-to-upper 3% range through the end of the year,” Léonard said.

He noted that underlying growth for private passenger auto has resumed its pre-pandemic trend. “Increases in replacement costs continue to decelerate and have now returned to pre-COVID trends as supply chain backlogs and labor disruptions ended,” Léonard said.

Dale Porfilio, Triple-I chief insurance officer added that catastrophe losses in the first half of 2023 were the highest in more than 20 years and slightly higher than the record set during the first half of 2021.

“The good news is that the personal auto net combined ratio is beginning to show incremental improvement,” he said. “Moreover, commercial lines continues its strong overall performance.

“We forecast Net Combined Ratios to incrementally improve each year from 2023 to 2025, with the industry returning to a small underwriting profit in 2025.”

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