After a 2017 cat loss bill of $3bn, Berkshire Hathaway’s 3Q 2018 modest cat losses of $372mn are a fraction of rivals, such as AIG’s hefty $1.62bn and Swiss Re’s $1.1bn.

Over the weekend, the Warren Buffett-led conglomerate said losses from Hurricane Florence and Typhoon Jebi are expected to cost the firm’s P&C (re)insurance units $372mn while it separately estimated that losses from October’s Hurricane Michael are expected to be in the $350mn-$550mn range.

The largest component of its 3Q cat losses came in its NICO unit with losses of $267mn from Florence and Jebi vs $2.29bn relating to Hurricanes Harvey, Irma and Maria in 3Q 2017.

In its full year 2017 accounts, Berkshire noted that it was withdrawing from reinsurance business where it believed pricing was weak.

“Industry capacity dedicated to property and casualty markets remains high and price competition in most reinsurance markets persists. We continue to decline business when we believe prices are inadequate”, it explained.

NICO - which is part of Berkshire Hathaway’s reinsurance operations led by Ajit Jain - said its premiums in the third quarter of 2018 were down 11.5 percent vs 2017.

This is despite approximately 40 percent of NICO’s 9 months earned premiums emanating from its 10-year, 20 percent quota share deal with Australian insurer IAG.

This apparent scaling back of cat reinsurance capacity meant the conglomerate’s share of third quarter cat losses is substantially lower than many in its peer group.

Last week, AIG confirmed its 3Q pre-tax cat losses were a substantial $1.62bn, even higher than Swiss Re which said it expects net cat losses of $1.1bn. (see table).

Berkshire-Hathaway's-modest-Q3-cat-loss-burden

Swiss Re is the largest Japanese cat reinsurer while AIG is the largest foreign-owned insurer in Japan with a market share of 6 percent, and 10 percent in the Jebi-affected region.

Separately, shares in Lloyd’s insurer Hiscox were down around 7 percent today after posting a higher-than-expected $125mn of losses from the 3Q cats

Berkshire Hathaway Reinsurance Group - which includes NICO and General Re - returned to underwriting profit in the third quarter after last year’s heavy losses, excluding its writing of retroactive or legacy reinsurance business.

The group’s reinsurance units made an underwriting profit of $67mn in the third quarter vs a loss of $1486mn in the third quarter 2017 with NICO’s loss of $29mn absorbed by General Re’s gain of $96mn.

However, the retroactive reinsurance arrangements entered into by Berkshire posted an underwriting loss for the quarter.

Pre-tax underwriting losses from retroactive reinsurance contracts - such as the giant $10.2bn stop loss AIG legacy deal in 2017 - in the third quarter were $246mn compared to $287mn in the same period in 2017.

At a group level, operating profits at the giant conglomerate were $6.88bn, up from $3.44bn in the previous year and higher than the Wall Street consensus estimate of $6.11bn.

The firm also repurchased $928bn of stock in the three-month period after the company changed a rule that had restricted stock buybacks and suggesting Buffett sees a shortage of investment options.

In January, longtime Warren Buffett lieutenant and mooted successor Jain was named to the Berkshire Hathaway board as vice chairman of insurance operations in a move that the legendary investor said prepares the way for his eventual successor.