Chicago, IL -(BusinessWire)- In a new special report, Fitch Ratings reviews the recent meaningful expansion by Berkshire Hathaway, Inc. (BRK) into the U.S. commercial lines insurance market. BRK is well known as one of the largest property/casualty insurers in the U.S. with operating franchises in reinsurance written through National Indemnity Company and General Reinsurance Corporation, and private passenger automobile insurance written through GEICO Corporation.
BRK has also quietly expanded to become the 10th largest U.S. commercial lines insurer based on 2014 direct premium volume. Fitch’s report explores the source of BRK’s premium growth, recent underwriting experience of new business, and the sustainability and credit implications of this growth.
Business expansion over the past five years has been significant with commercial lines direct premium expanding by 125% to $5.6 billion through organic growth and targeted acquisitions. Workers compensation insurance has been a key driver of this growth and BRK is now the seventh largest U.S. writer based on 2014 direct written premiums.
BRK’s commercial lines operations include several separate and distinct underwriting platforms. The Berkshire Hathaway Homestate Companies segment experienced the most significant recent growth, evolving from a regional organization that offers various coverages to smaller businesses into a nationwide organization that wrote over $1 billion in direct premiums in 2014.
Diverse commercial business segments and substantial capital resources position BRK for further market share growth that could marginalize smaller commercial lines underwriters that have less favorable market position. The 2013 formation of Berkshire Hathaway Specialty Insurance (BHSI) created a vehicle for further commercial lines expansion adding underwriting capability in a number of product lines, including: excess and surplus (E&S) lines, commercial property and professional liability insurance.
BRK’s commercial lines’ underwriting results have consistently outperformed the property/casualty industry and most peers and loss reserve experience is historically favorable. Maintaining underwriting profitability with a greatly expanded premium base in a competitive market environment may provide future challenges.
Additional information is available at www.fitchratings.com.
Source: BusinessWire