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Management’s Discussion (Continued)
Insurance—Underwriting (Continued)
Life/health (Continued)
Premiums written in 2012 increased $93 million (3.2%) and earned premiums increased $91 million (3.2%) from 2011.
Excluding the effects of foreign currency exchange rate changes, premiums written and earned in 2012 increased $239 million
(8.2%) and $236 million (8.2%), respectively, compared to 2011. The increases in premiums written and earned were primarily
attributed to increased writings in non-U.S. life business. The underwriting results for 2012 were negatively impacted by a
premium deficiency reserve that was established on the run off of the U.S. long-term care book of business as well as greater
than expected claims frequency and duration in the individual and group disability business in Australia. Underwriting results
for 2011 included losses of $15 million attributable to the earthquake in Japan, offset by lower than expected mortality in the
life business.
Berkshire Hathaway Reinsurance Group
Through BHRG, we underwrite excess-of-loss reinsurance and quota-share coverages on property and casualty risks for
insurers and reinsurers worldwide. BHRG’s business includes catastrophe excess-of-loss reinsurance and excess primary
insurance and facultative reinsurance for large or otherwise unusual property risks referred to as individual risk. BHRG also
writes retroactive reinsurance, which provides indemnification of losses and loss adjustment expenses with respect to past loss
events. Multi-line property/casualty refers to various coverages written on both a quota-share and excess basis and includes a
20% quota-share contract with Swiss Reinsurance Company Ltd. (“Swiss Re”) covering substantially all of Swiss Re’s property/
casualty risks incepting between January 1, 2008 and December 31, 2012. The Swiss Re quota-share contract is now in run-off.
BHRG’s underwriting activities also include life reinsurance and traditional annuity businesses. BHRG’s underwriting results
are summarized in the table below. Amounts are in millions.
Premiums earned
Pre-tax underwriting gain/loss
2013 2012 2011 2013 2012 2011
Catastrophe and individual risk ............................ $ 801 $ 816 $ 751 $ 581 $400 $(321)
Retroactive reinsurance .................................. 328 717 2,011 (321) (201) 645
Other multi-line property/casualty .......................... 4,348 5,306 4,224 655 295 (338)
Life and annuity ........................................ 3,309 2,833 2,161 379 (190) (700)
$8,786 $9,672 $9,147 $1,294 $ 304 $(714)
Catastrophe and individual risk premiums written were $807 million in 2013, $785 million in 2012, and $720 million in
2011. The level of business written in a given period will vary significantly depending on changes in market conditions and
management’s assessment of the adequacy of premium rates. We have constrained the volume of business written in recent
years. However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.
Periodic underwriting results of our catastrophe and individual risk business are subject to extraordinary volatility,
depending on the timing and magnitude of significant catastrophe losses. In 2013, we incurred losses of $20 million from floods
in Europe, while in 2012 we incurred losses of $96 million in connection with Hurricane Sandy. In 2011, we incurred losses of
approximately $800 million attributable to the earthquakes in Japan ($700 million) and New Zealand ($100 million).
Retroactive reinsurance policies provide indemnification of unpaid losses and loss adjustment expenses with respect to past
loss events, and related claims are generally expected to be paid over long periods of time. Premiums and limits of
indemnification are often very large in amount. Coverages are generally subject to policy limits. Premiums earned in 2013, 2012
and 2011 were attributed to a relatively small number of contracts. Premiums earned under retroactive reinsurance contracts in
2011 included approximately $1.7 billion from a reinsurance contract with Eaglestone Reinsurance Company, a subsidiary of
American International Group, Inc. (“AIG”). Under the contract, we agreed to reinsure the bulk of AIG’s U.S. asbestos
liabilities. The agreement provides for a maximum limit of indemnification of $3.5 billion.
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