Pretax underwriting losses in both its property/casualty and life and health operations adversely affected the first-quarter performance of Berkshire Hathaway Inc.'s General Re. Corp. unit.

But in all, Berkshire Hathaway's insurance businesses, which include personal lines automobile insurer GEICO, posted pretax income of $1.84 billion, including investment income of $1.09 billion, for the quarter.

Gen Re's property/casualty business produced aggregate pretax underwriting losses of $14 million in the first quarter, compared with gains of $101 million during the same period of 2014. The combined ratio deteriorated to 103.0% from 94.6%.

The total underwriting losses included $9 million in workers compensation.

Gen Re's property/casualty net written premiums dropped 16% in the first quarter of 2015 from a year earlier to $222 million, Berkshire Hathaway reported on Friday after the close of markets.

'Adequate' pricing sought

“Insurance industry capacity to write business remains high and price competition for most property/casualty markets persists,” the insurer said in a Securities and Exchange Commission filing. “We continue to decline business when we believe prices are inadequate. However, we remain prepared to write more business when appropriate prices can be attained relative to the risks assumed.”

The life and health business produced pretax underwriting losses of $33 million in the first quarter, bringing total underwriting losses for Gen Re to $47 million.

“In 2015, we increased liabilities for life benefits as a result of the reduction of discount rates in Europe and Australia,” Berkshire Hathaway said in its SEC filing.” In addition, we experienced foreign exchange losses on our international business and greater-than-expected loss activity from our North America operations.”

Reinsurance gains

The story was different at Berkshire Hathaway Reinsurance Group, which posted underwriting gains of $531 million, an increase of 82.4% from that of the same period a year earlier. The combined ratio improved to 68.3% from 90.9% in the first quarter of 2014.

“There were no losses from significant catastrophe events in 2015 or 2014,” Berkshire Hathaway said in its filing.” Underwriting results included foreign currency exchange rate gains of $167 million in the first quarter of 2015 compared to losses of $37 million in 2014.”

Net written premiums, however, dropped 2% to $1.37 billion.

“Our volume for most property/casualty coverages, and for property catastrophe coverages in particular, continues to be constrained,” Berkshire said in its filing. “Rates, in our view, are generally inadequate. However, we have the capacity and desire to write substantially more business when appropriate pricing can be obtained.”

The Berkshire Hathaway Primary Group, which includes numerous independently managed insurance businesses including the National Indemnity Company Group, posted underwriting gains of $175 million, a 76.8% increase from that of a year earlier.

The combined ratio for the group improved to 85.5% from 89.6% during the same period a year earlier.

“Overall, the claim environment in recent years has been favorable,” Berkshire Hathaway said in its filing. “However, these primary insurers write primarily liability and workers compensation business, and related claims settlements may occur over lengthy time periods. It should not be assumed that the current claim experience, loss ratios or underwriting results will continue into the future”.

Reinsurance competition

Analysts said reinsurance competition is a major factor for Berkshire Hathaway and the sector in general.

Reinsurance is not as good a business as it once was and may never be as capital is flooding in,” Cliff Gallant, an analyst at Nomura Securities International Inc. in San Francisco, said in a research note. ”Reinsurance is seen as a trendy new asset class, attractive for its uncorrelated return attributes.”

“We expect Gen Re and (Berkshire Hathaway Reinsurance Group's) premium volumes and margins to generally decline in the remainder of 2015 and beyond, reflecting enduring reinsurance price competition and some fallout from Berkshire's increasing pursuit of primary premium volumes at the likely expense of some former cedents,” Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore, said in a research note.

“Quarterly underwriting results depend largely on Mother Nature, but we anticipate an eventual reversion toward normal catastrophe losses and likely continuing adverse development on asbestos and environmental claims,” Mr. Shields said.