By Jamie McGee
March 15, 2010, 1:54 PM EDT
March 15 (Bloomberg) — Munich Re and Warren Buffett’s Berkshire Hathaway Inc. are among reinsurers reporting a third straight quarterly increase in policyholders’ surplus as capital markets improve and earnings rise.
The combined surplus of 19 U.S. property-casualty reinsurers rose to $77.32 billion in the fourth quarter, the Reinsurance Association of America said today in a report. The surplus, a measure of assets minus liabilities, climbed 20 percent in 2009 from $64.36 billion a year earlier.
“It is a combination of a much stronger financial market and solid profits in 2009, particularly because we didn’t have any major catastrophe events,” said Paul Newsome, an analyst at Sandler O’Neill & Partners LP. “Surplus will probably increase in 2010 because we will hopefully be having a reasonably stable financial market and the reinsurers have been pretty disciplined in their underwriting.”
Berkshire Hathaway and Munich Re, the world’s largest reinsurer, reported profit increases in the fourth quarter from a year earlier as investments improved. Only two tropical storms struck the U.S. in 2009, compared with 2008 when Hurricanes Ike and Gustav contributed to $27 billion in costs to insurers, according to the Insurance Information Institute.
Munich Re’s surplus rose 7.8 percent from the third quarter to $3.93 billion. The Munich-based reinsurer’s fourth-quarter profit increased sevenfold to 780 million euros ($1.07 billion). National Indemnity Co., owned by Omaha, Nebraska-based Berkshire Hathaway, reported an 11 percent surplus gain to $38.06 billion. The parent company’s profit increased to $3.06 billion in the last three months of 2009.
Prices
“Usually if you are in a period where you have excess capital, like the industry has, it does not bode well for pricing,” said Michael Paisan of Stifel Nicolaus & Co. “Demand has stayed stagnant and probably has decreased somewhat because of the economic problems.”
Global reinsurance prices dropped 6 percent for policies renewed Jan. 1, according to Guy Carpenter & Co., the reinsurer unit of Marsh & McLennan Cos. This compares with an 8 percent increase a year earlier.
–Editors: Dan Reichl, Steve Dickson
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