Company: BRK-A
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000950170-25-025210
Chunk: 250

Company: BERKSHIRE HATHAWAY INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 7
Chunk 250
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 losses and expected reporting patterns of paid and incurred losses, taking the initial expected ultimate losses into account to determine an estimate of the expected unpaid or unreported losses.

K-58

Management’s Discussion and Analysis 

Critical Accounting Estimates

Property and casualty insurance unpaid losses 

Frequency and severity methods commonly focus on a review of the number of anticipated claims and the anticipated claims severity and may also rely on development patterns to derive such estimates. However, our processes and techniques for estimating liabilities in such analyses generally rely more on a per-policy assessment of the ultimate cost associated with the individual loss rather than with an analysis of historical development patterns of past losses.

Additional analysis – In some cases we have established reinsurance claim liabilities on a contract-by-contract basis, determined from case loss estimates reported by the ceding company and IBNR liabilities that are primarily a function of an anticipated loss ratio for the contract and the reported case loss estimate. Liabilities are adjusted upward or downward over time to reflect case losses reported versus expected case losses, which we use to form revised judgment on the adequacy of the expected loss ratio and the level of IBNR liabilities required for unreported claims. Anticipated loss ratios are also revised to include estimates of known major catastrophe events. 

Our claim liability estimation process for short-tail lines, primarily property exposures, utilizes a combination of the paid and incurred loss development methods and the incurred and paid loss Bornhuetter-Ferguson methods. Certain property, individual risk and aviation excess-of-loss contracts tend to generate low frequency/high severity losses. Our processes and techniques for estimating liabilities under such contracts generally rely more on a per contract assessment of the ultimate cost associated with the individual loss event rather than with an analysis of the historical development patterns of past losses. 

For our long-tail lines, primarily casualty exposures, we may rely on different methods depending on the maturity of the business, with estimates for the most recent years being based on priced loss expectations and more mature years reflecting the paid or incurred development pattern indications.

In 2024, we reduced estimated ultimate pre-2024 accident years’ claim liabilities by $1.7 billion, of which $1.6 billion was attributable to lower-than-expected reported property losses. In 2024, we also reduced estimated ultimate casualty claim liabilities for pre-2024 accident years by approximately $100 million. These reductions produced corresponding increases in pre-tax earnings. 

The portfolios of contracts within the three BHRG Groups vary considerably, covering multiple lines of business within diverse geographic areas and legal environments, which requires