Company: BRK-A
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000950170-25-025210
Chunk: 110

Company: BERKSHIRE HATHAWAY INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 1B
Chunk 110
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 related to GEICO and the Berkshire Hathaway Reinsurance Group. Additional information regarding significant uncertainties inherent in the processes and techniques for estimating unpaid losses of these businesses follows. 

K-56

Management’s Discussion and Analysis 

Critical Accounting Estimates

Property and casualty insurance unpaid losses 

GEICO 

GEICO predominantly writes private passenger automobile insurance. As of December 31, 2024, GEICO’s gross claim liabilities were $24.8 billion and were $23.9 billion, net of reinsurance. GEICO’s claim reserving methodologies produce liability estimates based upon the individual claims. The key assumptions affecting our liability estimates include projections of ultimate claim counts (“frequency”) and average loss per claim (“severity”). A combination of several actuarial estimation methods, including Bornhuetter-Ferguson and chain-ladder methodologies. 

Claim liability estimates for liability coverages (such as bodily injury (“BI”), uninsured motorists and personal injury protection) are more uncertain due to the longer claim-tails, so we establish additional case development estimates. As of December 31, 2024, case development liabilities averaged approximately 31% of reported reserves. Case development factors are selected through analysis of the overall adequacy of historical case liabilities. 

The adequacy of the aggregate claim liabilities is tested using one or more actuarial projections based on claim closure models and paid and incurred loss triangles. Each type of projection analyzes loss occurrence data for claims occurring in a given period and projects the ultimate cost. 

The aggregate claim liability estimates recorded at the end of 2023 were reduced by $550 million during 2024, which produced a corresponding increase to pre-tax earnings. The assumptions used to estimate liabilities at December 31, 2024 reflect the most recent frequency and severity estimates. Future development of recorded liabilities will depend on whether actual frequency and severity of claims are more or less than anticipated. 

With respect to liabilities for BI claims, we believe it is reasonably possible that average claims severities will change by at least one percentage point from the projected severities used in establishing the recorded liabilities at December 31, 2024. A one percentage point increase or decrease in BI severities could produce a $220 million increase or decrease in recorded liabilities, with a corresponding decrease or increase in pre-tax earnings. Many of the economic forces that would likely cause BI severity to differ from expectations would likely also cause severities for other injury coverages to differ in the same direction. 

Berkshire Hathaway Reinsurance Group 

BHRG’s property and casualty claims