Berkshire Hathaway agreed to a request by the Securities and Exchange Commission to refine its disclosure of catastrophe and other losses.
In what appears to be a standard request to improve reporting, the SEC sent a letter dated April 2, to Senior Vice President and Principal Financial Officer Marc Hamburg to amend the company's annual 2012 10-K providing more information about catastrophe losses, and to do the same in the future.
Hamburg replied in a letter dated April 25 with the proposed changes, saying the company will provide additional disclosures and indicate how it identifies catastrophes as being significant.
In its proposed amended statement, Berkshire says it identifies catastrophe as a single event or series of similar events—such as a tornado—where losses exceed $75 million per loss event.
In 2012, the company recorded aggregate pre-tax losses of approximately $1.1 billion from Hurricane Sandy, including $490 million incurred by Geico. Otherwise, losses from other catastrophes events in 2012 were insignificant.
In 2011 and 2010, significant catastrophe losses impacted General Re and Berkshire Hathaway Reinsurance Group (BHRG). Nine events cost the group approximately $2.6 billion in pre-tax losses. The earthquake in Japan in 2011 came to $1.25 billion and New Zealand was $650 million. In 2010, catastrophe losses were approximately $900 million coming primarily from the Chilean and New Zealand earthquakes at approximately $600 million. The Gulf of Mexico BP Deepwater Horizon oil rig explosion amounted to $115 million and Australia floods to $100 million. Underwriting gains were the result of re-estimation of prior year catastrophe losses of approximately $120 million in 2012 and 2011 and $250 million in 2010.
Under the section concerning General Re reporting $266 million of catastrophe losses primarily attributable to Hurricane Sandy—Berkshire adds Sandy accounted for $226 million of the loss.
Additional breakdown of losses for General Re added in the disclosure were:
• Earthquakes (2011): New Zealand—$235 million and Japan—$189 million.
• Earthquakes (2010): Chile—$185 million and New Zealand—$105 million.
Additional breakdown of losses for BHRG were:
• Earthquakes (2011): Japan—$700 million and New Zealand ($100 million).
• Earthquakes (2010): Chile and New Zealand—$108 million.
• BP Deepwater Horizon rig explosion (2010)—$50 million.
• Australian floods (2010)—$35 million.
A follow-up letter to Berkshire Hathaway from the SEC dated May 14 says the review of the company's filing was complete.
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