A Berkshire Hathaway Inc. (BRK.B), American International Group Inc (AIG) Throwdown: Who’s The Better Insurer?

Page 1 of 2

Last Friday was the big day, folks. Berkshire Hathaway Inc. (NYSE:BRK.B) released its annual report and Warren Buffett’s annual shareholder letter.

Berkshire remains one of Wall Street’s favorites, and for good reason, but its insurance operations are not the only positive aspect of the company. With its varied subsidiaries, Berkshire presents ample opportunities for investors interested in financials, manufacturing, media, transportation, and other business segments. While Berkshire is a multifaceted company (to say the least), at its core is a huge insurance operation, with GEICO as its largest consumer-facing component.

Berkshire Hathaway Inc.

Since Berkshire is a perennial investor favorite, why not compare it to Wall Street’s latest hedge fund darling, American International Group Inc (NYSE:AIG)? One of the nation’s largest insurers, American International Group Inc (NYSE:AIG) is back in the investment spotlight (the good kind) after years of being shunned. By comparing the two companies in five categories, we’ll be able to see which one is a better insurance investment.

1. Breadth of services: American International Group Inc (AIG)
American International Group Inc (NYSE:AIG) wins this round based on its expansive products that range from basic property and casualty coverage to life and retirement policies. While Berkshire has exposure to all of the same types of products, its insurance operations mainly focus on life and retirement services through reinsurance, which is where Berkshire provides support to the main insurance companies offering the products to clients. AIG does not provide reinsurance to other companies, but focuses on consumer-facing products.

2. Premiums growth: Berkshire
The Gecko is doing his job, as Berkshire totally kicked AIG’s butt in 2012. With an 8.6% improvement in premiums written, Berkshire is the clear winner. American International Group Inc (NYSE:AIG) had a small 1.3%decline in premiums written, which the company offset with an increase in commercial rates around 6%. The chart below shows detail on the premium growth for both companies during the past five years.

Source: Company annual reports and financial supplements.

Berkshire has enjoyed GEICO’s impressive climb toward the top of the auto-insurer totem poll — it has improved its market share from 2.5% to 9.7% for personal auto coverage since 1995. AIG, on the other hand, had a huge decrease in premiums following its federal bailout, which is not a huge surprise. The company has been working its way back to pre-financial crisis levels and currently matches its 2009 premiums total.

3. Underwriting gains: Berkshire
Buffett’s operations once again trounced American International Group Inc (NYSE:AIG) in the underwriting gains department. With a gain of $1.05 billion, Berkshire handily beat AIG’s underwriting loss of $3 billion. Though it should be said that Hurricane Sandy contributed $2 billion to that loss. While American International Group Inc (NYSE:AIG) provides coverage for all types of property damage, Berkshire’s exposure to Sandy was relatively limited to damaged cars, creating a lesser strain on the business’ bottom line.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!