How Crucial is Managing Underwriting Expenses to BRK.B's Profits?

Berkshire Hathaway’s (BRK.B) insurance operations serve as the cornerstone of its business model and remain a key growth engine. GEICO, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group are the pillars of its business. Their profitability depends on how effectively they manage underwriting expense, which is actually operating costs comprising commissions, salaries, marketing and advertising expenses, policy acquisition costs, as well as technology, data, and regulatory costs.

Since Berkshire’s insurance subsidiaries provide not only underwriting income but also valuable float, the disciplined management of underwriting expense directly impacts both near-term earnings and long-term compounding capacity. Efficiently controlling underwriting costs also helps Berkshire maintain pricing at a competitive rate without compromising on profitability. Accelerated digitalization plays an important role in managing underwriting expenses.

When underwriting expenses are well controlled, Berkshire’s combined ratio, the measure of underwriting profitability for an insurer, improves too, with the loss ratio being a component of the combined ratio. Delivering underwriting profits helps generate float that can be reinvested across its vast investment portfolio, creating amplified value over time.

Underwriting expenses have gone up in the last two years, reflecting higher volumes of business. However, they are not just a cost item but an important driver of BRK.B’s profitability. Effective management strengthens underwriting results, supports float stability, fuels investment firepower and sustains Berkshire’s long-term intrinsic value growth.

What About BRK.B’s Peers?

Underwriting expenses are central to Progressive Corporation’s PGR underwriting profitability as well. As a leading auto insurer, Progressive has to incur high underwriting expenses. When Progressive effectively controls these costs, it drives underwriting gains, maintains competitive pricing and secures sustainable long-term growth.

The same holds true for Allstate Corporation ALL. As a top personal lines insurer, Allstate depends on controlling underwriting expenses to sustain profitability. When Allstate manages these effectively, it strengthens underwriting margins, ensures earnings stability and secures long-term value creation for shareholders.

BRK.B’s Price Performance

Shares of BRK.B have gained 7.9% year to date, in line with the industry.

BRK.B’s Expensive Valuation

BRK.B trades at a price-to-book value ratio of 1.57, above the industry average of 1.54. But it carries a Value Score of D.

Estimates Movement for BRK.B

The Zacks Consensus Estimate for BRK.B’s third-quarter 2025 EPS has witnessed 23% upside over the past 30 days, while that for the fourth quarter witnessed no movement. The consensus estimate for full-year 2025 has moved 0.3% north over the past 30 days, while that for 2026 has witnessed no movement.
 

The consensus estimates for BRK.B’s 2025 and 2026 revenues indicate year-over-year increases. While the consensus estimate for BRK.B’s 2025 EPS indicates a year-over-year decline, the same for 2026 suggests an increase.  

BRK.B stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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