Insurance companies are largely backing away from making investments in fossil fuel producers. However, two major exceptions, Berkshire Hathaway and State Farm, have increased their holdings so much that they skewed the entire sector’s results, according to a report from the Wall Street Journal. More than half the 238 property-and-casualty insurers in the analysis reduced their investments in oil, gas and coal companies over the past decade, sending their median percentage down to 1.8% of insurers’ 2023 portfolios compared with 3.4% in 2014. By contrast, Berkshire Hathaway and State Farm increased their fossil fuel positions by around $200 billion in that period—so much that it pushed fossil fuels’ presence to 4.4% of the insurance industry’s cumulative portfolios from 3.8%.
For half of insurers, fossil fuels make up 1.8% or less of their portfolios.
Climate change was cited as a reason most insurers reduced their fossil fuel holdings. Facing higher claims from wildfires and storms associated with a warming planet, some companies are questioning whether supporting fossil fuel companies is counterproductive. To reject fossil fuel companies, however, crosses off valuable investment opportunities in a sector that will be the core of the energy mix for the foreseeable future. An Enverus Intelligence® Research (EIR) analysis last December, available to EIR subscribers, found that oil and gas assets have stronger returns on average than renewables projects.
Berkshire Hathaway, the Warren Buffett-led company whose insurance arm includes not only namesake companies but also auto insurer Geico, owns stock in just two oil and gas companies, Occidental Petroleum and Chevron Corp., and it has invested heavily in both.
Berkshire is the leading shareholder in Oxy, owning 27.3% of its equity, a stake worth $16.1 billion at the end of Q2, according to SEC filings. It also is the third-largest institutional shareholder in Chevron, owning a 6.5% stake worth $18.6 billion at the end of H2. Combined, the two holdings make up 9.6% of Berkshire’s portfolio, the company reported.
State Farm holds nearly $4.8 billion in stocks and bonds of companies including Chevron, ExxonMobil and Diamondback Energy, according to the Wall Street Journal. State Farm owns less than 1% of those companies’ shares, unlike Berkshire’s large equity positions. However, Exxon makes up 3.0% and Chevron 1.7% of the equity portfolio of State Farm’s investment arm.
Property-and-casualty insurance companies collected a combined $930 billion in premiums in the U.S. during 2023, money that needs to be invested somewhere until they need to pay out claims. State Farm ranked as the largest such insurer by direct premiums in 2023 with $88 billion, while Berkshire was third with $58.1 billion.
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