Warren Buffett's firm reports USD 2.7B loss on investment drop

OMAHA: Warren Buffett's company again reported a loss — this time only USD 2.7 billion — because of a drop in the paper value of its investment portfolio in the third quarter, but most of its operating businesses performed well with the notable exception of Geico.

Berkshire Hathaway reported a quarterly loss on Saturday of USD 2.7 billion, or USD 1,832 per Class A share.

That's down from a USD 10.3 billion profit, or USD 6,882 per Class A share, a year ago when the stock market was soaring. In the second quarter of this year, Berkshire reported a USD44 billion loss.

Buffett has long said he believes Berkshire's operating earnings are a better measure of the company's performance because they exclude investment gains and losses, which can vary widely quarter to quarter.

By that measure, Berkshire's operating earnings jumped 20per cent to USD 7.76 billion, or USD 5,293.83 per Class A share. That's up from USD6.47 billion, or USD 4,330.60 per Class A share.

The four analysts surveyed by FactSet expected Berkshire to report operating earnings per Class A share of USD 4,205.82 on average.

Berkshire said its revenue grew 9 per cent to USD 76.9 billion.

Most of Berkshire's eclectic assortment of more than 90 companies performed well during the quarter, but the key insurance unit of Geico reported a pre-tax underwriting loss of USD 759 million as the cost of auto claims soared along with the prices of used cars and car parts.

Geico has been hampered by soaring costs since the second half of last year.

Geico did increase its rates by 5.4 per cent during the quarter, but that was almost entirely offset because it lost 4.6per cent of its customers.

Another notable weak spot in the results was that BNSF railroad's profit declined 6per cent to USD 1.44 billion as it hauled 5 per cent less freight the cost of fuel soared and salary costs were adjusted up to reflect the raises railroads have agreed to pay their workers in tentative agreements with their 12 unions.

Most of BNSF's peers reported significant increases in profits during the quarter.

Berkshire said its insurance units recorded after tax losses of USD 2.7 billion related to Hurricane Ian.

That compares with USD 1.7 billion in catastrophic losses a year ago related to Hurricane Ida and major floods in Europe.

Berkshire is sitting on nearly USD 109 billion cash even though it has been actively investing in the stock market this year, including putting more than USD 51 billion to work in the first quarter.

That is up slightly from the USD 105.4 billion it held at the end of the second quarter because Berkshire's businesses generated more cash than it spent. Although after the end of the third quarter, Berkshire did spend USD 11.6 billion in October to complete its acquisition of the Alleghany insurance conglomerate.

Buffett's biggest stock investments this year included buying roughly USD 12 billion worth of Occidental Petroleum stock and about USD 20 billion worth of Chevron shares.

Besides those oil sector investments, Berkshire also bought more than 120 million shares of printer maker HP Inc. and bet big that Microsoft's acquisition of Activision Blizzard will go through by buying nearly 70 million shares of the video game maker.

Berkshire's investment portfolio also includes major stakes in Apple, American Express, Bank of America and Coca-Cola stock.

The Omaha, Nebraska, based conglomerate's companies include manufacturing firms like aviation parts maker Precision Castparts and specialty chemical maker Lubrizol, retail firms like See's Candy, Dairy Queen and Helzberg Diamonds and other companies like NetJets.