Warren Buffett’s firm reports $2.7B loss on investment drop

Nov 5, 2022, 6:44 AM | Updated: 11:54 am

OMAHA, Neb. (AP) — Warren Buffett’s company again reported a loss — this time only $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 Saturday of $2.7 billion, or $1,832 per Class A share. That’s down from a $10.3 billion profit, or $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 $44 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 20% to $7.76 billion, or $5,293.83 per Class A share. That’s up from $6.47 billion, or $4,330.60 per Class A share.

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

Berkshire said its revenue grew 9% to $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 $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% during the quarter, but that was almost entirely offset because it lost 4.6% of its customers.

Another notable weak spot in the results was that BNSF railroad’s profit declined 6% to $1.44 billion as it hauled 5% 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 also owns a number of businesses linked to the housing market which has weakened significantly as mortgage rates more than doubled over the past year. So Berkshire’s large network of real estate brokers and its Clayton Homes manufactured housing unit could suffer in the months ahead.

CFRA Research analyst Cathy Seifert said at a time like this when a number of Berkshire’s businesses are facing challenges it would be nice if the company would share more details about what it’s doing to respond. But Berkshire’s longstanding practice is just to post its quarterly report online without holding a conference call to discuss the results, so investors are left to draw their own conclusions about what’s ahead because Berkshire does not say much in its report about what it is anticipating.

And Berkshire is known for its decentralized approach that largely lets its businesses run themselves on a day-to-day basis.

“It’s fine to be hands off when everything is going well. When you start getting into a more difficult operating environment, investors should demand more detail, and it’s not forthcoming here,” Seifert said. “And I personally find that problematic.”

But Edward Jones analyst Jim Shanahan said he thought the results were good overall, and the utility unit was a particularly strong contributor. Berkshire’s utilities, which include MidAmerican Energy and PacifiCorp, added $1.59 billion in profits, up 6% over last year.

Berkshire said its insurance units recorded after tax losses of $2.7 billion related to Hurricane Ian. That compares with $1.7 billion in catastrophic losses a year ago related to Hurricane Ida and major floods in Europe.

Berkshire is sitting on nearly $109 billion cash even though it has been actively investing in the stock market this year, including putting more than $51 billion to work in the first quarter. That is up slightly from the $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 $11.6 billion in October to complete its acquisition of the Alleghany insurance conglomerate.

Buffett’s biggest stock investments this year included buying roughly $12 billion worth of Occidental Petroleum stock and about $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.

But during the third quarter, Berkshire was only a net buyer of about $3.7 billion in stocks, Shanahan said. About $2 billion of that went to Occidental purchases that have already been disclosed. Berkshire also repurchased $1.05 billion of its own shares.

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.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Lead water pipes pulled from underneath the street are seen in Newark, N.J., Oct. 21, 2021. (AP Pho...

Associated Press

Biden to require cities to replace harmful lead pipes within 10 years

The Biden administration has previously said it wants all of the nation's roughly 9 million lead pipes to be removed, and rapidly.

2 days ago

Facebook's Meta logo sign is seen at the company headquarters in Menlo Park, Calif., on, Oct. 28, 2...

Associated Press

Meta shuts down thousands of fake Facebook accounts that were primed to polarize voters ahead of 2024

Meta said it removed 4789 Facebook accounts in China that targeted the United States before next year’s election.

2 days ago

A demonstrator in Tel Aviv holds a sign calling for a cease-fire in the Hamas-Israel war on Nov. 21...

Associated Press

Hamas releases a third group of hostages as part of truce, and says it will seek to extend the deal

The fragile cease-fire between Israel and Hamas was back on track Sunday as the first American was released under a four-day truce.

6 days ago

Men look over the site of a deadly explosion at Al-Ahli Hospital in Gaza City, Wednesday, Oct. 18, ...

Associated Press

New AP analysis of last month’s deadly Gaza hospital explosion rules out widely cited video

The Associated Press is publishing an updated visual analysis of the deadly Oct. 17 explosion at Gaza's Al-Ahli Hospital.

10 days ago

Peggy Simpson holds a photograph of law enforcement carrying Lee Harvey Oswald's gun through a hall...

Associated Press

JFK assassination remembered 60 years later by surviving witnesses to history, including AP reporter

Peggy Simpson is among the last surviving witnesses who are sharing their stories as the nation marks the 60th anniversary.

10 days ago

Israeli Prime Minister Benjamin Netanyahu, chairs the weekly cabinet meeting in Jerusalem, Sunday, ...

Associated Press

Israeli Cabinet approves cease-fire with Hamas; deal includes release of 50 hostages

Israel’s Cabinet on Wednesday approved a cease-fire deal with the Hamas militant group that would bring a temporary halt to a devastating war.

11 days ago

Sponsored Articles

(KTAR News Graphic)...

KTAR launches online holiday auction benefitting Boys & Girls Clubs of the Valley

KTAR is teaming up with The Boys & Girls Clubs of the Valley for a holiday auction benefitting thousands of Valley kids.

Follow @KTAR923...

The 2023 Diamondbacks are a good example to count on the underdog

The Arizona Diamondbacks made the World Series as a surprise. That they made the playoffs at all, got past the Milwaukee Brewers in the NL Wild Card round, swept the Los Angeles Dodgers in the NLDS and won two road games in Philadelphia to close out a full seven-game NLCS went against every expectation. Now, […]

Follow @KTAR923...

West Hunsaker at Morris Hall supports Make-A-Wish Foundation in Arizona

KTAR's Community Spotlight this month focuses on Morris Hall and its commitment to supporting the Make-A-Wish Foundation in Arizona.

Warren Buffett’s firm reports $2.7B loss on investment drop