Berkshire Hathaway lost a whopping $43.8 billion; improving operating results

Falling US share prices punished Berkshire Hathaway Inc.’s bottom line in the second quarter as the billionaire Warren Buffett-run company lost $43.8 billion.

Berkshire nevertheless made about $9.3 billion in profit from its operating businesses, as reforms from reinsurance and BNSF Railroad offset losses at Geico Car Insurer, where car parts shortages and high vehicle prices increased losses from accidents. .

Rising interest rates and dividend payments helped Berkshire’s insurance units generate more money from investments, while a strengthening US dollar boosted profits from the company’s European and Japanese debt investments.

Berkshire also slowed purchases of its shares, including itself, though it ended June with $105.4 billion in cash and equivalents it could still deploy. “It reflects the fickle nature of markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which invests more than $8 billion, of which 17% is in Berkshire. “It’s business as usual at Berkshire Hathaway.”

Investors watch Berkshire closely because of Buffett’s reputation, and because the results of the Omaha, Nebraska-based group’s dozens of operating units often reflect macroeconomic trends.

Berkshire owns dozens of businesses, including steady earners such as its namesake energy company, several insurers and industrial companies, and familiar consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and Seas Candies.

In its quarterly report, Berkshire said “significant disruption to supply chains and high costs remain” as new COVID-19 variants emerge and because of geopolitical conflicts, including Russia’s invasion of Ukraine.

But it said the company did not suffer directly despite the impact of higher costs for materials, shipping and labor.

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profit swing

Berkshire’s $53 billion loss from investments and derivatives suffered the net result.

Stocks in the three major holdings — Apple Inc., Bank of America Corp and American Express Company — each fell more than 21%, while those of the Standard & Poor’s 500 declined 16%.

Accounting rules require Berkshire to report the loss along with its results, even if it doesn’t buy and sell anything.

Buffett urges investors to ignore volatility, and Berkshire will make money if the stock rises over time.

For example, in 2020, Berkshire lost about $50 billion in the first quarter as the pandemic took hold, but earned $42.5 billion for the full year.

Quarterly net loss equaled $29,754 per Class A share, compared to net profit of $28.1 billion, or $18,488 per Class A share a year ago. Berkshire’s operating profit of $9.28 billion, or about $6,326 per Class A share, rose 39% from $6.69 billion, or $4,424 per Class A share a year ago.
Mudra gains on foreign debt total $1.06 billion.

Geico’s $487 million pre-tax loss was more than offset by a $976 million pre-tax gain in property and casualty reinsurance, and a 56% jump to $1.91 billion in after-tax insurance investment income.

Profit at BNSF rose 10%, with higher revenue per car from fuel surcharges partially offset by lower freight volumes and higher fuel costs, while profit from Berkshire Hathaway Energy rose 4%.

Berkshire repurchased only $1 billion of its own stock, down from $3.2 billion in the first quarter, and compared to $51.7 billion in 2020 and 2021.

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Its stock purchases of $6.15 billion fell from $51.1 billion in the first quarter, when it took major stakes in oil companies Chevron Corp and Occidental Petroleum Corp. Berkshire expects to complete its $11.6 billion acquisition of insurance company Allegheny Corp in the fourth quarter.