Berkshire Hathaway lost $43.8 billion. Operating results improve

Berkshire Hathaway Chairman Warren Buffett walks into the exhibition hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan // File Photo

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Aug 6 (Reuters) – A slump in US stock prices has penalized Berkshire Hathaway (BRKa.N) In the second quarter, the company run by billionaire Warren Buffett posted a loss of $43.8 billion.

However, Berkshire made nearly $9.3 billion in profit from its operating business, as improvements from reinsurance and BNSF rail offset Geico’s car insurance loss, as auto parts shortages and higher car prices increased accident losses. .

Higher interest rates and dividends helped Berkshire’s insurance units generate more money from investments, while a stronger US dollar boosted earnings from the company’s investments in European and Japanese debt.

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Berkshire also slowed purchases of its own stock, including its own, although it ended June with $105.4 billion in cash and cash equivalents.

“It shows the volatile nature of the markets,” said Tom Russo, partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which invests more than $8 billion, 17% of which is in Berkshire. “Business as usual in Berkshire Hathaway.”

Investors are watching Berkshire closely because of Buffett’s reputation, and because results from dozens of units operating in Omaha, which are based in Nebraska, often reflect broader economic trends.

Berkshire owns dozens of companies, including fixed income owners such as the energy company of the same name, several insurance companies, industrial companies and well-known consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.

Berkshire said in its quarterly report that “significant disruptions to supply chains and rising costs have continued” with the emergence of new variants of COVID-19 and due to geopolitical conflicts including the Russian invasion of Ukraine.

But it said the company’s direct losses were not material, despite the impact of higher material, shipping and labor costs.

profit volatility

The net results suffered from Berkshire’s $53 billion losses from investments and derivatives.

Shares of Three Major Holdings – Apple Inc (AAPL.O)Bank of America Corp and American Express Co (AXP.N) – Both are down more than 21%, compared to a 16% drop in the S&P 500 (.SPX).

Accounting rules require Berkshire to report losses with their results even if they buy and sell nothing.

Buffett is urging investors to ignore volatility, and Berkshire will make money if stocks rise over time.

In 2020, for example, Berkshire lost nearly $50 billion in the first quarter as the pandemic spread, but made $42.5 billion for the full year.

The quarterly net loss was equal to $29,754 per Class A share, and compared to net profit of $28.1 billion, or $18,488 per Class A share, a year earlier.

Berkshire’s operating profit of $9.28 billion, or about $6,326 per Class A share, is up 39% from $6.69 billion, or $4,424 per Class A share, a year ago. The total currency gain on external debt was $1.06 billion.

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

Profits were up 10% at BNSF, with higher revenue per vehicle from fuel surcharges partially offsetting lower freight volumes and higher fuel costs, while Berkshire Hathaway Energy’s profit was up 4%.

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

Its $6.15 billion in stock purchases fell from $51.1 billion in the first quarter, when it acquired large stakes in oil companies Chevron Corp and Occidental Petroleum Corp.

Berkshire expects to complete its $11.6 billion acquisition of insurance company Alleghany Corp. (YN) in the fourth quarter.

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(Jonathan Stemple reports) in New York. Editing by Jason Neely and Diane Kraft

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