Berkshire Hathaway posted a loss of $43.8 billion

Berkshire Hathaway Chairman Warren Buffett walks through the exhibit 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) – U.S. stocks fell as Berkshire Hathaway Inc. (BRKa.N) The conglomerate, run by billionaire Warren Buffett, posted a $43.8 billion loss on Saturday, bottoming out in the second quarter.

Still, Berkshire posted an operating profit of nearly $9.3 billion, as gains on reinsurance and BNSF Railroad offset fresh losses at auto insurer Geico, where parts shortages and higher auto prices drove up accident claims.

Rising interest rates and dividend payments helped insurance businesses generate more cash from investments, while a strengthening US dollar boosted profits from European and Japanese debt investments.

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Despite the big net loss, “the results show Berkshire’s resilience,” said Edward Jones & Co analyst James Shanahan, who rates Berkshire “neutral.”

“Businesses are performing well despite high interest rates, inflationary pressures and geopolitical concerns,” he said. “If there is a recession it gives me confidence in the company.”

Berkshire also reduced its share buybacks, although it still has $105.4 billion in cash, including its own shares.

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

Those units include its namesake energy company, several industrial companies, and stable revenue earners such as familiar consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and Cheese Candies.

“Berkshire is a microcosm of the broader economy,” said CFRA Research analyst Cathy Seifert, who has a “hold” rating on Berkshire. “Many businesses are experiencing improved demand, but they are not immune to higher input costs from inflation.”

Disruptions continue

In its quarterly report, Berkshire said “significant disruptions to supply chains and high costs persisted” due to the emergence of new Covid-19 variants and geopolitical conflicts including Russia’s invasion of Ukraine.

But it said the direct losses were not material, despite higher costs for materials, shipping and labor.

Net results were hurt by Berkshire’s $53 billion in losses from investments and derivatives, including more than 21% declines in three key stocks: Apple Inc (AAPL.O)Bank of America Corp. and American Express Co (AXP.N).

Accounting rules require Berkshire to report losses with its results regardless of whether it buys or sells anything.

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

For example, in 2020, Berkshire lost nearly $50 billion in the first quarter due to the pandemic, but made $42.5 billion for the full year.

“It shows the volatility of the markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, who invests more than $8 billion, 17% of which is in Berkshire. “It’s business as usual at Berkshire Hathaway.”

Standard & Poor’s 500 (.SPX) It fell 16% in the quarter.

GEICO LOSSES

Berkshire’s quarterly net loss was $29,754 per Class A share, compared with a net profit of $28.1 billion, or $18,488 per Class A share, a year earlier.

Operating profit of $9.28 billion, or $6,326 per Class A share, was up 39% from $6.69 billion a year earlier.

This includes currency gains of $1.06 billion on foreign debt. Revenue rose 10% to $76.2 billion.

Geico posted a pretax underwriting loss of $487 million, its fourth straight quarterly loss.

“All auto insurers deal with inflation in claims costs,” Seifert said. “Geico has had less success than some in increasing rates and retaining customers.”

A pre-tax gain of $976 million in property and casualty reinsurance and a 56% rise in insurance investment income offset losses to $1.91 billion.

Profits at BNSF rose 10% as higher revenue per car from fuel surcharges partially offset lower inventory levels, while profits at Berkshire Hathaway Energy rose 4%.

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

Its $6.15 billion in share buybacks fell from $51.1 billion in the first quarter, when it took large stakes in oil majors Chevron Corp and Occidental Petroleum Corp.

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Reporting by Jonathan Stempel in New York; Editing by Jason Neely and Diane Croft

Our Standards: Thomson Reuters Trust Principles.

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