Due to a decline in the paper value of its investment portfolio in the third quarter, Warren Buffett’s company once again reported a loss, though this time it was just $2.7 billion.
However, most of its running businesses fared well, with the conspicuous exception of Geico.
On Saturday, Berkshire Hathaway announced a $2.7 billion quarterly loss or $1,832 per Class A share.
When the stock market was booming a year ago, the company made $10.3 billion in profit or $6,882 per Class A share.
The second quarter of this year saw a $44 billion loss for Berkshire.
Since operating earnings at Berkshire do not include investment gains or losses, which can vary significantly from quarter to quarter, Buffett has long maintained that operating earnings are a better indicator of the company’s performance.
By that standard, Berkshire saw a 20% increase in operating earnings to $7.76 billion, or $5,293.83 per Class A share.
This is an increase from $6.47 billion, or $4,330.60 per Class A share.
Berkshire was predicted to report operating earnings per Class A share of an average of $4,205.82 by the four analysts FactSet surveyed.
Berkshire reported a 9% increase in revenue to $76.9 billion.
Most of Berkshire’s oddball collection of more than 90 businesses fared well during the quarter, but Geico, the company’s primary insurance division, recorded a pre-tax underwriting loss of $759 million as the cost of auto claims increased alongside the prices of used automobiles and auto parts.
Since the second half of last year, Geico has been constrained by rising expenses.
During the quarter, Geico raised prices by 5.4%, but a 4.6% customer decrease nearly offset this.
Another weak point in the results was the 6% decline in BNSF’s profit to $1.44 billion as a result of hauling 5% less freight, a spike in fuel prices, and salary cost adjustments to account for the raises that railroads have agreed to give their employees as part of tentative agreements with their 12 unions.
The majority of BNSF’s competitors reported notably higher profits for the quarter.
In addition, Berkshire owns several companies involved in the housing industry, which has suffered dramatically due to the recent increase in mortgage rates.
So, in the coming months, Berkshire’s extensive network of real estate brokers and its Clayton Homes manufactured housing subsidiary may suffer.
It would be helpful if the company shared more information about what it is doing to respond at a time like this when several of Berkshire’s businesses are suffering difficulties, said CFRA Research analyst Cathy Seifert.
However, Berkshire has a longstanding policy of simply posting its quarterly report online without holding a conference call to discuss the results.
As a result, investors are left to make their predictions about what lies ahead since Berkshire makes few mentions of its expectations in its report.
Additionally, Berkshire is renowned for its decentralized management style, which essentially allows its firms to manage themselves daily.