As inflation continues to put pressure on Berkshire Hathaway Inc.’s operating units, Warren Buffett, who has frequently expressed his love for insurance companies, took a painful hit on the company’s underwriting businesses. The conglomerate reported a $962 million loss on insurance underwriting in the third quarter, the worst quarterly loss in a year. With a pre-tax loss of $759 million, Geico’s auto insurance division suffered the most among its insurance businesses. Since the second quarter of last year, the division has not produced a quarterly profit.
Cost of Inflation
Even yet, Berkshire’s other operating divisions, which include the BNSF railroad as well as its utilities and energy businesses, were successful. However, BNSF’s income decreased from the previous year as rising inflation took a toll on the Omaha, Nebraska-based corporation.
Operating profits as a whole totaled $7.76 billion, a 20% increase from the previous year. The increase included $858 million in foreign exchange gains connected to debt that was not denominated in US dollars, a 17% increase in income from firms that Berkshire owns between 20% and 50% of under the equity method of accounting after its share in the company topped 20% earlier this year. When warrants are taken into account, the conglomerate owns more than 30% of the oil company. As a result, Berkshire’s share of Occidental earnings will be included in earnings in the fourth quarter of 2022 since the corporation states that results from that division would be revealed with a quarter’s lag.
Additionally, Berkshire posted net earnings of roughly $2.69 billion for the quarter, driven by a $10.4 billion hit to its investment portfolio as market turbulence was caused by the economy. In the same frame, the corporation repurchased $1.05 billion worth of shares, matching the roughly $1 billion it had done in the previous three months. Buffett is increasingly using buybacks as a strategy to allocate funds when there aren’t many other alternatives. The amount of cash held by Berkshire climbed slightly to $109 billion as Buffett maintained the company’s reserve of dry powder through a market slump brought on by economic worries.