Berkshire Hathaway reports major investment losses in 2022

NOT even Warren Buffett, one of the world’s most successful investors, was immune last year to whipsawing markets.

But as his conglomerate, Berkshire Hathaway, reported a big loss, the billionaire executive urged shareholders to focus on the long term and the underlying health of his empire, which includes insurance, railroads, energy and stock holdings in the likes of Coca-Cola, American Express and more.

Berkshire reported on Saturday (Feb 25) that it lost US$22.8 billion last year, driven by US$53.6 billion in unrealized losses on its investments. That mirrored the experience of other investors, who were hit by market volatility as inflation rose swiftly and central banks responded by rapidly raising interest rates.

But in his annual letter to shareholders, Buffett pointed to the company’s operating earnings, which are drawn from its underlying businesses and exclude those paper investment values. On that basis, Berkshire earned a record US$30.8 billion last year.

And its holdings of cash and equivalents have grown to US$125 billion, giving Buffett more firepower to invest in stocks and, potentially, buy new companies.

Factoring Berkshire’s investment performance into its overall returns is “100 per cent misleading”, Buffett wrote, since those results are likely to change easily quarter to quarter.

Berkshire’s vast business empire is often seen as a microcosm of American industry. And many of its subsidiaries reported being hurt by the broader economic forces affecting the country.

Weaknesses included Berkshire’s consumer products businesses, which reported a 23 per cent drop in earnings last year from 2021, hurt by lower demand and higher costs for raw materials and shipping. In its annual report, Berkshire said that it expected continued soft demand in 2023 and that it planned to “right size” its operations and reduce product inventories.

The conglomerate’s core insurance businesses, which generate the cash that powers Buffett’s vast investments, also reported underwriting losses from catastrophic events, including hurricanes, and a rise in auto claims at Geico.

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And BNSF Railway reported a slight drop in earnings, in large part because of the rising cost of fuel and lower volumes of shipments.

Still, Buffett professed continued faith in the resilience of the United States. “I have yet to see a time when it made sense to make a long-term bet against America,” he wrote. NYTIMES