Buffett’s Berkshire cash hits US$381.7 billion, earnings soar
Despite its growing cash hoard, the firm’s net investment income declined 13% to US$3.2 billion amid lower short-term interest rates
BERKSHIRE Hathaway’s cash pile soared to US$381.7 billion in the third quarter, a fresh record, and operating earnings surged 34 per cent at CEO Warren Buffett’s conglomerate.
That figure hit US$13.5 billion, as the firm’s insurance underwriting profit more than trebled in a period marked by unusually low disaster activity, according to filings published on Saturday (Nov 1).
Earlier this year, Buffett appeared to be back on the hunt for deals, with the acquisition of a US$1.6 billion stake in UnitedHealth Group and a US$9.7 billion deal to buy OxyChem last month. But the famed billionaire remained on the sidelines in Q3. Berkshire Hathaway offloaded US$6.1 billion of shares during the period.
“There isn’t much opportunity in Buffett’s eyes right now,” said Jim Shanahan, an analyst for Edward Jones.
Despite its growing cash hoard, the firm’s net investment income declined 13 per cent to US$3.2 billion amid lower short-term interest rates.
The firm’s collection of primary insurance and reinsurance businesses both turned a pretax underwriting profit this quarter, after posting losses in the year-ago period.
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But Berkshire auto insurer Geico’s pretax underwriting profit fell 13 per cent amid slightly higher claims and a 40 per cent increase in underwriting costs, which the firm said is due to “increased policy acquisition-related expenses”.
“That’s likely to be mostly advertising,” Shanahan said. “Geico is everywhere right now.”
Berkshire’s earnings are closely watched because the conglomerate’s stable of businesses – ranging from insurance to rail, energy and manufacturing – provides a snapshot of the health of the US economy.
Investors may also pay closer attention as the company nears a new era, with Buffett handing off the role of CEO to Greg Abel at year-end.
Operating earnings at its railroad unit BNSF rose 5 per cent, to US$1.4 billion, as revenue from the transportation of agricultural and energy products grew, driven in part by slightly higher grain exports. At the same time, Berkshire’s utilities business, which runs PacifiCorp, MidAmerican and NV Energy, posted a 9 per cent decline in operating earnings, to US$1.5 billion over the period.
One sore point is Pilot, which posted a US$17 million loss in the third quarter. Berkshire said the decline is driven by lower wholesale fuel and retail margins, as well as higher expenses.
The truck-stop chain is considering the sale of its water-management business to focus on its primary businesses, Bloomberg News reported in July. BLOOMBERG
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