Berkshire Hathaway, the conglomerate led by legendary investor Warren Buffett, has reported a first quarter profit of $35.5 billion, driven by gains from common stocks like Apple.[0] The company’s income from investments has also bolstered its operating profit, leading to an increase of 13% to $8.07 billion.[0] Despite the impressive results, Buffett has cautioned investors to not pay attention to quarterly fluctuations in unrealized gains on investments.[1]
At the end of the quarter, Berkshire further increased its cash reserves, amounting to approximately $130.6 billion, compared to the $128.6 billion it had at the end of the previous year.[2] After subtracting purchases, the company earned $10.4 billion from selling stocks, making them a net seller of equities for the quarter.[3] Additionally, Berkshire repurchased $4.4 billion worth of stock, the most since Q1 2021, up from $2.8 billion at the end of last year.
The company was boosted by a strong performance from its auto-insurance arm, Geico, which swung to profitability after six quarters of losses.[1] Geico’s underwriting profit for Q1 was $703 million, up from a loss of $178 million in the same period a year ago.[4] Berkshire’s profit from insurance underwriting came in at $911 million, up sharply from $167 million a year prior.[1] The investment income from insurance also experienced a significant increase of 68%, rising from $1.170 billion to $1.969 billion.[1]
Despite the strong results, Geico remains an issue for Berkshire, with top line growth in the quarter of less than 1% that “significantly lags peers,” according to CFRA analyst Cathy Seifert. According to her, the increase in rates to counter the rise in claim costs is resulting in people canceling their policies.[5] “While the loss of unprofitable policies is not always a bad thing, that’s not usually the policies and policyholders that leave.”
Berkshire Hathaway’s Class A shares are up 4.9% this year through Friday’s close, lagging the S&P 500’s 7.7% advance.[5] Nevertheless, the stock is only a fraction under 3% from its highest point ever.[1] Later today, the annual general meeting of the company will take place in Omaha, Nebraska. Thousands of fans will be present to ask questions to Buffett and his trusted business partner and Vice Chairman, Charlie Munger.[3]
In summary, Berkshire Hathaway’s impressive Q1 results have been driven by gains from common stocks like Apple and a strong performance from Geico, which swung to profitability after six quarters of losses. The company has also topped up its cash pile and repurchased $4.4 billion worth of stock. While Geico remains an issue for the company, its overall performance has been strong and its Class A shares are up 4.9% this year.
0. “Warren Buffett’s Berkshire Hathaway posts $35.5 billion profit, buys back more stock” Business Today, 6 May. 2023, https://www.businesstoday.in/technology/news/story/warren-buffetts-berkshire-hathaway-posts-355-billion-profit-buys-back-more-stock-380290-2023-05-06
1. “Berkshire Hathaway’s Operating Earnings Increase 12% in the First Quarter, Cash Hoard Tops $130 Billion” NBC Southern California, 6 May. 2023, https://www.nbclosangeles.com/news/business/money-report/berkshire-hathaways-operating-earnings-increase-12-in-the-first-quarter-cash-hoard-tops-130-billion/3148495
2. “Berkshire Earnings Rise Solidly On Geico Revival As Warren Buffett Leads Shareholder Meeting Investor’s Business …” Investor’s Business Daily, 6 May. 2023, https://www.investors.com/news/berkshire-earnings-q1-2023-brkb-stock-warren-buffett-esg
3. “Berkshire’s Operating Profit Rises Fueled by Geico’s Rebound” Financial Post, 6 May. 2023, https://financialpost.com/pmn/business-pmn/berkshires-operating-profit-rises-fueled-by-geicos-rebound
4. “Berkshire Hathaway P&C reinsurance premiums soar 30% in Q1 2023” Reinsurance News, 6 May. 2023, https://www.reinsurancene.ws/berkshire-hathaway-pc-reinsurance-premiums-soar-30-in-q1-2023
5. “Berkshire’s Operating Profit Rises Fueled by Geico’s Rebound” Yahoo Finance, 6 May. 2023, https://finance.yahoo.com/news/berkshire-hathaway-boosts-pace-share-121737958.html