Berkshire Hathaway’s Q1 Profit Soars on Apple Stock Gains and Insurance Rebound
Warren Buffett’s Berkshire Hathaway Inc. has reported a first-quarter profit of $35.5 billion, largely driven by gains from common stocks like Apple Inc. The company’s income from investments has also bolstered its operating profit, leading to an increase of 13% to $8.07 billion, or about $5,561 per Class A share, compared to $7.16 billion in the same period last year.
Berkshire Hathaway’s insurance business also rebounded, with Geico achieving a remarkable turnaround by generating $703 million in earnings. Higher average premiums earned, paired with lower advertising expenses and claim frequencies, contributed to this positive outcome. With that frame of reference, Buffett commented that he expects the insurance sector to perform solidly, due to its relatively low correlation with economic business activity.
Berkshire Hathaway’s cash pile also swelled to more than $130 billion, up from $128 billion at the end of last year. After subtracting purchases, the company earned $10.4 billion from selling equities in the quarter. However, Berkshire also repurchased $4.4 billion worth of stock, the most since the first quarter of 2021, up from $2.8 billion at the end of last year, signaling the company’s confidence in its future prospects.
Despite the impressive earnings results, Buffett’s commentary about the economy somewhat conflicted with the earnings results of the Berkshire conglomerate, where operating earnings for Q1 2023 increased 13% YoY versus the respective period in 2022 despite the unfavorable economic backdrop. From January to March, the Berkshire conglomerate generated $8.07 billion in operating earnings, with support from a rebounding insurance sector.
Berkshire Hathaway also sold an estimated $6 billion worth of Chevron stock last quarter, as disclosed in its earnings report. However, the company continues to invest in stocks, with Buffett expressing his fondness for Apple, Berkshire’s largest equity position. He commented that it’s “better than any business” Berkshire owns outright, and that the iPhone’s “moat” with consumers makes it an “extraordinary product.”
As for first-quarter operating earnings, they came in at $8.065 billion, and insurance underwriting totaled $911 million. Furthermore, Berkshire Hathaway’s insurance investment surged by a remarkable 68%, increasing from $1.170 billion to $1.969 billion. Berkshire Hathaway’s portfolio experienced significant success with Geico, showcasing an underwriting profit of $703 million.
How will Berkshire’s capital allocation and stock buyback policy be affected by the increase in cash reserves? Is there a possibility for the company to declare a cash dividend for its common shares? These questions remain to be answered, but with a succession plan in place and Vice Chairman Greg Abel scheduled to succeed Buffett as CEO, Berkshire Hathaway appears to be in good hands for the future.
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