Feb 25 (Reuters) – Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) on Saturday reported its highest-ever annual working revenue, at the same time as overseas forex losses and rising rates of interest contributed to decrease earnings within the fourth quarter.
Buffett known as 2022 a “good yr” for Berkshire in his annual shareholder letter, after the conglomerate’s dozens of companies generated $30.8 billion of revenue regardless of rising inflation and provide chain disruptions, together with from the struggle in Ukraine.
Berkshire additionally bulked up its money hoard, ending the yr with $128.6 billion after promoting about $16.3 billion of shares within the fourth quarter.
The Omaha, Nebraska-based firm discovered extra worth shopping for again its personal shares, repurchasing $2.6 billion, and purchased again about $700 million extra within the first month-and-a-half of 2023.
Although its inventory worth is down 1.5% this yr, lagging the three.4% achieve within the Customary & Poor’s 500 (.SPX), Berkshire shares outpaced the index by 22 share factors in 2022, reflecting their standing as a defensive funding in rocky markets.
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Berkshire shareholders “belief us to deal with their cash as we do our personal,” Buffett mentioned in his letter. “And that may be a promise we are able to make.”
Quarterly working revenue fell 8% to $6.71 billion, or $4,596 per Class A share, from $7.29 billion.
Internet revenue for the quarter fell 54% to $18.16 billion, or $12,412 per Class A share, from $39.65 billion a yr earlier.
Buffett considers internet outcomes deceptive as a result of they embrace features and losses on investments that Berkshire hasn’t bought.
GEICO STRUGGLES PERSIST
Working outcomes included about $1.2 billion of forex losses and a sixth straight underwriting loss on the automotive insurer Geico, which has boosted premiums after scuffling with accident claims and correctly pricing insurance policies to replicate danger.
Berkshire projected that Geico, which shed 7% of its 41,000-person workforce final yr, will generate an underwriting revenue in 2023.
Outcomes additionally mirrored a 24% bounce in revenue from power and utility operations, in addition to Berkshire’s share of Occidental Petroleum Corp’s (OXY.N) earnings after it constructed a 21.4% stake within the oil firm.
Berkshire additionally owns 20.4% of American Specific Co (AXP.N), which its monetary outcomes don’t incorporate.
Although rising charges helped Berkshire generate extra revenue from insurance coverage investments, additionally they damage its Clayton Houses unit and namesake actual property brokerage by reducing into demand for housing building, purchases and refinancings.
As well as, revenue on the BNSF railroad fell 13% because the Federal Reserve’s rate-hike marketing campaign started slowing the nation’s economic system, and delivery volumes of client, industrial and agricultural merchandise in addition to coal all declined.
“Rates of interest had been the first driver in considerably gentle fourth-quarter outcomes” in an in any other case “fairly robust yr” for Berkshire, Jim Shanahan, an Edward Jones & Co analyst with a “purchase” score on Berkshire.
For all of 2022, Berkshire posted a internet lack of $22.82 billion, although that largely mirrored declines in its $308.8 billion portfolio of frequent shares, led by Apple Inc (AAPL.O).
MORE FLOAT
Berkshire did spend $11.5 billion within the fourth quarter to purchase the insurance coverage firm Alleghany Corp.
That buy helped increase insurance coverage “float,” which displays premiums collected up entrance earlier than claims are paid and assist fund development, 12% final yr to $164.1 billion.
“Buffett takes these insurance coverage premiums and buys good high quality companies,” mentioned Invoice Smead, a longtime Berkshire investor at Smead Capital Administration in Phoenix, which invests $5.5 billion.
Thomas Russo, whose Gardner Russo & Quinn in Lancaster, Pennsylvania invests $8 billion, about 17% of which is in Berkshire, added: “Buffett typically describes float as extra essential than money.”
Berkshire additionally spent $8.2 billion on Jan. 31 to spice up its stake in truck cease operator Pilot Journey Facilities to 80% from 38.6%.
Cathy Seifert, a CFRA Analysis analyst who charges Berkshire “maintain,” mentioned Geico stays a “huge ache level” due to elevated accident losses, and known as on it to reveal “extra about what it is doing to rectify a continual state of affairs.”
Reporting by Jonathan Stempel in New York; Enhancing by Mark Potter and Diane Craft
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