Berkshire Hathaway repurchased US$9.6 billion worth of its own shares in the third quarter, but Geico’s numbers got worse as it invested more in ads and its overall profit fell more than 28 per cent as the value of its investments changed.
But the buybacks likely came to a halt recently as Berkshire’s Class A stock price surged past US$878,000 and topped where it was before Warren Buffett surprised investors with his plans to retire at the annual meeting in May 2025. He gave up the chairman title in September after relinquishing the CEO job to Greg Abel in January.
Berkshire’s massive cash pile also returned to growing in the third quarter and reached US$377.4 billion, up from US$365.5 billion at the end of June.
CFRA Research Analyst Cathy Seifert said Geico is in a tough spot right now with insurance premiums declining at the same time the average cost of the claims are increasing. Berkshire underwriting profit at all its insurers fell to US$1.35 billion from last year’s US$2.37 billion. Geico accounted for most of that by generating US$982 million this year, down from US$1.77 billion a year ago.
Investor Chris Ballard, who is managing director at Check Capital, said they were not disappointed in Geico’s numbers, because they reflect that the company is investing again in its iconic spokes lizard and trying to attract more customers. Getting more aggressive at writing new policies always tends to put pressure on an auto insurer’s bottom line.
“It should be looking better. Progressive is doing better, but they were doing so well for so long. They had cut their advertising for quite a while there,” said Ballard, whose firm invested in Berkshire. “So we’ve been kind of expecting this on our end.”
Seifert said Berkshire’s non-insurance businesses that Abel has overseen for years – such as manufacturers like Precision Castparts, the utilities and BNSF railroad – seem to be performing better than its massive insurance unit even with the lack of major hurricanes or other catastrophes this year.
“I think we’re seeing the businesses that play to Greg’s strengths do well. But the question is ‘what about the rest of the franchise?,” Seifert said.
Berkshire reported a US$22.1 billion profit, or US$15,502 per Class A share, on Saturday morning. That’s down from US$30.8 billion, or US$21,413 in last year’s third quarter, but those bottom-line figures always tend to obscure how the dozens of companies the conglomerate owns are performing.
The company has long recommended that investors pay more attention to operating earnings, which exclude the value of its investments that can vary widely, but those also slipped nearly 6 per cent to US$12.7 billion, or US$8,907 per Class A share. That’s down from US$13.485 billion, or US$9,376.15 per Class A share a year ago.
The four analysts surveyed by FactSet Research had predicted Berkshire would report operating earnings of US$8,821.84 per Class A share.
Berkshire owns several major insurers, including Geico, a collection of big utilities, BNSF railroad and a varied assortment of manufacturing and retail companies, including Precision Castparts and See’s Candy.
AP
