Warren Buffett’s Berkshire Hathaway reported a jump in earnings in the first quarter of 2023 ahead of the Oracle of Omaha’s annual shareholders meeting.
Operating earnings increased about 12% from the prior year to $8.065 billion in the first quarter, the earnings release said Saturday. Operating earnings are the profit left after costs from a business’ core operations are taken out.
The conglomerate posted a $35.5 billion first-quarter profit.
The jump in earnings is attributed in part to a comeback in Berkshire’s insurance empire.
The company’s insurance underwriting business saw a clear spike, from earnings of $167 million in the first quarter of 2022 to $911 million now. Insurance investment income increased from $1.17 billion to $1.97 billion.
Geico, which is owned by Berkshire Hathaway, had a $1.9 billion pretax underwriting loss at year’s end, after losing market share to competitor Progressive. So far this year, it is faring better, posting an underwriting profit of $703 million in this year’s Q1, thanks to higher average premiums and lower advertising costs, despite lower claims frequencies.
However, Berkshire’s energy company and freight railroad company, BNSF, had a decrease in earnings compared to this quarter last year.
Berkshire also bought back approximately $4.4 billion in stocks, and its cash hoard increased to $130.6 billion from $128 billion in 2022 Q4.
Coined “Woodstock for Capitalists,” the annual meeting will feature Buffett, 92, and Berkshire vice chairman Charlie Munger, 99, who took the stage on Saturday to answer questions from shareholders and engage in discussion about the business and broader economy.
- Investors looked forward to hearing from the Oracle from Omaha on the recent bank failures and the shakeup in the industry and not surprisingly, they were among the topics he touched on. “It would have been catastrophic,” Buffett said, if regulators did not backstop Silicon Valley Bank depositors.
- Buffett also noted that fear in banking has always been contagious, but setting up the FDIC was “enormously sensible,” assuring the agency and US government has no interest in letting banks fail. In regards to First Republic Bank, Buffett said, “The CEO and the director should suffer. The stockholders in the future shouldn’t suffer. They didn’t do anything.”
- The nonagenarians were skeptical about the hyperbolic chatter surrounding AI, but said it would be transformative. “We’re going to see a lot more robotics in the world,” Munger said. “I’m personally skeptical of some of the hype in AI. I think old fashioned intelligence works pretty well.”
- Buffett also made comments on the commercial real estate market. There is an abundance of office building space vacant, and higher interest rates have also caused developers to delay new construction projects. “We are starting to see the consequences of people who could borrow at 2.5% and find out it doesn’t work at current rates,” Buffett said.
- Buffett also revealed the best business in Berkshire’s expansive portfolio. “Apple is different than the other businesses we own. It just happens to be a better business,” said Buffett. Berkshire has recently held a 5.6% stake in Apple, Reuters reported.
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