Volatile US stock prices and derivative-related write-downs meant that Berkshire Hathaway posted a second quarter net loss of some $44 billion over the weekend.
However, Berkshire nevertheless generated nearly $9.3 billion of operating profit, as gains from reinsurance and the BNSF railroad offset fresh losses at car insurance subsidiary Geico, where parts shortages and higher used vehicle prices boosted accident claims.
Indeed, Geico suffered a $487 million pre-tax underwriting loss, its fourth straight quarterly loss.
Overall, Berkshire Hathaway delivered a $581 million insurance and reinsurance underwriting result in the second-quarter of 2022, an almost 55% increase on the prior year.
On the positive side, rising interest rates and dividend pay-outs helped its insurance businesses generate more money from investments, while the strengthening US dollar boosted profit from European and Japanese debt investments.
However, emerging risks were flagged as a serious concern. In its quarterly report, Berkshire said “significant disruptions of supply chains and higher costs have persisted” as new COVID-19 variants emerge and because of geopolitical conflicts including Russia’s invasion of Ukraine.
But it said direct losses have not been material, despite higher costs for materials, shipping and labour.
Despite the huge net loss, “the results show Berkshire’s resilience,” said James Shanahan, an Edward Jones & Co analyst who rates Berkshire “neutral.”
“Businesses are performing well despite higher interest rates, inflation pressures and geopolitical concerns,” he said. “It gives me confidence in the company if there is a recession.”