Warren Buffett's conglomerate, Berkshire Hathaway, reported its operating earnings rose by 12% during the first quarter as its cash levels jumped to $130 billion and insurance profits rebounded, the company reported at its annual shareholder meeting.
The conglomerate's fully-owned businesses, generated $8.065 billion during the first quarter, an increase of 12.6% from $7.16 billion compared to last year.
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Buffett and Munger Speak
Buffett, known as the Oracle of Omaha and who serves as both CEO and chairman, and Charlie Munger, the vice chairman of Berkshire Hathaway, are speaking to shareholders and answering questions today at their popular meeting held annually in Omaha, Neb., known as the “Woodstock for Capitalists.”
"Their earnings show the strength of the Berkshire family of companies as well as the resiliency of the U.S. economy," Robert Johnson, a professor at the Heider College of Business at Creighton University, told TheStreet.
The core businesses of Berkshire Hathaway (BRK.A), have focused on businesses like insurance and railroad companies. During the first quarter, the insurance underwriting business reported a profit of $911 million, an increase from $167 million a year prior.
Insurance investment income rose by 68% to $1.969 billion from $1.17 billion.
Auto insurance company Geico reported a large rebound with an underwriting profit of $703 million. Last year, the company lost customers to its competitors like Progressive (PGR) and reported a $1.9 billion pretax underwriting loss.
"For all the worries that Geico was under existential threat from Progressive, first quarter earnings showed the world they are still firing on all cylinders," Thomas Hayes, chairman of Great Hill Capital in New York, told TheStreet. "This was a major turnaround from last year and contributor to Berkshire earnings this quarter."
BNSF railroad reported its profit declined by 9% to $1.25 billion, impacted by a decline in shipping volumes and a rise in fuel prices.
Berkshire Hathaway Energy, which has reported steady earnings in the past, reported a decline in its profit by 46% since it stashed $359 million to pay for legal services and other costs due to wildfires in Oregon and Northern California.
Berkshire’s cash levels, which have always been large, jumped to $130.616 billion from $128 billion in the fourth quarter of 2022.
Company's Huge Cash Hoard
"The company still has a huge cash hoard, but cash drag is lessened because yield on short term Treasuries has risen markedly," Johnson said. "Warren Buffett emphasized that very point when delivering the earnings news in the arena."
The company repurchased $4.4 billion worth of stock, the largest level since the first quarter of 2021. At the end of 2022, repurchases totaled $2.8 billion.
The net earnings of Berkshire, which includes profits from their investments such as Apple (AAPL), Bank of America BAC and and American Express (AXP), rose to $35.5 billion during the quarter from $5.6 billion in the same period a year ago.
The company divested $13.3 billion of stocks and purchased only $2.9 billion.
Berkshire's stake in Chevron (CVX) declined by 28% to $21.6 billion even thought the oil producer's shares only fell by 9%.
Berkshire also owns a 23.6% stake in another oil company, Occidental Petroleum Corp (OXY).
The company increased its share in Pilot Travel Centers, a truck stop operator, to 80% from 38.6%, spending $8.2 billion on the investment.
Berkshire's Class A shares increased by 4.9% so far in 2023, falling behind the S&P 500's increase of 7.7%, but in 2022, the benchmark index trailed Berkshire by 23.4 percentage points, not including dividends.
