Berkshire Hathaway Inc. Warren Buffett-owned increase in operating profit After your auto insurance company Gekko It returned to profitability after six quarters of losses.
Geico reported a profit of $703 million, Higher average premiums and lower ad spend contributed to the gainsDespite the lower frequency of claims, Berkshire said in a statement, reporting first-quarter results on Saturday.
In all, the group reported an operating profit of $8,070 million, up nearly 13% over the same period in the previous year.
Geico’s recovery comes after a difficult period for subscription businesses, such as The impact of inflation on the cost of materials and labor. Geico has also faced pressure from competitors such as Progressive Corp, which Buffett called “Well managedAnd Allstate Corp., which has long used IT software to track drivers and encourage better behavior before Geico made the offer.
Berkshire previously said it expects Geico to return to operating profitability in 2023, after securing premium rate increases.
Geico’s earnings also helped the Berkshire group of insurers post profits of $911 million, compared to $167 million a year earlier. Berkshire Corp. added: Alleghany Corp to its list of insurance companies, The closing of the $11,600 million acquisition deal by the end of last year.
lagging behind its competitors
but, Geico remains problematic for Berkshire, with top-quarter revenue growth of less than 1%“,”significantly lower than its competitors.According to Cathy Seifert, analyst at CFRA.
“I suspect that the interest rate hikes that are applied to offset the cost inflation of claims are being answered by the policy’s cancellation“, He said. “Although losing out on unprofitable policies isn’t always a bad thing, it’s the policies and policyholders who leave.“.
Other parts of the conglomerate were also hit hard, with Berkshire Hathaway Energy’s after-tax profit down 46.3% from the same period last year amid “declining earnings from U.S.-regulated utilities, other energy companies and real estate brokerages.”
Berkshire bought back $4.4 billion worth of stock, compared with the same period a year earlier, as the billionaire investor’s company faced turbulent markets offering less than the mega deals the investor is known for. Berkshire has resorted to buybacks more often, as valuations in public markets have made it difficult for Buffett to identify promising acquisitions.
Berkshire also increased its cash pile, finishing the quarter with about $130.6 billion, after ending last year with $128.6 billion in cash on hand. The company was a net seller of shares in the quarter$10.4 billion in stock sales net of purchases.
The Federal Reserve also raised interest rates Fighting inflation, Berkshire’s investment returns have increased, which helped push worldwide profit to $35.5 billion in the quarter. Berkshire often advises investors to ignore investment earnings, which are tied to accounting standards and can be misleading to investors.
The company holds its annual general meeting in Omaha, Nebraska, later, where Buffett and partner and vice president Charlie Munger will answer questions. Thousands of followers.
(Updates with analyst comments in the sixth paragraph.)
More info at bloomberg.