Berkshire Hathaway Inc. (BRK.B) reported third-quarter 2023 operating earnings of $10.8 billion, which increased 40.6% year over year. The increase was driven by higher earnings in Insurance-underwriting and Insurance-investment income, other controlled businesses and Pilot Travel Centers.
Berkshire Hathaway Inc. Price, Consensus and EPS Surprise
Berkshire Hathaway Inc. price-consensus-eps-surprise-chart | Berkshire Hathaway Inc. Quote
Behind the Headlines
Revenues increased 21.2% year over year to $93.2 billion, attributable to higher revenues at Insurance and Other, as well as Railroad, Utilities and Energy.
Costs and expenses decreased 1.4% year over year to $56.3 billion, largely due to a decrease in insurance losses and loss adjustment expenses and the cost of sales and services. The figure was lower than our estimate of $66.9 billion.
Segment Performance
Berkshire Hathaway’s Insurance and Other segment revenues increased 6.8% year over year to $66.9 billion in the reported quarter on the back of higher insurance premiums earned, leasing revenues and interest, dividend and other investment income.
Insurance underwriting earnings were $2.4 billion in the quarter against losses of $1.1 billion from the year-ago quarter. Earnings in 2023 benefited from relatively lower catastrophe losses. Underwriting earnings in 2023 also reflected improved results at GEICO.
Railroad, Utilities and Energy operating revenues increased 84.6% year over year to $26.2 billion, attributable to higher utility and energy operating revenues. Pre-tax earnings of Railroad decreased 14.6% year over year to $1.6 billion.
Operating earnings from the Railroad business decreased 14.2% year over year to $1.8 billion.
Total revenues at Manufacturing, Service and Retailing increased 1.1% year over year to $42.6 billion. Pre-tax earnings increased 4.3% year over year to $4.4 billion.
In the reported quarter, earnings from the Manufacturing, Service and Retailing businesses increased 2.9% year over year.
Financial Position
As of Sep 30, 2023, consolidated shareholders’ equity was $531.5 billion, up 10.3% from the level as of Dec 31, 2022. At quarter-end, cash and cash equivalents were $25.6 billion, down 20.7% from the level at 2022 end.
Berkshire exited the second quarter of 2023 with a float of about $167 billion, up from $164 billion from the figure at year-end 2022.
Cash flow from operating activities totaled $34.8 billion in the first nine months of 2023, up 28.7% from the year-ago period.
Berkshire Hathaway bought back shares worth $7 billion in the first nine months of 2023.
Zacks Rank
Berkshire currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Property & Casualty Insurers
CNA Financial Corporation CNA reported third-quarter 2023 core earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 15.2%. The bottom line increased 35.9% year over year. Total operating revenues of CNA were $3 billion, up 11.8% year over year due to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 3.1%.
Net written premiums of Property & Casualty Operations increased 6% year over year to $2.2 billion, driven by a retention rate of 83% and renewal premium change of 6%, with a written rate of 6%, exposure change of 1% and new business increase of 4%. Pretax net investment income increased 31% to $553 million pretax, including a $72 million increase from limited partnerships and common stock to $28 million and a $59 million increase from fixed-income securities and other investments to $525 million.
Total claims, benefits and expenses remained almost flat year over year at $3 billion and came in line with our estimate. Catastrophe losses were $94 million, narrower than a loss of $114 million in the year-ago quarter. Underwriting income increased 56% year over year to $131 million. The combined ratio improved 150 basis points year over year to 94.3. The Zacks Consensus Estimate was pegged at 95.
Arch Capital Group Ltd. ACGL reported third-quarter 2023 operating income of $2.31 per share, beating the Zacks Consensus Estimate by 50%. The bottom line increased more than eightfold year over year. Gross premiums written improved 17.2% year over year to $4.5 billion. Net premiums written climbed 35.8% year over year to $3.4 billion. Net premiums beat our estimate of $3 billion.
Net investment income increased 108.5% year over year to $269 million and beat our estimate of $265.3 million. The Zacks Consensus Estimate was pegged at $261 million. Operating revenues of $3.5 billion rose 32.6% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 1.5%. Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $180 million. Arch Capital’s underwriting income increased more than tenfold year over year to $721 million.
Cincinnati Financial Corporation CINF reported third-quarter 2023 operating income of $1.66 per share, which surpassed the Zacks Consensus Estimate by 55%. The bottom line more than doubled year over year. Total operating revenues in the quarter under review were $2.3 billion, which improved 8.7% year over year. Also, the top line beat the consensus mark by 1.2%. Net written premiums climbed 12% year over year to $1.9 billion and matched our estimate.
Investment income, net of expenses increased 17% year over year to $225 million and beat our estimate of $210.8 million. The growth was driven by an increase in bond interest income and a rise in stock portfolio dividends. The Zacks Consensus Estimate was pegged at $216 million. Total benefits and expenses of Cincinnati Financial decreased 1.4% year over year to $1.9 billion. Our estimate was $2 billion. In its property & casualty insurance business, CINF witnessed an underwriting income of $112 million against an underwriting loss of $66 million in the year-earlier period. Our estimate of underwriting income was pegged at $2.1 million.
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