Berkshire Hathaway repurchased $9.6 billion of its own shares during the third quarter, according to the company's November 7 earnings release, even as net income fell 28% to $22.11 billion from $30.80 billion a year earlier. The conglomerate's insurance underwriting earnings declined 43% to $1.35 billion, with Geico's underwriting profit dropping approximately 45% to $982 million due to increased claims costs and advertising expenses. The accelerated buyback program marks a significant capital-allocation shift under CEO Greg Abel, who succeeded Warren Buffett in January and has shown greater willingness to deploy Berkshire's substantial cash reserves despite the quarterly profit decline.
Berkshire Accelerates $9.6B Buyback Program Under Greg Abel
Berkshire's $9.6 billion third-quarter repurchase program was approximately twice the $4.8 billion spent during the first six months of the year. The company bought back $14.4 billion of shares through September and reportedly purchased another $2 billion during October, according to the earnings release.
The acceleration follows Buffett's leadership transition, which left Abel responsible for overseeing Berkshire's enormous investment portfolio and operating businesses. Berkshire ended September with approximately $356.9 billion in cash and equivalents under the measure covering its insurance and other businesses, compared with roughly $380.2 billion in March.
Operating earnings, which exclude volatile investment gains and losses, slipped 5.8% to $12.71 billion during the third quarter. Despite the buybacks, the conglomerate retained substantial financial flexibility for acquisitions, investment opportunities and potential economic disruptions.
Geico Underwriting Profit Falls 45% as Railroad and Energy Earnings Rise
Berkshire's insurance operations were the primary source of weakness during the quarter. Insurance underwriting earnings declined 43% to $1.35 billion from $2.37 billion a year earlier. Geico's underwriting profit fell approximately 45% to $982 million as claims costs and advertising expenses increased. Insurance investment income also declined 14% to $2.73 billion.
Several noninsurance businesses performed substantially better. BNSF railroad earnings increased 19% to $1.73 billion, while Berkshire Hathaway Energy's profit rose 8% to $1.61 billion. Manufacturing, service and retailing earnings climbed approximately 12% to $4.04 billion. These gains helped offset insurance weakness, illustrating the advantages of Berkshire's diversified business structure.
Investment Gains Decline $7.9 Billion Year-Over-Year
The 28% decline in reported net income partly reflects investment accounting rather than deterioration across every operating business. Investment gains fell to $9.41 billion from $17.31 billion a year earlier. Berkshire cautions that quarterly investment gains, including unrealized stock-market movements, can distort reported profitability.
The company has continued diversifying its investments, including an additional $330 million commitment to Italian software company Bending Spoons.
FAQ
How much did Berkshire Hathaway spend on stock buybacks in the third quarter?
Berkshire Hathaway repurchased $9.6 billion of its own shares during the third quarter, according to the company's November 7 earnings release. This amount was approximately twice the $4.8 billion spent during the first six months of the year.
Why did Berkshire Hathaway's net income fall in the third quarter?
Berkshire's net income declined 28% to $22.11 billion from $30.80 billion a year earlier due to insurance underwriting earnings falling 43% and investment gains dropping to $9.41 billion from $17.31 billion. Geico's underwriting profit fell approximately 45% to $982 million as claims costs and advertising expenses increased.
Which Berkshire Hathaway businesses showed earnings growth in the third quarter?
BNSF railroad earnings increased 19% to $1.73 billion, Berkshire Hathaway Energy's profit rose 8% to $1.61 billion, and manufacturing, service and retailing earnings climbed approximately 12% to $4.04 billion during the third quarter, according to the November 7 earnings release.
