Warren Buffett’s Berkshire Cash Pile Hits $382 Billion, Q3 Earnings Soar 34%

Berkshire Hathaway Inc.’s cash pile soared to $381.7 billion in the third quarter, a fresh record, and operating earnings surged 34% at Chief Executive Officer Warren Buffett’s conglomerate.  

That figure hit $13.5 billion, as the firm’s insurance underwriting profit more than tripled in a period marked by unusually low disaster activity, according to filings published Saturday.

Earlier this year, Buffett appeared to be back on the hunt for deals, with the acquisition of a $1.6 billion stake in UnitedHealth Group Inc. and a $9.7 billion deal to buy OxyChem last month. But the famed billionaire remained on the sidelines in the third quarter. Berkshire Hathaway offloaded $6.1 billion of shares during the period. 

“There isn’t much opportunity in Buffett’s eyes right now,” said Jim Shanahan, an analyst for Edward Jones.

Despite its growing cash hoard, the firm’s net investment income declined 13% to $3.2 billion amid lower short-term interest rates.

The firm’s collection of primary insurance and reinsurance businesses both turned a pretax underwriting profit this quarter, after posting losses in the year-ago period.

But Berkshire auto insurer Geico’s pretax underwriting profit fell 13% amid slightly higher claims and a 40% increase in underwriting costs, which the firm said is due to “increased policy acquisition-related expenses.” 

“That’s likely to be mostly advertising,” Shanahan said. “Geico is everywhere right now.”

New Era

Berkshire’s earnings are closely watched because the conglomerate’s stable of businesses — ranging from insurance to rail, energy and manufacturing — provides a snapshot of the health of the US economy.

Investors may also pay closer attention as the company nears a new era, with Buffett handing off the role of CEO to Greg Abel at year-end.

Operating earnings at its railroad unit BNSF rose 5%, to $1.4 billion, as revenue from the transportation of agricultural and energy products grew, driven in part by slightly higher grain exports. At the same time, Berkshire’s utilities business, which runs PacifiCorp, MidAmerican and NV Energy, posted a 9% decline in operating earnings, to $1.5 billion over the period.

One sore point is Pilot, which posted a $17 million loss in the third quarter. Berkshire said the decline is driven by lower wholesale fuel and retail margins, as well as higher expenses.

“The Pilot business is not really doing very well,” Shanahan said. “I’m interested to see what the plan might be to turn that around.”

The truck-stop chain is considering the sale of its water-management business to focus on its primary businesses, Bloomberg News reported in July.

No Buybacks

For the fifth straight quarter, the firm declined to buy back its own shares, which have fallen nearly 12% since Buffett’s announcement in May that he would step down.

“I think that sends a very powerful message to shareholders,” said Cathy Seifert, an analyst at CFRA Research. “If they’re not buying back their shares, why should you?”

Despite the earnings gains, the firm’s tepid revenue growth in the period is not going to help investor sentiment, according to Seifert. 

“I’m struggling to find a catalyst” for an increase in the stock price, she said.