(Reuters) — Warren Buffett’s Berkshire Hathaway Inc on Saturday reported its highest-ever annual operating profit, even as currency losses and rising interest rates contributed to lower fourth-quarter results.
Mr. Buffett called 2022 a “good year” for Berkshire in his annual shareholder letter, after the conglomerate’s dozens of businesses generated $30.8 billion in profit despite rising inflation and supply chain disruptions, including from the war in Ukraine.
Berkshire also boosted its cash, ending the year with $128.6 billion after selling about $16.3 billion worth of stock in the fourth quarter.
The Omaha, Nebraska-based company found more value by buying back its own stock, repurchasing $2.6 billion and repurchasing about $700 million more in the first month and a half of this year.
Although the share price is down 1
.5% this year, following a 3.4% gain in the Standard & Poor’s 500, Berkshire shares outperformed the index by 22 percentage points in 2022, reflecting their status as a defensive investment in rocky markets.Berkshire shareholders “trust us to treat their money as we do our own,” Buffett said in his letter. “And that’s a promise we can make.”
Operating profit for the quarter fell 8% to $6.71 billion, or $4,596 per Class A share, from $7.29 billion.
Net income for the quarter fell 54% to $18.16 billion, or $12,412 per Class A share, from $39.65 billion a year earlier.
Mr. Buffett believes the net results are misleading because they include gains and losses on investments that Berkshire has not sold.
The operating result included about $1.2 billion in currency losses and a sixth straight underwriting loss at insurer Geico, which has increased premiums after struggling with accidents and proper pricing policies to reflect risk.
Berkshire predicted that Geico, which cut 7% of its 41,000-person workforce last year, will generate an insurance profit this year.
While rising interest rates helped Berkshire generate more income from insurance investments, they also hurt its Clayton Homes unit and real estate brokerage of the same name by reducing demand for homebuilding, buying and refinancing.
For all of 2022, Berkshire posted a net loss of $22.82 billion, though that largely reflected declines in its $308.8 billion portfolio of common stocks, led by Apple Inc.
Berkshire spent $11.5 billion in the fourth quarter to buy insurer Alleghany Corp.
That purchase helped boost insurance “liquidity,” which reflects premiums collected up front before claims are paid, and helped fund growth, 12% last year to $164.1 billion.
“Buffett takes these insurance premiums and buys good quality companies,” said Bill Smead, a longtime Berkshire investor at Smead Capital Management in Phoenix, which invests $5.5 billion.
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