Berkshire Hathaway reports major investment losses in 2022
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Berkshire Hathaway chairman and chief executive Warren Buffett at the company's annual meeting in Omaha, Nebraska, last April.
PHOTO: BLOOMBERG
NEW YORK – Not even Mr Warren Buffett, one of the world’s most successful investors, was immune in 2022 to whipsawing markets.
But as his conglomerate, Berkshire Hathaway, reported a big loss, the billionaire executive urged shareholders to focus on the long term and the underlying health of his empire, which includes insurance, railroads, energy and stock holdings in the likes of Coca-Cola, American Express and more.
Berkshire reported on Saturday that it lost US$22.8 billion (S$30.8 billion) in 2022, driven by US$53.6 billion in unrealised losses on its investments. That mirrored the experience of other investors, who were hit by market volatility as inflation rose swiftly and central banks responded by rapidly raising interest rates.
But in his annual letter to shareholders, Mr Buffett pointed to the company’s operating earnings, which are drawn from its underlying businesses and exclude those paper investment values. On that basis, Berkshire earned a record US$30.8 billion in 2022.
And its holdings of cash and equivalents have grown to US$125 billion, giving Mr Buffett more firepower to invest in stocks and, potentially, buy new companies.
Factoring Berkshire’s investment performance into its overall returns is “100 per cent misleading”, he wrote, since those results are likely to change easily from quarter to quarter.
Berkshire’s vast business empire is often seen as a microcosm of American industry. And many of its subsidiaries reported being hurt by the broader economic forces affecting the United States.
Weaknesses included Berkshire’s consumer products businesses, which in 2022 reported a 23 per cent drop in earnings from 2021, hurt by lower demand and higher costs for raw materials and shipping. In its annual report, Berkshire said it expected continued soft demand in 2023, and planned to “right-size” its operations and reduce product inventories.
The conglomerate’s core insurance businesses, which generate the cash that powers Mr Buffett’s vast investments, also reported underwriting losses from catastrophic events, including hurricanes, and a rise in auto claims at Geico.
And BNSF Railway, whose parent company is a subsidiary of Berkshire, reported a slight drop in earnings in large part because of the rising cost of fuel and lower volumes of shipments.
Still, Mr Buffett professed continued faith in the resilience of the US. “I have yet to see a time when it made sense to make a long-term bet against America,” he wrote. NYTIMES
