Berkshire Hathaway Profit Slips
Berkshire Hathaway reported a drop in quarterly profit, dragged down by underperformance in its insurance operations. The conglomerate also took a writedown on its stake in Occidental Petroleum, signaling headwinds for the insurance sector and the broader economy.
A $4.5 billion writedown on Berkshire Hathaway's investment in Occidental Petroleum contributed to the profit decline. This impairment reflects a significant drop in the oil company's stock price. Berkshire initially invested $10 billion in Occidental in 2019 to help finance its acquisition of Anadarko Petroleum. The conglomerate's insurance underwriting profit saw a steep 54% drop in the fourth quarter, falling to $1.56 billion from $3.41 billion the previous year. Insurance investment income also decreased by nearly 25% to $3.1 billion. This reflects broader industry trends of rising claim costs due to inflation and supply chain issues. The property and casualty insurance sector is currently facing numerous challenges, including increased competition, the high cost of claims, and more frequent and severe natural disasters. "Social inflation," or the rising cost of litigation, is also putting significant pressure on insurers' profitability. These factors are leading to a re-evaluation of pricing and coverage strategies across the industry. This earnings report is the first under the new leadership of CEO Greg Abel, who took over from Warren Buffett in January 2026. Abel, a long-time Berkshire executive, previously headed Berkshire Hathaway Energy. In his first letter to shareholders, he pledged to maintain the company's established culture of financial discipline. Despite the downturn in insurance and the Occidental writedown, some of Berkshire's other businesses showed modest growth. The manufacturing, retail, and service businesses saw a 3% increase in profits during the quarter. However, the company's cash hoard dipped slightly to $373.3 billion from a record high in the third quarter. For the full year of 2025, Berkshire Hathaway's operating earnings fell 6.2% to $44.49 billion. The company's Class A shares experienced a 10% increase in 2025, which underperformed the S&P 500's 16.4% advance for the same period.
