Berkshire Hathaway Profits Drop on Insurance Weakness
Warren Buffett's Berkshire Hathaway reported a drop in quarterly profit, hit by poor performance in its core insurance operations. The results were also dragged down by a writedown on its investment in Occidental Petroleum. The numbers serve as a bellwether for the broader insurance industry, which is facing rising claims costs and intense competition.
This quarter's results represent a significant transitional moment for Berkshire Hathaway, marking the final period with Warren Buffett as CEO before his successor, Greg Abel, took the helm in January 2026. In his first letter to shareholders, Abel paid tribute to Buffett and pledged to maintain the company's long-standing culture and financial discipline. A deeper look into the insurance operations reveals a 54% plunge in underwriting profits, falling to $1.56 billion from $3.41 billion a year earlier. This was largely driven by struggles at GEICO, which saw its pre-tax underwriting profit nearly halve due to increased advertising spending and a rise in accident claims. Insurance investment income also saw a significant drop of nearly 25% to $3.1 billion. The reported earnings were also impacted by a significant $4.5 billion impairment charge on Berkshire's investments in Kraft Heinz and Occidental Petroleum. The writedown on the 26.9% stake in Occidental Petroleum reflects the company's assessment that the oil giant's declining stock price was not a temporary fluctuation. Despite this, Berkshire has indicated it does not intend to sell its Occidental shares. For the full year of 2025, Berkshire's operating earnings fell to $44.49 billion from $47.44 billion in the previous year. The company's massive cash hoard saw a slight dip but remained substantial at $373.3 billion. Notably, Berkshire did not buy back any of its own shares for the sixth consecutive quarter. In his inaugural letter, new CEO Greg Abel was more direct than his predecessor about the performance of some of Berkshire's businesses. He described the performance gap between the BNSF railroad and its competitors as "too wide" and pointed to "self-inflicted" issues at Shaw flooring that have impacted quality and customer service. Looking ahead, analysts noted that Abel has set an expectation that growth in the reinsurance and commercial insurance sectors may be "nonexistent" in 2026. He also addressed the significant legal challenges facing the PacifiCorp utility, which is dealing with over $50 billion in claims related to wildfires in Oregon and California. Despite the headwinds, Berkshire's new leadership has a considerable amount of "dry powder" with its cash reserves for potential future acquisitions. Abel has affirmed he will not rush to spend this capital and will adhere to the investment principles established by Buffett. The company also has no plans to begin paying a dividend, continuing a long-held company stance.
