Berkshire Hathaway Profits Drop on Insurance Weakness
Warren Buffett’s Berkshire Hathaway reported a drop in quarterly profit, dragged down by poor performance in its insurance operations. The company also took a significant writedown on its stake in Occidental Petroleum. The results highlight growing challenges for the insurance sector amid rising claims and market volatility.
The fourth-quarter operating profit saw a steep decline of 30% to $10.2 billion. For the full year of 2025, operating profit was down 6% to $44.49 billion, while net income fell by 25%. This marked the final quarter with Warren Buffett as CEO, with his successor Greg Abel now at the helm. The core insurance business experienced a significant downturn, with underwriting profits plunging 54% to $1.56 billion in the quarter. At GEICO, pretax underwriting profit was nearly halved due to increased advertising costs and a rise in accident claims. Meanwhile, reinsurance operations faced headwinds from increased market capital and lower pricing. A $4.5 billion writedown was taken on the company's investments in Occidental Petroleum and Kraft Heinz. Berkshire indicated the decline in Occidental's stock price was not considered "temporary," prompting the impairment charge. It wasn't all negative, as the BNSF railroad division saw profits increase by 6% in the fourth quarter. However, profits from Berkshire's energy operations dipped by 5%, and consumer businesses like Duracell and Fruit of the Loom faced "sluggish" demand. This quarter was the 13th in a row that Berkshire was a net seller of stocks and the sixth consecutive quarter without any share buybacks. In his first letter to shareholders, new CEO Greg Abel paid tribute to Buffett and pledged to maintain his disciplined investment strategy. Despite the profit drop and market headwinds, the conglomerate's massive cash reserves stood at $373.3 billion at the end of 2025. Abel referred to this cash pile as "dry powder," ensuring Berkshire is ready to act decisively on investment opportunities.
