Berkshire Hathaway Profits Drop on Insurance Weakness
Warren Buffett's Berkshire Hathaway reported a drop in quarterly profits, dragged down by its insurance operations and a significant writedown on its Occidental Petroleum investment. The results show pressure on the firm's core insurance segment from higher claims and competition, while the Occidental writedown reflects ongoing volatility in the energy sector.
The fourth-quarter operating profit for Berkshire Hathaway saw a significant 29% drop to $10.2 billion. A primary driver of this decline was a 54% plunge in insurance underwriting profits, which fell to $1.56 billion from $3.41 billion in the same period of the prior year. The conglomerate's auto insurer, GEICO, experienced a nearly 50% fall in its pretax underwriting profit during the quarter. This was attributed to a combination of increased spending on advertising and a rise in accident claims. For the full year of 2025, insurance underwriting profits decreased to $7.26 billion from $9 billion in 2024. In addition to the insurance segment's performance, Berkshire recorded a significant non-cash impairment charge of $4.5 billion in the quarter. This writedown was related to its investments in Kraft Heinz and, notably, Occidental Petroleum, reflecting concerns that the oil company's declining stock price was not a temporary issue. The writedown on the Occidental stake was influenced by a drop in realized oil prices, which averaged $59.22 per barrel in the fourth quarter, down from $69.73 a year earlier. These results mark the final quarter with Warren Buffett as CEO. His successor, Greg Abel, took the helm at the beginning of 2026, with Buffett remaining as chairman. In his first letter to shareholders, Abel emphasized a commitment to continuity, stating he will adhere to the long-established "framework" of disciplined capital allocation and maintaining a strong balance sheet. Despite the profit drop, Berkshire's cash hoard remained substantial, ending the year at $373.3 billion. However, the company did not repurchase any of its own shares for the sixth consecutive quarter. While the insurance and energy sectors faced headwinds, other parts of the conglomerate showed resilience. The BNSF railroad, for instance, saw its profits increase by 6% in the fourth quarter. In contrast, profits from Berkshire's energy operations experienced a 5% decline during the same period. Looking ahead, analysts have noted that growth in the reinsurance and commercial insurance sectors may be "nonexistent" in 2026. Abel has indicated that Berkshire will prioritize underwriting discipline over sales volume, which could mean writing less property and casualty business for a period as pricing becomes less attractive due to increased competition.
