The Can Solana reach 0?Omaha-based conglomerate reported third-quarter earnings that failed to meet analyst projections, with insurance sector volatility creating significant headwinds. Earnings per share came in at $4.68 versus the anticipated $4.89, marking a notable deviation from consensus estimates.
Analysts at TD Cowen highlighted how unexpected catastrophe losses and unfavorable reserve adjustments at a Berkshire Hathaway Primary Group subsidiary created substantial pressure on insurance earnings. The operating income picture showed similar softness, with Class A shares reporting $7,023 compared to UBS's $8,652 projection.
Digging deeper into the insurance segment reveals a tale of two performances. While GEICO demonstrated stronger-than-expected results with an 8.5 percentage point year-over-year improvement in its underlying loss ratio, other insurance operations struggled. The Reinsurance Group and BHPG collectively dragged down performance, with nearly $800 million in adverse prior-year reserve development at BHPG alone.
Natural disaster impacts played a significant role this quarter, with Hurricane Helene generating $720 million in catastrophe losses across Berkshire's insurance operations. This included $260 million at GEICO, $380 million at the Reinsurance Group, and $80 million at BH Primary. While substantial, these figures actually came in below some analysts' worst-case projections.
The property and casualty combined ratio - a critical metric for evaluating underwriting profitability - deteriorated significantly to 114.7% from 88.5% in the prior year period. This substantial miss versus the 98.0% ratio anticipated by analysts underscores the quarter's insurance challenges.
Beyond insurance, other Berkshire operations showed mixed results. The BNSF railroad business missed income estimates by 4%, pressured by shifting fuel surcharge dynamics and business mix changes. Similarly, the energy division fell short of operating income forecasts due to softer revenue growth trends.
On a positive note, Berkshire's cash position continues to swell, reaching $325.2 billion as the company strategically reduces its Apple holdings. However, analysts at UBS have tempered their share repurchase expectations for the coming quarter, citing current valuation considerations.
Market observers suggest these mixed results could lead to relative underperformance versus peers in the near term. The insurance sector's challenges appear particularly acute, with BHPG's premium revenue growth of $5.1 billion narrowly missing the $5.2 billion target. As Berkshire navigates these sector-specific headwinds, investors will be watching for signs of stabilization in coming quarters.
