10-QPeriod: Q3 FY2023

BERKSHIRE HATHAWAY INC Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 6, 2023For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. reported a net earning of $58.6 billion for the first nine months of 2023, a significant turnaround from a net loss of $40.2 billion in the same period of 2022. This improvement was largely driven by a substantial increase in investment and derivative gains, which swung from a significant loss in the prior year to a gain in the current period. Total revenues for the first nine months also saw a healthy increase, reaching $271.1 billion compared to $223.9 billion in the prior year, boosted by contributions from the consolidated Pilot Travel Centers (PTC) and increased insurance premiums. Shareholders' equity grew to $531.5 billion as of September 30, 2023. The company continued its share repurchase program, acquiring $7.0 billion in the first nine months of 2023, demonstrating a commitment to returning capital to shareholders when valuations are deemed attractive. The balance sheet remains strong with substantial cash, cash equivalents, and U.S. Treasury Bills totaling $152.0 billion. However, investors should note the ongoing impact of legal proceedings, particularly concerning PacifiCorp's wildfire liabilities and HomeServices of America's antitrust cases, which represent significant contingent risks.

Financial Highlights

28 data points
Beta

Revenue

$93.21B

Net Income

-$12.57B

-13.5% Net Margin

Total Assets

$1.02T

Cash & Equivalents

$31.60B

Free Cash Flow

$8.37B

Financial Statements
Beta
Revenue$93.21B
Operating Expenses$80.65B
Net Income-$12.57B

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders for the first nine months of 2023 were $58.6 billion, a substantial improvement from a net loss of $40.2 billion in the same period of 2022, primarily due to a significant swing in investment and derivative gains/losses.
  • 2Total revenues increased to $271.1 billion for the first nine months of 2023 from $223.9 billion in the prior year, aided by the consolidation of Pilot Travel Centers (PTC) and growth in insurance premiums.
  • 3Shareholders' equity increased to $531.5 billion as of September 30, 2023, reflecting strong earnings and capital management.
  • 4Berkshire repurchased approximately $7.0 billion of its Class A and Class B common stock during the first nine months of 2023, continuing its strategy of buying back shares when deemed undervalued.
  • 5The company maintains a strong liquidity position, with $152.0 billion in cash, cash equivalents, and U.S. Treasury Bills as of September 30, 2023.
  • 6Significant potential liabilities are highlighted from legal proceedings, including PacifiCorp's wildfire-related litigation ($1.7 billion net accrual as of Q3 2023) and HomeServices of America's antitrust cases (potential for trebled damages of $1.8 billion from one verdict).
  • 7Insurance underwriting earnings significantly improved, turning positive at $4.6 billion for the first nine months of 2023 compared to a loss of $190 million in the prior year, largely due to lower catastrophe losses, particularly Hurricane Ian in 2022.

Frequently Asked Questions

The primary driver for the significant improvement in net earnings was a dramatic swing in investment and derivative contract gains (losses). In the first nine months of 2023, Berkshire reported gains of $38.0 billion, compared to losses of $82.4 billion in the same period of 2022. This shift from a substantial loss to a gain heavily influenced the overall net earnings.

Berkshire Hathaway acquired a controlling interest in PTC on January 31, 2023, and began consolidating its financial statements from February 1, 2023. For the first nine months of 2023, PTC contributed $37.4 billion in revenues and $380 million in net earnings attributable to Berkshire shareholders. This consolidation has positively impacted total revenues and segment earnings.

Two significant contingent liabilities are highlighted. First, PacifiCorp, a subsidiary of Berkshire Hathaway Energy, is facing substantial claims related to wildfires, with an estimated probable pre-tax loss accrual of $1.9 billion for the first nine months of 2023, net of expected insurance recoveries. Second, HomeServices of America is involved in antitrust litigation concerning real estate commissions, with one jury awarding $1.8 billion in damages (subject to trebling) which HomeServices intends to appeal. It is also reasonably possible that losses will be incurred from three other similar antitrust cases.

Berkshire Hathaway continues its share repurchase program, repurchasing approximately $7.0 billion of its Class A and Class B common stock in the first nine months of 2023. The program allows repurchases whenever Warren Buffett and Charlie Munger believe the repurchase price is below Berkshire's intrinsic value. The company emphasizes that it will not repurchase shares if doing so would reduce its consolidated cash, cash equivalents, and U.S. Treasury Bills holdings below $30 billion, highlighting its commitment to financial strength and liquidity.