The head of Berkshire may be new, but nothing has changed in the business model.

In Berkshire's first quarter Greg under Abel, who succeeded Buffett in January as Berkshire's chief executive, the company on Saturday reported a higher first-quarter operating profit even as economic uncertainty weighed on several of its consumer-oriented ​businesses. The Omaha, Nebraska-based conglomerate built by Warren Buffett and now led by Greg Abel also reported a record cash level, reflecting continuing difficulty finding ‌investments that meet its value-oriented principles.The conglomerate also continued its trend of divesting its stock portfolio with the largest sales od equity securities in Q1 since mid-2024; it also unveiled the first, modest stock buyback since Q2 of 2024.

Profit from Berkshire's numerous businessesrose 18% to $11.35 billion, or about $7,891 per Class A share, from $9.64 billion a year earlier. Net income, including from common stock investments, more than doubled to $10.1 billion, or $7,027 per Class A share, from $4.6 billion thanks to a boost from an improvement in underwriting results in its vast insurance businesses (Berkshire has traditionally downplayed the relevance of net income, which because of accounting rules includes unrealized gains and ​losses on stocks it has no plans to sell, and its therefore especially volatile during periods of market stress).

Berkshire's earnings are closely watched because the conglomerate’s businesses, ranging from insurance to railroads to energy and manufacturing, provide a snapshot of the health of the US economy. The company owns dozens of businesses including Geico, the BNSF railroad, Berkshire Hathaway Energy, Dairy Queen and See's Candies. Yet while Berkshire is sometimes considered a microcosm of the broader U.S. economy,its focus on insurance and hard ​assets has left it out of step with broader market trends, including the prevailing euphoria over artificial intelligence.

Worries about the economy took a toll on several of ​Berkshire's consumer-oriented businesses. Berkshire said economic conditions weighed on building products businesses such as the Clayton Homes mobile home unit, while the Forest River RV unit, Fruit of the Loom ‌and Squishmallows ⁠maker Jazwares reported lower revenue amid "higher economic uncertainty" and lower consumer confidence.

Underwriting earnings from the firm’s collection of insurance businesses surged to $1.7 billion, up about 29% from a year ago, when the units were hit by losses tied to the Los Angeles wildfires. Still, Geico posted a 35% decline in pretax underwriting earnings, as the unit faced more losses and spent more to gain new clients.

“Most of Geico’s peer group this quarter posted significantly improved underwriting results,” said Cathy Seifert, an analyst at CFRA Research, on the contrast between competitors and Geico. “They’re a big unit and that’s a big deterioration.”

Profit from all insurance operations rose 4% ⁠to $4.4 billion from a year earlier, when wildfires in Southern California hurt results in reinsurance and smaller insurance businesses. The overall improvement came despite the 35% profit drop at Geico, where accident claims and marketing expenses ​increased. Geico spent several years upgrading its underwriting discipline and technology, and is trying to reclaim market share it ​gave up to rivals ⁠such as Progressive. Abel said at the meeting that the insurance sector generally is "softening" and becoming "more challenging" as more capital flows into the market, making it harder for Berkshire to charge sufficient premiums for the risks it takes on.

Profit at its railroad unit BNSF rose 13% to $1.4 billion, helped by higher demand to ship grains, petroleum fuels, oilseeds and meals, and relieving pressure on BNSF management, led by CEO Katie Farmer, to improve the unit’s operating margin and close the gap with its most efficient peers.

The railroad ​has lagged some peers in operating margin, and Abel said in his first annual letter to ​Berkshire shareholders that improved efficiency and service were necessary. Abel had given the division’s management a clear mandate to improve the business on those fronts. He said at the meeting that while he’s pleased with the first-quarter results, there’s still room for improvement.

Source: ZeroHedge News