Warren Buffett’s Berkshire hit by whopping $44bn loss on market headwinds

Berkshire Hathaway, the conglomerate run by billionaire Warren Buffett (pictured), fell to sizable loss both in the second quarter and first half of the year due to a huge hit on its investments amid the overall market turmoil driven by the surging inflation.

The insurance giant reported a net loss attributable to  Berkshire Hathaway shareholders of $44 billion in Q2 and $38 billion in H1 2022, compared with a profit of $28 billion and $40 billion generated in Q2 and H1 of 2021.

The main reason for the change in the company’s fortunes was a $53 billion second quarter loss from a reduction in the amount of unrealized capital gains that existed in its investment holdings.

Nearly $1 billion was used to repurchase  Berkshire shares during the second quarter of 2022, bringing the six-month total to $4.2 billion. At June 30, 2022, insurance float (the net liabilities assumed under insurance contracts) was approximately $147 billion, relatively unchanged from year-end 2021.

Insurance underwriting operating profit rose to $581 million Q2 and $628 million in H1, compared with $376 million Q2 and $1.14 billion H1 a year earlier.

Underwriting expenses increased $194 million (30.6%) in Q2 and $347 million (28.1%) in the first six months of 2022 compared to the same periods in 2021. The expense ratio increased 2.0 percentage points in the second quarter and 1.8 percentage points in H1 reflecting costs associated with new business development and changes in business mix.

The company noted that GEICO’s pre-tax underwriting loss in the first half of 2022 reflected increased claims severities, primarily due to significant cost inflation in automobile markets, which began to accelerate in the second half of 2021.

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