As the railroad business sags, Berkshire Hathaway's operating earnings drop by 8%.

Berkshire Hathaway's operating earnings fall 8% as the railroad business suffers.

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Stock repurchases increased to $2.6 billion in the fourth quarter, the total for 2022 is now $7.9 billion, up from $1 billion in the third quarter. This significantly decreased from $27 billion in 2021 to $24.7 billion in 2020.

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According to Trade Algo, Berkshire's operational profits per share for the fourth quarter, excluding changes in the company's investment portfolio's value, declined 7% to around $4,585 per class A share. This was less than the FactSet average expectation of $5,305 per share.

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Berkshire's overall earnings fell 53% to $18.1 billion in the quarter, indicating reduced investment gains. The majority of the investment profits are unrealized gains in Berkshire Hathaway's large equities portfolio. CEO Warren Buffett advises investors to focus on operational earnings since quarterly variations in the value of an equity portfolio can obscure the overall result.

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Berkshire's operating earnings increased 12% yearly to $30.8 billion after taxes.

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According to Trade Algo, Berkshire's book value per share will be around $323,600 per class allocation by the end of 2022, down from $342,600 at the end of 2021, representing a reduction in the value of Berkshire's stock portfolio over the year.

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In 2022, Berkshire Hathaway suffered $53.6 billion in investment losses, including $58.6 billion in unrealized losses on its equity portfolio., which remained at $309 billion at the end of the year.

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This was only the fourth yearly fall in book value throughout Buffett's 58-year tenure.

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Nonetheless, book value increased in the fourth quarter from around $310,000 on September 30.

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Berkshire's Class A shares, which closed on Friday at $461,705, are now worth 1.4 times the company's year-end book value. The current price-to-book ratio is lower as the value of Berkshire's stock portfolio has increased since the beginning of 2023, led by Apple, the company's largest equity investment.

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Even after spending almost $12 billion for insurer Alleghany in October, Berkshire is flush with cash. Berkshire's total cash and equivalents, principally Treasury bills, were $128 billion on December 31, up from $109 billion on September 30th.

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Berkshire appears to have sold a portion of Alleghany's bond portfolio, which reached around $15 billion by the end of 2022, as well as the majority of Alleghany's equity holdings, which amounted to about $3 billion.

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After the beginning of 2023, Berkshire continued repurchasing shares, repurchasing an estimated $700 million through February 13th, the date of the company's 10-K report.

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Berkshire revealed in its 10-K that it paid $8.2 billion for a 41.4% share in Pilot Co. in late January, in accordance with an agreement signed with the Haslam family in 2017 when Berkshire purchased a 38.6% investment in the truck-stop operator.

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The 41.4% holding is more than double the almost $3 billion Berkshire paid for the original stake, bringing Berkshire's total ownership in Pilot Flying J truck stops to 80%.

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Berkshire stated in its annual 10-K filing that due to premium hikes, its Geico auto-insurance company is anticipated to achieve an underwriting profit in 2023, following a $1.9 billion underwriting loss in 2022. Geico, one of the top three vehicle insurance in the country, has been raising policyholder rates to cover increasing claims expenses, such as labor and parts.

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The expected increase in Geico profits in 2023 could boost Berkshire's earnings this year. Geico's voluntary policies in force fell by 1.7 million in 2022, and it may have lost its position as the No. 2 auto insurer in the country to arch-rival Progressive, which has bested Geico with much stronger technology for pricing policies, including the use of real-time driving information, or telematics.

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The prediction of 2023 underwriting profits for Geico suggests that reforms taken by CEO Todd Combs are having a good impact. Combs, who also manages a portion of Berkshire's stock portfolio, was appointed CEO of Geico three years ago.

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Berkshire Hathaway continues to profit from higher interest rates on its cash, primarily stored in Treasury bills, and increasing dividend income on its equities holdings. Insurer investment income increased 66% in the fourth quarter to $2 billion after taxes and increased 35% year over year to $6.5 billion in 2022. This is another aspect that should boost the company's profitability in 2023.

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Earnings at the Burlington Northern railroad fell 13% in the fourth quarter to $1.5 billion and were unchanged in 2022 compared to 2021, totaling $5.9 billion.

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Berkshire's strong utility company increased fourth-quarter earnings by 24% to $739 million, while year-to-date profits increased by 8% to $3.9 billion.

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Berkshire Hathaway BRK.B, +0.31% Energy, is one of Berkshire's most valued companies. Based on the amount the unit paid last year for a 1% ownership in the firm, it has an implicit worth of around $90 billion. Abel, 60, is Buffett's potential successor as CEO. Buffett is 92.

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The following is the 10-K succession language:

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"If for any reason the services of our key individuals, notably Mr. Buffett, were to become unavailable, there may be a major unfavorable effect on our business. If a successor for Mr. Buffett is required immediately, Berkshire's Board of Directors has decided that Mr. Abel should take his position. The Board constantly monitors this risk and may change its position on Mr. Buffett's successor."

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Berkshire Hathaway Energy, formerly led by Abel, is one of the country's leading renewable energy producers and is actively investing in electricity transmission networks. It also has a number of natural gas pipelines.

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