By Elsie Kamsiyochi
Berkshire Hathaway reported a sharp decline in fourth-quarter operating profit on Saturday, capping the final quarter of Warren Buffett’s tenure as chief executive with weaker insurance earnings and a multibillion-dollar writedown tied to its investment in Occidental Petroleum.
The Omaha, Nebraska-based conglomerate said quarterly operating profit fell 30% to $10.2 billion, or roughly $7,092 per Class A share, compared with $14.53 billion a year earlier. The decline was driven largely by a 38% drop in insurance underwriting and investment income, reflecting pricing pressures and the impact of lower interest rates on returns from Berkshire’s vast cash reserves.
Despite the weaker quarter, Berkshire ended 2025 with a record $373.3 billion in cash, providing significant financial firepower to new Chief Executive Greg Abel, who officially succeeded Buffett at the start of 2026. Buffett, 95, remains chairman of the company.
Insurance Pressures Weigh on Results
Berkshire’s insurance businesses — long the cornerstone of Buffett’s empire — saw notable strain during the quarter. Pretax underwriting profit at Geico, the auto insurer, fell nearly 50% as advertising spending rose and accident claims increased. Reinsurance and commercial insurance units also faced muted growth prospects heading into 2026.
Falling interest rates compounded the pressure by reducing income generated from Berkshire’s enormous cash holdings and bond portfolio. Analysts noted that while underwriting discipline remains intact, opportunities to expand aggressively in insurance markets appear limited.
“Top-line growth is a challenge,” said Cathy Seifert, an analyst at CFRA Research. “Abel set the tone that reinsurance and commercial insurance growth could be flat in 2026, and revenue growth more broadly has been pretty subdued.”
The fourth quarter marked the 13th consecutive period in which Berkshire sold more stocks than it purchased, and the sixth straight quarter without share buybacks — a sign that management continues to find few attractively priced opportunities in public markets.
Net Income Dampened by Occidental Writedown
Net income for the quarter slipped 3% to $19.2 billion from $19.69 billion a year earlier. The modest decline masked significant underlying shifts: a $4.5 billion writedown of Berkshire’s 26.9% stake in Occidental Petroleum offset gains in major equity holdings such as Apple Inc. and American Express.
Berkshire said the writedown reflected its determination that the decline in Occidental’s share price was not “temporary” under accounting rules. However, the conglomerate emphasized it does not intend to sell its shares.
Buffett began building Berkshire’s position in Occidental in 2019, helping finance the oil producer’s acquisition of Anadarko Petroleum. He frequently praised Occidental’s management and strategy, making the impairment notable even if it does not signal a strategic retreat.
The Occidental writedown follows another major impairment earlier in 2025 — a $3.76 billion reduction in the value of Berkshire’s stake in Kraft Heinz.
For the full year, operating profit declined 6% to $44.49 billion, while net income fell 25% to $66.97 billion. Buffett has long urged shareholders to focus on operating earnings rather than net income, which fluctuates based on accounting rules requiring unrealized gains and losses from stock holdings to be recorded in reported earnings.
A Leadership Transition and a Promise of Continuity
In his first annual letter to shareholders as CEO, Abel paid tribute to Buffett, calling him a “remarkable CEO” and “arguably the greatest investor of all time.” He pledged to preserve the disciplined capital allocation strategy that defined Berkshire’s decades of outperformance.
“We are committed to strengthening the great legacy built by Warren Buffett and his business partner Charlie Munger,” Abel wrote, referencing Berkshire’s late vice chairman. “Our focus will remain on long-term value creation and maintaining the culture that has guided this company for more than half a century.”
While Abel is widely expected to take a more hands-on operational role than Buffett, Berkshire’s decentralized structure will remain intact, with subsidiary managers retaining broad autonomy.
Some businesses showed resilience. Profit at BNSF Railway rose 6% in the quarter, while Berkshire’s manufacturing, retail and service operations reported a 3% increase in quarterly profit and a 4% gain for the year. However, “sluggish” consumer demand weighed on several consumer-facing brands, including Duracell, Fruit of the Loom and toy maker Jazwares, which produces Squishmallows.
Berkshire’s energy division posted a 5% drop in quarterly profit, reflecting softer commodity dynamics and cost pressures.
Market Reaction and Investor Outlook
Since Buffett announced on May 3 that he would step down as CEO, Berkshire shares have underperformed the S&P 500 by more than 27 percentage points. In 2026, both the company’s shares and the broader index have risen less than 1%, highlighting a period of relative stagnation after years of strong gains.
Investors now face a pivotal question: can Abel deploy Berkshire’s massive cash hoard into transformative acquisitions that eluded Buffett in his later years? With equity valuations high and competition intense, finding sizable, attractively priced deals remains challenging.
Still, Berkshire’s fortress balance sheet and diversified earnings base offer stability. Even in a weaker quarter, the conglomerate generated more than $10 billion in operating profit and added to its already formidable liquidity position.
As Buffett transitions into a chairman role and Abel steps fully into the spotlight, Berkshire enters a new era — one defined less by the personality of its legendary leader and more by the durability of the system he built.
Whether that system can reignite growth in a tougher operating environment will shape the company’s next chapter.
Source: Reuters
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