By Jonathan Stempel
(Reuters) -Warren Buffett's Berkshire Hathaway Inc on Saturday posted its first quarterly loss in a year as the prices of Apple and other stocks it owns fell, but said improved results from insurance helped boost operating profit to a record.
Rising interest rates boosted yields in the third quarter on Berkshire's vast U.S. Treasury bill holdings above 5%, while fewer car accidents and a quiet Atlantic hurricane season bolstered the Geico car insurer and reinsurance businesses.
Operating profit rose 41% to $10.76 billion, even as Berkshire's net loss more than quadrupled to $12.77 billion.
Berkshire also signaled it remains cautious about stock valuations and the market environment.
The Omaha, Nebraska-based conglomerate's cash stake swelled to a record $157.2 billion, enough for one or more large acquisitions, as Berkshire sold $5.3 billion more stocks than it bought and slowed repurchases of its own stock to $1.1 billion.
Berkshire also reported signs of caution among consumers, where confidence has been declining amid inflation worries, higher borrowing costs and political instability.
Its BNSF railroad shipped fewer consumer goods, while lower homebuying hurt its namesake real estate brokerage and building products units such as Clayton Homes. Sales of Forest River RVs and Fruit of the Loom apparel also came under pressure.
Jim Shanahan, an Edward Jones analyst who rates Berkshire "hold," said overall results were "pretty good" and exceeded his expectations, though the new "softness" in consumer businesses could persist for several quarters.
Many consumer companies are experiencing higher input costs and "tepid" demand, said Cathy Seifert, a CFRA Research analyst who on Oct. 31 raised her Berkshire rating to "buy."
"Against that backdrop it's not surprising that Berkshire's consumer and housing-related subsidiaries are seeing pressure," she said.
Jazwares, a toymaker that makes the popular Squishmallows and which Berkshire bought one year ago, helped offset some of the weakness, generating $469 million of revenue in the quarter.
'CASH IS NOT TRASH'
Investors watch Berkshire closely because its results often reflect broader economic trends, and because of the 93-year-old Buffett's reputation as one of the world's greatest investors.
Many investors extol Berkshire's caution in spending cash even as they wait for Buffett to make a major acquisition.
"Berkshire is disciplined," said Tom Russo, a partner at Gardner Russo & Quinn in Lancaster, Pennsylvania who has owned Berkshire stock since 1982. "It is not demonstrating a 'fear of missing out' by trading and buying businesses whose appeal may eventually appear illusory."
Buffett himself has preached patience. "Cash is not trash," he said at Berkshire's annual meeting in May.
Berkshire's $12.77 billion overall loss equaled $8,824 per Class A share, and rose from $2.8 billion a year earlier.
Its $10.76 billion of operating profit equaled $7,444 per Class A share, and was up from $7.65 billion a year earlier.
Overall results included $23.5 billion of investment losses, primarily reflecting a 12% decline in the stock price of iPhone maker Apple, where Berkshire had owned a $177.6 billion stake.
Berkshire's net results swing widely because accounting rules require the company to report investment gains and losses even if it buys and sells nothing.
Buffett says the volatility is usually meaningless, and Berkshire appears to have kept its Apple stake.
Insurance operations generated $4.89 billion of profit, up from just $336 million a year earlier, when it lost $2.7 billion from Hurricane Ian alone.
Geico swung to a $1.05 billion pre-tax profit from a $759 million pre-tax loss as fewer drivers submitted claims, even though significantly reduced advertising contributed to a 13% drop in overall policies.
Shanahan said some insurers are resisting new business in larger states such as California, Florida, New Jersey and New York because premiums may be too low.
"The question is whether Geico is positioned for growth given the retrenchment in policies-in-force," he said.
BNSF, which often generates one-fifth of Berkshire's operating profit, saw net income fall 15% to $1.22 billion.
Profit from energy businesses slid 69% to $498 million, as the PacifiCorp utility forecast more losses from litigation over wildfires in the western United States.
Berkshire would not predict the impact of an Oct. 31 jury verdict awarding home sellers $1.78 billion over an alleged illegal antitrust conspiracy among several defendants, including its HomeServices of America unit, to inflate broker commissions.
The Pilot truck stop unit, in which Berkshire took an 80% stake in January, added $183 million of profit. Its founders, the billionaire Haslam family, are suing Berkshire over how much the 20% they still own would be worth if they sold it.
Berkshire also said geopolitical risks remain a concern, though its IMC metalworking unit, which makes many products in Israel, has not seen significant effects from the war between that country and Hamas.
Buffett has run Berkshire since 1965. His $117.5 billion net worth ranks fifth worldwide according to Forbes magazine.
Berkshire shares are up 14% this year, matching the Standard & Poor's 500.
(Reporting by Jonathan Stempel in New York; editing by Ira Iosebashvili, Jason Neely and Diane Craft)