Berkshire Hathaway Inc. (BRK.B) delivered second-quarter 2023 operating earnings of $10 billion, which increased 6.6% year over year. The increase was driven by higher earnings insurance underwriting, insurance-investment income, other businesses, and non-controlled businesses.
Behind the Headlines
Revenues increased 21.4% year over year to $92.5 billion, attributable to higher revenues at Insurance and Other, as well as Railroad, Utilities and Energy.
Costs and expenses increased 24.4% year over year to $80.6 billion, largely due to an increase in insurance losses and loss adjustment expenses, insurance underwriting expenses, selling, general and administrative expenses, utilities and energy cost of sales and other expenses, and interest expenses. The figure was lower than our estimate of $66.3 billion.
Segment Performance
Berkshire Hathaway’s Insurance and Other segment revenues increased 4% year over year to $65.6 billion in the reported quarter on the back of higher insurance premiums earned, leasing revenues and interest, dividend and other investment income.
Insurance underwriting earnings increased 76% year over year.
Railroad, Utilities and Energy operating revenues doubled year over year to $26.8 billion, attributable to higher utility and energy operating revenues. The figure was higher than our estimate of 13.5 billion. Pre-tax earnings of Railroad decreased 24.9% year over year to $1.6 billion.
Operating earnings from the Railroad business decreased 23.7% year over year.
Total revenues at Manufacturing, Service and Retailing decreased 1.2% year over year to $42.1 billion. Pre-tax earnings increased 4.4% year over year to $4.5 billion.
Earnings from Manufacturing, Service and Retailing businesses increased 4.3% year over year.
Financial Position
As of Jun 30, 2023, consolidated shareholders’ equity was $548.5 billion, up 13.9% from the level as of Dec 31, 2022. At quarter-end, cash and cash equivalents were $44.6 billion, up 38.2% from the level at 2022 end.
Berkshire Hathaway exited the second quarter of 2023 with a float of about $166 billion, up from $164 billion from the figure at year-end 2022.
Cash flow from operating activities totaled $21.1 billion in the reported quarter, up 37.5% from the year-ago period.
The company bought back shares worth $5.8 billion in the first half of 2023.
Zacks Rank
Berkshire Hathaway currently carries a Zacks Rank #3 (Hold).
Performance of Other Property & Casualty Insurers
Selective Insurance Group, Inc. SIGI reported a second-quarter 2023 operating income of 99 cents per share, which matched the Zacks Consensus Estimate. The bottom line declined 15% from the year-ago quarter. Total revenues of $1 billion increased 15.2% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written. The top line outpaced the Zacks Consensus Estimate by 0.8%.
On a year-over-year basis, NPW increased 17% to $1 billion. The figure matched our estimate. After-tax net investment income increased 37% year over year to $77.8 million. After-tax net underwriting loss was $1.2 million against the year-ago underwriting income of $29.8 million.
Pre-tax catastrophe losses doubled year over year to $100 million. Non-catastrophe property loss and loss expenses of $138.6 million increased 13.4% year over year. The combined ratio deteriorated 470 bps on a year-over-year basis to 100.2. Total expenses increased 18.6% year over year to $966.4 million. The figure was higher than our estimate of $882.9 million.
NMI Holdings Inc. NMIH reported a second-quarter 2023 operating net income per share of 95 cents, which beat the Zacks Consensus Estimate by 9.2%. The bottom line increased 10.4% year over year. NMI Holdings’ total operating revenues of $143 million increased 8.3% year over year on higher net premiums earned (up 4.2%) and net investment income (up 51.2%). Revenues beat the Zacks Consensus Estimate by 2.1%.
Primary insurance-in-force increased 13.5% to $191.3 billion. Annual persistency was 86%, up 1000 bps year over year. New insurance written was $11.5 billion, down 30.9% year over year. Underwriting and operating expenses totaled $27.4 million, down 10.7% year over year.
Insurance claims and claim expenses were $2.9 million compared with a benefit of $3 million in the year-ago quarter. The loss ratio was 2.3 against (2.5) in the year-ago quarter. The adjusted expense ratio of 21.8 improved 360 bps year over year, while the adjusted combined ratio of 24.1 deteriorated 120 bps year over year.
Kinsale Capital Group KNSL delivered second-quarter 2023 net operating earnings of $2.88 per share, which outpaced the Zacks Consensus Estimate by 14.7%. The bottom line improved 50% year over year. Total revenues rose 60.8% year over year to $295.7 million. Gross written premiums of $438.2 million rose 58.2% year over year. Our estimate was $343.2 million.
Net written premiums climbed 41% year over year to $242.3 million in the quarter. Our estimate for net written premiums was pegged at a loss of $282.2 million. Net investment income more than doubled year over year to $24.2 million in the quarter and beat our estimate of $14.9 million. The Zacks Consensus Estimate was pegged at $20.7 million.
Total expenses increased 35.8% year over year to $205.6 million due to a rise in losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, interest expenses and other expenses. Our estimate was pinned at $197.9 million.
Kinsale Capital’s underwriting income of $61.5 million soared 39.3% year over year. Our estimate was $50.8 million. The combined ratio improved 70 bps to 76.7 in the quarter under review. While the expense ratio improved 150 bps to 21 in the quarter, the loss ratio deteriorated 80 bps to 55.7.
Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI): Free Stock Analysis Report
NMI Holdings Inc (NMIH): Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL): Free Stock Analysis Report
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