The sprawling conglomerate — which owns the BNSF railroad and Geico insurer — increased the holdings by nearly $17bn in the second quarter, to sit just below an all-time high of $149bn set in 2021.

The disclosure came days after rating agency Fitch stripped the US of its prized triple A rating. Analysts cited Washington’s repeated stand-offs over the debt ceiling, which drove the Treasury’s cash balances to dangerously low levels.

Buffett, who has led Berkshire for more than half a century, told CNBC last week that Fitch’s decision would not change the company’s investment strategy and that he was not worried about the US dollar or Treasury market.

“Berkshire bought $10bn in US Treasuries last Monday,” he said. “We bought $10bn in Treasuries this Monday. And the only question for next Monday is whether we will buy $10bn in three-month or six-month” bills.

Berkshire has long kept cash in short-term Treasuries to give the company the flexibility to pay out catastrophic insurance losses and to have reserves ready to splash out on multibillion-dollar acquisitions.

“There are some things people shouldn’t worry about,” he said. “This is one.”

The company on Saturday reported that it swung to a profit of $35.9bn between April and June, from a loss of $43.6bn in the same period the year before.

The figures are distorted by movements in the value of Berkshire’s mammoth $353bn stock portfolio, which includes stakes in Apple, American Express and Bank of America. Berkshire is required by US accounting rules to include those shifts in its earnings, even if it has not sold the stocks.

Excluding those gains, Berkshire’s smattering of businesses reported operating earnings of $10bn, up from $9.4bn a year before. The results were buoyed by the company’s core insurance businesses, where underwriting profits climbed 74 per cent to $1.2bn, as well as its large holdings of cash and Treasury bills.

The company, which uses the premiums it receives on insurance policies to fund its investments, has benefited from the Federal Reserve’s move to increase interest rates. Berkshire disclosed it earned $1.4bn of interest income in the quarter and just over $2.5bn in the first half of the year.

“Our investment income is going to be a lot larger this year than last year, and that’s built in,” Buffett said at the company’s annual meeting in May. He estimated the Treasury bill portfolio could earn the company $5bn annually in income, given interest rates are now above 5 per cent.

Berkshire’s insurance results stood out in an industry that has struggled with higher costs to repair or replace automobiles, as well as the string of catastrophic storms that caused billions of dollars in property damage.

Geico reported a second quarter of underwriting profits, following more than a year of losses. The unit cut advertising spending, lifted insurance premiums and said it had significantly reduced the number of consumers it was insuring.

The company spent $1.4bn on share buybacks, a far slower pace than in the first three months of the year when it repurchased $4.4bn of its stock.

This story originally appeared on: Financial Times - Author:Eric Platt

The deals — including two announced this month with AT&T and PayPal — underscore the growing reach of the private credit industry as it helps companies bypass traditional banks and bond markets to raise money.

Other deals, such as KKR’s agreement last week to purchase up to €40bn of consumer loans originated by PayPal, have more closely resembled traditional asset-backed securities. In those transactions, a pool of assets — such as mortgages, credit card receivables or auto loans — are packaged together, with the interest payments funding new slices of debt that are sold on to investors.

The use of insurance capital and private credit is just the latest example of blue-chip companies pairing up with alternative asset managers.

Intel last year struck a $30bn deal with Brookfield and its infrastructure funds, with the asset manager investing $15bn in a new chip foundry.

Intel, like most companies entering into these agreements, did not say how much it would pay Brookfield for the investment. However, its chief financial officer David Zinsner told analysts last year that Brookfield would receive part of the cash flows the plant generates once it is operational, giving the investment firm a return somewhere between 4.4 per cent and 8.5 per cent.

“It will protect our strong balance sheet,” Zinsner said of the deal. “It allows us to tap into a new pool of capital while protecting our cash and debt capacity for future investments.”

This story originally appeared on: Financial Times - Author:Eric Platt

Concern over how long the 92-year-old will be at Berkshire’s helm have stalked its investors for years. But at this year’s annual meeting in Omaha, they got their best view yet of the man whom Buffett regards as the answer to the succession question: Greg Abel, the 60-year-old vice-chair of the company’s businesses outside insurance.

“Warren grew up with all the businesses,” Abel told CNBC last month. “I had to learn the businesses and their industries, which means there’s going to be an active dialogue with the managers. And that helps immediately.”

This story originally appeared on: Financial Times - Author:Eric Platt

“Even though the FDIC [Federal Deposit Insurance Corporation] limit is $250,000 . . . that is not the way the US is going to behave anymore than they’re going to let the debt ceiling let the world go into turmoil,” the Berkshire Hathaway chief executive told tens of thousands of shareholders gathered in downtown Omaha for the company’s annual meeting on Saturday.

This story originally appeared on: Financial Times - Author:Eric Platt