Due to the poor performance of the insurance business income, Berkshire Hathaway's third-quarter revenue and operating profit unexpectedly declined slightly. At the same time, a significant reduction in key holdings drove Berkshire's cash reserves to reach a historical high. In the third quarter, Buffett continued to reduce holdings in Apple, with a reduction ratio of up to 25%.

On Saturday, November 2, Berkshire Hathaway released its third-quarter financial report:

Total revenue in the third quarter was $93 billion, slightly lower than the $93.21 billion in the same period last year;

Operating profit decreased by 6.2% year-on-year to $10.09 billion, below the market's expected $10.9 billion. Net income was $26.25 billion, compared to a loss of $12.77 billion in the same period last year.

Investment income was $20.51 billion, compared to a loss of $29.78 billion last year.

Operating profit is the most important indicator that Buffett values, which can reflect the solid growth of diversified main business of subsidiary companies, while net income includes "paper investment gains or losses without meaning for a certain period", the latter often fluctuates significantly.

Berkshire Hathaway's cash reserves rose by 48 billion USD to 325.2 billion USD in the third quarter, hitting a record high. This is mainly because Buffett sold 36 billion USD of stocks in the third quarter, with reducing positions in Apple and Bank of America bringing in 20 billion USD and 9 billion USD in revenue respectively. At the same time, Buffett continued to avoid major acquisitions.

Differentiation in insurance business income

According to the financial report statement, the decline in third-quarter revenue and operating profit is mainly due to poor performance in the insurance business, fluctuations in investment income, increased claims due to major disastrous events (hurricanes), adjustments in the stock investment portfolio, and rising operating costs.

Differentiation in insurance business performance:

In the third quarter, operating income from insurance underwriting business decreased by 69% to 0.75 billion USD, while operating income from insurance investment business increased by 48% to 3.66 billion USD.

Insurance float reached 174 billion USD in the third quarter.

In addition, operating income of other holding companies of the group was 3.34 billion USD in the third quarter; operating income of non-subsidiary companies was 0.199 billion USD; other operating income was -0.877 billion USD.

Continued shareholding reduction in apple in the third quarter, with a reduction ratio as high as 20%.

According to the 10-Q report released by Berkshire Hathaway, the company held apple shares worth approximately $69.9 billion in the third quarter of its fiscal year, while holdings worth approximately $84.2 billion in the second quarter. Based on apple's latest stock price calculation, the number of shares held decreased from approximately 0.4 billion shares in the second quarter to about 0.314 billion shares, with a reduction ratio of 25%.

According to media calculations, Buffett has reduced his apple stake by 67.2% since the fourth quarter of last year.

The true motive behind Berkshire's continuous reduction in apple holdings is currently unclear. Analysts and shareholders have speculated that potential reasons may include overvaluation and the diversification of investment portfolio management. At one point, Berkshire's apple stock holdings were very substantial, accounting for half of its stock investment portfolio.

In May this year, at the Berkshire Hathaway annual shareholders meeting, Buffett hinted that the apple reduction may be due to tax reasons, as he speculated that the U.S. government might raise capital gains tax in the future to offset the rising fiscal deficit. However, the scale of the stock sale has led many to believe that the reduction may not be solely for tax purposes.

Share repurchase halted.

The financial report also shows that Berkshire did not repurchase any shares in the third quarter, whereas it repurchased approximately $0.345 billion in the second quarter and around $2.6 billion in the first quarter.

Berkshire Class A shares have risen 23% so far this year, exceeding the 20.1% increase in the S&P 500 index, with the group's stock price hitting a historic high in the third quarter, breaking the $1 trillion market cap mark.