The biggest takeaway from Berkshire Hathaway's latest quarter isn't the $357 billion cash or its stock buybacks

By Steve Goldstein

Geico profits slumped in the third quarter, Berkshire Hathaway said.

Berkshire Hathaway is still sitting on a mountain of cash - approximately $357 billion at the end of September, down just 2% from the previous quarter, the company announced this weekend.

That's enough to buy all but 28 of the largest companies in the U.S. without borrowing a single dollar or issuing any stock.

The Omaha, Neb. conglomerate, now with Warren Buffett's son Howard as chairman and Greg Abel as chief executive, also announced $9.6 billion in stock buybacks during the third quarter.

But the real story in Berkshire Hathaway's (BRK.B) (BRK.A) third-quarter earnings was the dismal performance of its Geico insurance operation, where pretax earnings tumbled 45%, to $982 million.

Geico's premiums written were nearly flat, easing 0.3%, to $11.71 billion. But total losses and loss-adjustment expense rose 8.5%, and the ratio of claims and expenses to premiums rose to 91.4% from 84.3%.

The company said the unit was hurt by higher claims frequencies and average severities, in addition to lower average earned premiums per policy.

Analysts at Evercore noted that Geico is ramping advertising expenditure, just as rivals Allstate and Progressive have done. "We wonder if renewal pricing decreases will come next. We have been surprised that there hasn't been more price competition to date, which could be due to a more concentrated market," the analysts said.

Berkshire Hathaway's overall operating earnings fell 6% to $12.7 billion in the third quarter.

Berkshire Hathaway's stock, up 15% this year, has trailed Allstate (ALL) but outperformed Progressive (PGR).

-Steve Goldstein

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11-09-26 0727ET