$BRK.B · The Motley Fool · 2026-11-09

over the weekend, Birkshshire Hathaway posting its third quarter results. And I want to start off by talking about insurance. Obviously, Birkshshire is a huge company, so we can't talk about everything, but insurance a very big component of the business.

Berkshire's management admitted this uh several times uh saying that they lost the number two market share state farms number one they lost the number two market share a few years ago to progressive and it's they were they fell behind on technology their ad campaigns weren't as effective as they used to be you know the gecko got kind of tired after after a while I guess um but and their profitability hadn't been that great if you look at their combined ratio even a year ago when Geico is highly profitable.

Geico's combined ratio is about 84%. It went up to 91%. Meaning that their underwriting margin is now in the single digits.

but they're starting to play offense again, which that's why their cost structure went up so much over the past year. That's why they're not as profitable as we'd like to see. And that's really the biggest reason Bergkshire's earnings were down.

Uh it's because of of underwriting in or uh the underwriting profitability in insurance because they're spending more money on growth, which as a shareholder, I'm fine with that.

I'm not fi fine with them kind of passively falling behind, but I'm fine with them spending money to kind of catch up.

Yeah, I mean this is kind of a deliberate underwriting microcycle strategy where the unit economics flipped a bit more favorably. Greg Abel's team is decided to fund this kind of massive advertising spree to work on clawing back and expanding market share which is something they really need to do.

And just as a reminder, if you're listening on Apple Apple podcast or anywhere you listen to podcast, if you could throw us a follow, that would help this show. But we want to keep talking Birkshshire and talk about the repurchases.

I want to hit you both with a stat here. So $9.6 billion in share repurchases for Birkshshire during the quarter. If you look from the start of 2024 through last quarter, 7.6 billion cumulative and now we're two billion higher than that in a single quarter.

And of course, Warren Buffett historically purchased aggressively when Birkshshire was trading under its intrinsic value. And so Rachel, is this a signal that it is trading under its intrinsic value according to new CEO Greg Ael?

And how would you even talk about what intrinsic value is?

I think we are very clearly seeing a shift in Birkshshire's capital allocation strategy under CEO Greg Gable and I think that was expected... You look at the way in which AEL is uh you know adjusting Birkshshire's capital allocation strategy.

This acceleration of their Q3 share rate purchases essentially more than double what was deployed in Q2 that pushes the yeartoate buyback total to uh over 14 billion if my math is right.

And I mean it differs from the sort of historic Buffett approach, right? I mean Buffett maintained kind of a strict rule as you said to only buy back shares when the price sat safely below conservative conservative intrinsic estimates which was about 1.2 two times book value and the stock trades a bit above that at this point.

I think we're seeing the new CEO uh is sort of shephering the company in a different way. I think he's putting his own mark and footprint on things. I don't think that that's a bad thing.

Rachel's right. uh you know that's the textbook definition of intrinsic value, but a lot of it is very subjective, especially when it comes to valuing a company that owns 60 plus businesses and things like that.

So if you ask 10 financial experts to tell you what Bergkshire Hathway's intrinsic value is, you're probably going to get 10 different answers. Uh and that's what makes this so tough.

Uh Bergkshire's rule, and Rachel mentioned this as well, is that the company can only repurchase shares when management believes the stock trades below intrinsic value. So, we have absolutely no idea what Greg Abel's estimate of Bergkshire's intrinsic value is.

We have no idea if it's the same as what Warren Buffett used. We like we have no idea. Uh but clearly, he thinks it's it was below its intrinsic value for most of the third quarter. um the the stock just hit an al an new all-time high, so he might not feel that way anymore.

Uh $9.6 billion, that's a fairly aggressive uh buyback. It represents less than 1% of Bergkshire's outstanding shares. So, put it in perspective. Bergkshire numbers are very, very big.

Uh $9.6 billion is, you know, 1% of your outstanding shares is an aggressive buyback, but it's not the most aggressive we've seen. A lot of companies are much more aggressive than that. for Berkshire standards that they're very conservative with cash.

Uh so that is a pretty bullish [music] uh bullish signal.

talk about Bergkshire's buybacks compared to Monday's.