WASHINGTON, Feb. 23 (Xinhua) -- U.S. business magnate Warren Buffett told stakeholders Saturday that his Berkshire Hathaway Inc. gained a net income of 4 billion U.S. dollars in 2018, while criticizing a new accounting rule that will drive further swings in earnings.
Berkshire in 2018 gained 24.8 billion dollars in operating earnings, and 2.8 billion dollars in realized capital gains from the sale of investment securities, said Buffett in a letter to stakeholders.
It, meanwhile, saw a 3.0-billion-dollar non-cash loss from an impairment of intangible assets, and a 20.6-billion-dollar loss from a reduction in unrealized capital gains in the company's investment holdings.
The result vastly contrasts the company's 44.9-billion-dollar net gain in 2017. The reason for the drastic decline has to do with a new rule in the generally accepted accounting principles (GAAP) that asks publicly traded companies to incorporate unrealized gains and losses from the equity market into their net income.
"As I emphasized in the 2017 annual report, neither Berkshire's Vice Chairman, Charlie Munger, nor I believe that rule to be sensible," said Buffett, who is the CEO of Berkshire.
The world-famous investor expected that "wide swings" in Berkshire's quarterly GAAP earnings will "inevitably continue," citing the company's huge stock portfolio valued at nearly 173 billion dollars at the end of 2018.
Berkshire was hit by a staggering net loss of 25.4 billion dollars in the fourth quarter of 2018, for which Buffett blamed market volatility during that period.
"In the fourth quarter, a period of high volatility in stock prices, we experienced several days with a 'profit' or 'loss' more than 4 billion dollars," the billionaire said.
Berkshire wrote off 2.7 billion dollars from its stake in food maker Kraft Heinz, which on Thursday announced a 15.4-billion-dollar write-down in value due to an ongoing investigation by the U.S. Securities and Exchange Commission into the company's alleged procurement mishandlings.
Berkshire is Kraft Heinz's biggest shareholder. At the end of 2018, the market value of Berkshire's holdings in Kraft Heinz was 14 billion dollars, Buffett said in the letter.
The company, which also holds shares in a myriad of business giants such as American Express, Apple, Bank of America, Coca-Cola and Delta Air Lines, benefited from gains in its railroad and energy businesses in the past year, according to the letter.
Year 2018 also saw a boost in Berkshire's insurance and re-insurance units, with full-year underwriting profit reaching 1.57 billion dollars, rebounding from the 2.2-billion-dollar loss in 2017 as a result of hurricanes Harvey, Irma and Maria.
Buffett said in the letter that the insurance business "has been the engine propelling Berkshire's growth since 1967."
Berkshire's revenue grew to 247.8 billion dollars in 2018, up 3.3 percent from a year earlier.
