Warren Buffet’s annual letter to Berkshire Hathaway shareholders published on Saturday featured the usual folksy wisdom from the “Oracle of Omaha,” and gave a glimpse into the earnings of its HomeServices of America affiliate, the nation’s second-largest real estate brokerage.
HomeServices net income grew to $160 million in 2019, compared with $145 million in 2018. That’s a gain of 10%, fueled by a years-long acquisition spree.
Last year, for example, HomeServices purchased one of its own franchisees, Berkshire Hathaway HomeServices Florida Realty, increasing its Florida footprint by 40 offices and 1,750 agents.
Buffett, the fourth-richest man in the world, according to Forbes’ real-time ranking, didn’t offer any pearls of wisdom related to his real estate brokerage business. The explanation of HomeService’s income gain in the annual report that accompanied his letter was pretty dry.
Some of it was due to a bump in refinancing activity, the report said. Like many brokerages, HomeServices offers mortgage, title, escrow and insurance services.
“The increase was primarily due to higher after-tax earnings at existing mortgage businesses due to increased refinance activity and earnings attributable to recent business acquisitions, partially offset by lower after-tax earnings at existing brokerage businesses primarily from lower units and margins,” the report said, the only discussion of the brokerage in its 144 pages.
HomeServices is part of Berkshire’s energy subsidiary, Berkshire Hathaway Energy – previously known as MidAmerican Energy. The parent company Buffett leads owns a wide range of businesses, including Dairy Queen, Fruit of the Loom, Geico, and Duracell.
Overall, Berkshire Hathaway reported $81.4 billion of net income for 2019, $53.7 billion of that coming from net unrealized gains in the stocks it holds.
Buffett did show some of his signature dry wit in a discussion about losses stemming from a fire at one of the French factories operated by Lubrizol, a chemical company Berkshire Hathaway bought for $9 billion in 2011.
Luckily, insurance will cover a big chunk of the losses, but the insurer is owned by Berkshire Hathaway, Buffett said.
“One of the largest insurers of Lubrizol was a company owned by . . . uh, Berkshire,” Buffet wrote. “In Matthew 6:3, the Bible instructs us to ‘Let not the left hand know what the right hand doeth.’ Your chairman has clearly behaved as ordered.”