Has Donald Trump just given Berkshire a $37 billion boost?

Recent tax law changes may have inflated insurer's book value, analysts say

Has Donald Trump just given Berkshire a $37 billion boost?

Insurance News

By Lyle Adriano

Thanks to tax law changes enacted by President Trump, Berkshire Hathaway could be looking at a multimillion dollar financial shot in the arm.

Barclays Capital analysts suggest that the insurance conglomerate may see its book value grow by US$37 billion thanks to the changes. Led by Jay Gelb, the analysts noted that Berkshire’s book value likely rose by 12% in the final quarter of 2017.

Last month, Trump signed into law a reduction in the corporate income tax rate to 21%, from 35%. The tax changes allow companies such as Berkshire to lower their tax bills on investments that have increased in value.

The changes leave Berkshire valued at about 1.39 times book value – something that Gelb called “attractive.”

Reuters reported that Berkshire ended September with US$86.6 billion of income tax liabilities, mainly deferred.

Gelb added that lower tax rates could increase Berkshire’s earnings power from its more than 90 operating units (such as the BNSF railroad and GEICO auto insurance) by 12%.

While the tax changes would not add to Berkshire’s US$109 billion of cash and equivalents, Gelb noted that any large all-chase acquisition could improve the company’s earnings per share.

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