Buffett promised Berkshire would invest in companies that keep cash in his yearly letter to shareholders.
Warren Buffett’s Berkshire Hathaway reported that its insurance company’s enhanced underwriting and increased investment income helped it set a record operating profit in the fourth quarter and for the third consecutive calendar year.
Berkshire Hathaway Inc. is an American multinational conglomerate in Omaha, Nebraska. It was originally a textile manufacturer, and then the company switched into a conglomerate starting in 1965 under the management of chairman and CEO Warren Buffett.
Warren Buffett used his annual shareholder letter to alert Washington to spend their money wisely and care for people who get “short straws in life.”
The 94-year-old Buffett, arguably the world’s most famous investor, promised Berkshire would invest in companies that keep cash in his yearly letter to shareholders.
Much of his income comes from Berkshire‘s massive cash stake, which made a grand finish in 2024 with a record of $334.2 billion, double that of the previous year.
However, he added that his Omaha, Nebraska-based conglomerate performed better than expected, though 53% of its 189 operating companies reported lower earnings.
He attributed the reason for higher yields on US Treasury notes and Geico auto insurance, which profited from better pricing and stricter underwriting as accident loss rates decreased.
Thomas Russo, a partner at Gardner Russo & Quinn in Lancaster, Pennsylvania, which owned Berkshire stock since the 1980s, said they brought in astonishing figures. He was excited about witnessing the strength of Berkshire’s investments and insurance business.
Buffett specifically credited Todd Combs, who has been the CEO of Geico since 2020 and is also an investment manager at Berkshire, stating that since his position as CEO, he has significantly changed Geico for the better by increasing efficiency and enhancing underwriting, also reminding that there is still more work.
Geico laid off about 2300 jobs last year, and since the end of 2022, they have laid off around 10,000 workers, which is 26% of its workforce.
Its operating profit increased by 71% to $14.53 billion in the fourth quarter, and in 2024, it increased by 27% to $47.44 billion.
The company’s quarterly net income was $19.69 billion, or $13,695 per average equivalent share after Berkshire’s investment in Apple, American Express, and other companies had increased. The net income was $89 billion during the year.
Buffet views net earnings as misleading since they contain gains and losses on investments that Berkshire has not sold and sometimes has no intention of selling.
The lead source of the increase in cash state was the $143.4 billion in stock sales in 2024, which included 62% of Berkshire’s Apple and one-third of its Bank of America holdings.
Berkshire has been a net seller of stocks for the past nine quarters.
In 2024, Berkshire repurchased its shares for $2.9 billion. It has not repurchased any shares since last May as of February 10.
Bill Smead, a long-term investor of Berkshire at Smead Capital Management in Phoenix, noted Buffett’s statement in the annual letter that Berkshire infrequently finds it knee-deep in things to buy.
Geico’s pretax underwriting profit increased by 29% in the fourth quarter and more than doubled in 2024 as the premiums used to settle claims decreased from 81% in 2023 to 71.8% in 2024. The rate increased to counterbalance the slight decrease in the quantity of policies.
Berkshire predicted a $1.3 billion pretax hit due to the wildfires in Los Angeles, even though the total insurance underwriting profit doubled in the fourth quarter.
The BNSF railroad’s profit decreased 1% in 2024 and 6% in the fourth quarter.
The company’s full-year profit also decreased in its retail and service businesses since there were declining margins at the Pilot truck stop chain and Berkshire’s car dealership business.
Clayton Homes, a mobile home company, also witnessed a fall in profit due to a rise in insurance claims and projected loan losses.
Berkshire Hathaway Energy’s full-year earnings increased by more than half as the utility margin rose and PacifiCorp utility reduced its lawsuit budget for 2020 wildfires in Oregon and California.
Buffett revealed that Berkshire paid $3.9 billion last year to buy 8% of Berkshire Hathaway Energy that it did not own.
Berkshire owns many industrial businesses and consumer brands like Dairy Queen, Fruit of the Loom, and See’s Candies.
