Berkshire Hathaway reported a 71% increase in operating earnings for the fourth quarter, driven by higher interest rates that boosted investment income, and an improvement in its insurance business.
The company’s operating earnings reached $14.5 billion for the three months ending in December. Insurance investment income rose 48% to $4.1 billion due to higher interest rates. Insurance underwriting earnings also saw a significant increase, rising to $3.4 billion over the period.
GEICO, Berkshire’s subsidiary, contributed to the growth in underwriting earnings, with its pretax underwriting profit more than doubling to $7.8 billion in 2024. The auto insurer added new customers in the second half of the year, reversing a trend of declining policy growth. Pretax underwriting earnings from Berkshire’s reinsurance businesses increased by 44% over the past year.
Berkshire estimated pretax losses of about $1.3 billion from the wildfires that affected parts of Los Angeles last month.
CFRA analyst Cathy Seifert said that while Berkshire’s performance in 2024 was strong, future results could be impacted by early-year losses and the upcoming hurricane season. She noted that GEICO’s turnaround, following adjustments to policies in certain regions, exceeded expectations.
Berkshire’s cash reserves increased for the 10th consecutive quarter, reaching a record $334.2 billion by the end of 2024. The company was a net seller of $6.7 billion in shares during the fourth quarter, continuing a trend of limited major stock purchases.
In his annual letter to shareholders, Warren Buffett addressed concerns about Berkshire’s cash holdings, stating that most of the company’s assets remain invested in equities and that this approach would not change.
“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” Buffett wrote.
Buffett also noted that the value of Berkshire’s private equity holdings increased and remained larger than its portfolio of marketable securities, which declined by 23% to $272 billion in 2024.
The company signalled a possible increase in its holdings of Japan’s five largest trading houses—Itochu, Marubeni, Mitsui, Mitsubishi, and Sumitomo. Initially, Berkshire planned to keep its stake below 10%, but the firms have agreed to allow some flexibility as that threshold approaches.
Berkshire did not repurchase its own shares for the second consecutive quarter, suggesting Buffett views the stock as trading above its intrinsic value. The company’s market capitalization has remained above $1 trillion since late January.
Despite gains in operating earnings - up nearly 27% for the year - Buffett pointed out in his letter that 53% of Berkshire’s 189 operating businesses reported a decline in earnings in 2024.
Jim Shanahan, an equity analyst at Edward Jones, noted that Buffett’s decision to remain a net seller of shares, combined with earnings declines across a majority of Berkshire’s subsidiaries, may indicate concerns about a slowdown in the US economy.
“If Berkshire represents a snapshot of the broader US industrial, consumer products, services, retailing economy, then, to me, it looks pretty soft right now,” Shanahan said.
