Berkshire Hathaway Reports Strong Q4 Earnings
Berkshire Hathaway announced a significant rise in its operating earnings for the fourth quarter of 2024, reflecting the positive impact of increased interest rates and improvements within its insurance operations. Operating earnings for the three months ending in December reached $14.5 billion, a substantial 71% increase.
Insurance Business Drives Growth
The company’s financial results were particularly buoyed by its insurance sector. Insurance investment income experienced a notable 48% increase, reaching $4.1 billion, primarily due to the higher interest rates. Furthermore, insurance underwriting earnings also saw a substantial upswing, climbing to $3.4 billion during the same period.
GEICO, Berkshire’s subsidiary, played a significant role in this growth. GEICO’s pretax underwriting profit more than doubled in 2024, reaching $7.8 billion. The auto insurer also saw an influx of new customers in the second half of the year, reversing a previous trend of policy decline. Pretax underwriting earnings from Berkshire’s reinsurance businesses increased by 44% over the past year.
However, Berkshire estimated pretax losses of approximately $1.3 billion stemming from wildfires that impacted certain areas of Los Angeles last month.
Cathy Seifert, a CFRA analyst, noted that while the 2024 performance was strong, future results could be affected by early-year losses and the upcoming hurricane season. She highlighted GEICO’s turnaround as exceeding projections, following adjustments to the company’s policies in specific regions.
Cash Holdings and Investment Strategy
Berkshire’s cash reserves continued to climb, marking the tenth consecutive quarter of growth. By the end of 2024, the company’s cash holdings had reached a record-breaking $334.2 billion. During the fourth quarter, Berkshire was a net seller of $6.7 billion in shares, continuing a pattern of limited significant stock purchases.
In his annual letter to shareholders, Warren Buffett addressed concerns about the company’s considerable cash reserves, stating that the majority of Berkshire’s assets are invested in equities and that there would be no change to this overarching strategy. “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 reported that the valuation of Berkshire’s private equity holdings had risen and remained larger than its portfolio of marketable securities, which decreased by 23% to $272 billion in 2024. The company indicated a possible increase in its holdings of Japan’s five largest trading houses, including Itochu, Marubeni, Mitsui, Mitsubishi, and Sumitomo. Originally, Berkshire aimed to keep its stake below 10%, but the firms have since granted some flexibility as the threshold approaches.
Berkshire did not repurchase its own shares for the second consecutive quarter, indicating Buffett’s view that the stock is trading above intrinsic value. Since late January, the company’s market capitalization has remained above $1 trillion.
Analyst Perspectives
Despite gains in operating earnings, which were up nearly 27% for the year, Buffett noted 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, observed that Buffett’s choice to stay a net seller of shares, coupled with earnings declines across a majority of Berkshire’s subsidiaries, may indicate concerns about a potential slowdown in the U.S. 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.
