By Jonathan Stempel
(Reuters) -Warren Buffett’s Berkshire Hathaway on Saturday said operating profit set a record in the fourth quarter and for the third straight calendar year, bolstered by improved underwriting and higher investment income in its insurance businesses.
Much of that income came from Berkshire’s enormous cash stake, which ended 2024 at a record $334.2 billion, twice as much as a year earlier.
In his annual letter to Berkshire shareholders, the 94-year-old Buffett assured that Berkshire would prefer investing in businesses to holding cash.
But he also said his Omaha, Nebraska-based conglomerate “did better than I expected,” though 53% of its 189 operating businesses posted lower earnings.
He attributed the improvement in part to higher yields on U.S. Treasury bills, and improvement at the Geico car insurer, which benefited from improved pricing and tighter underwriting as loss rates from accidents declined.
“Those were incredible numbers,” said Thomas Russo, a partner at Gardner Russo & Quinn in Lancaster, Pennsylvania, which has owned Berkshire stock since the 1980s. “You really saw the power of Berkshire’s insurance operations and investments.”
Buffett singled out Todd Combs, Geico’s chief executive since 2020 and also a Berkshire investment manager, saying he has “reshaped Geico in a major way” by increasing efficiency and improving underwriting, though more work remains.
Geico cut more than 2,300 jobs last year, and has shed about 10,000 jobs–26% of its workforce–since the end of 2022.
NO BUYBACKS
Operating profit rose 71% to $14.53 billion in the fourth quarter, and 27% to $47.44 billion in 2024.
Quarterly net income totaled $19.69 billion, or $13,695 per average equivalent share, as the value of Berkshire’s holdings in Apple, American Express and other stocks increased. For the year, net income totaled $89 billion.
Buffett considers net results misleading because they include gains and losses on investments that Berkshire has not sold and sometimes has no plan to sell.
The increased cash stake in 2024 largely came from $143.4 billion of stock sales, including 62% of Berkshire’s holdings in Apple and one-third of its stake in Bank of America.
Berkshire has been a net seller of stocks for nine consecutive quarters.
Meanwhile, Berkshire spent just $2.9 billion repurchasing its own stock in 2024. Through February 10, it has conducted no repurchases since last May.
Bill Smead, a longtime Berkshire investor at Smead Capital Management in Phoenix, noted Buffett’s comment in the annual letter that Berkshire only “very infrequently” finds itself knee-deep in things to buy.
“He is saying: nothing looks compelling,” Smead said.
LOS ANGELES WILDFIRES
Geico’s pretax underwriting profit rose 29% in the fourth quarter, and more than doubled in 2024 as the percentage of premiums used to pay claims fell to 71.8% from 81% in 2023. Rate increases offset a small decline in the number of policies.
While overall insurance underwriting profit quadrupled in the fourth quarter, Berkshire projected a $1.3 billion pre-tax hit from last month’s wildfires in the Los Angeles area.
Profit at the BNSF railroad fell 6% in the fourth quarter and 1% in 2024.
Full-year profit also declined in Berkshire’s retail and service businesses, as margins fell at the Pilot truck stop chain and at Berkshire’ namesake car dealership business.
Profit also declined at mobile home unit Clayton Homes, reflecting higher insurance claims and projected loan losses.
Full-year profit at Berkshire Hathaway Energy rose by more than half as utility margins increased, and the PacifiCorp utility set aside less money for litigation arising from Oregon and California wildfires in 2020.
Buffett disclosed that Berkshire paid $3.9 billion late last year to buy the 8% of Berkshire Hathaway Energy it did not already own.
Berkshire also owns a variety of industrial companies, as well as consumer brands such as Dairy Queen, Fruit of the Loom and See’s Candies.
(Reporting by Jonathan Stempel in New YorkEditing by Bernadette Baum and Diane Craft)
