© Reuters. FILE PHOTO: Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott
By Jonathan Stempel
(Reuters) – Warren Buffett’s Berkshire Hathaway (NYSE:) on Saturday posted its second straight record annual operating profit, with its insurance business benefiting from improved underwriting and higher income from investments as interest rates rose.
Net income also reached a record $96.2 billion, as the rising stock market boosted the value of Berkshire’s $354 billion equity portfolio, half of which is in Apple (NASDAQ:).
In his annual letter to Berkshire shareholders, Buffett said Berkshire’s insurance businesses performed “exceptionally well” — among them, Geico, where better underwriting quality helped it more than reverse year-earlier losses.
This helped offset declining fourth-quarter and full-year profit at the BNSF railroad, where rising wages and costs for upkeep increased as revenue fell, and Berkshire Hathaway Energy, beset by wildfire litigation and a tougher regulatory climate.
Buffett nevertheless assured investors about Berkshire’s long-term health, saying the approximately $903 billion conglomerate’s “extreme fiscal conservatism” — including a now-record $167.6 billion cash stake — would serve them well.
Operating profit rose 28% to $8.48 billion, or about $5,884 per Class A share, in the fourth quarter, and 21% to $37.4 billion for the year.
Net income for the quarter more than doubled to $37.57 billion, or $26,043 per Class A share.
The $96.2 billion annual profit topped the old record $89.9 billion from 2021. Berkshire lost $22.8 billion in 2022, when the stock market fell.
Buffett considers net results misleading because they include gains and losses on investments that Berkshire has not sold.
Berkshire also spent about $2.2 billion in the fourth quarter and $9.2 billion in 2023 repurchasing its own stock.
MYSTERY STOCK
Though many investors and Buffett himself at times lament his inability to make another large acquisition, the cash stake helped Berkshire generate more investment income as the Federal Reserve boosted short-term interest rates to curb inflation.
Cash also grew because Berkshire was a net seller of stocks, selling $24.2 billion more than it bought in 2023.
It has been quietly building one or more holdings after obtaining U.S. Securities and Exchange Commission approval for confidentiality so that other investors won’t copy Buffett while he is buying.
Some analysts have said those holdings could come from the bank, insurance and finance sector because Berkshire’s cost basis there has risen. Berkshire invested about $3.6 billion in that sector in last year’s second half.
Berkshire’s insurance businesses generated 38% more income from investments than a year earlier in the fourth quarter, and $9.6 billion for all of 2023, up 48%.
Results also included some of Occidental Petroleum Corp (NYSE:)’s earnings, which reflected Berkshire’s approximately 28% stake in the oil company. Buffett said he expects Berkshire will keep that stake “indefinitely.”
Berkshire’s dozens of businesses also include industrial parts and chemical companies, a big real estate brokerage, and retail brands such as Dairy Queen ice cream, Fruit of the Loom underwear and See’s candies.
Its stock has outperformed the market in 2024, rising 16% compared with the ‘s 7% gain, and set a record on Friday.
