(Reuters) - Warren Buffett's Berkshire Hathaway (BRKa.N)
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 (AAPL.O), American Express (AXP.N) 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 (BAC.N).
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's 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.
Warren Buffett said on Saturday that his conglomerate Berkshire Hathaway (BRKa.N) will likely increase its ownership in the five Japanese trading houses it holds.
In his annual letter to Berkshire shareholders, the billionaire investor said Itochu (8001.T), Marubeni (8002.T), Mitsubishi (8058.T), Mitsui (8031.T) and Sumitomo (8053.T) agreed to "moderately relax" limits that capped Berkshire's ownership stakes below 10%.
Berkshire's investments in the companies totaled $23.5 billion at the end of 2024.
"Over time, you will likely see Berkshire's ownership of all five increase somewhat," Buffett wrote.
The 94-year-old Buffett also said he and Berkshire Vice Chairman Greg Abel, his designated successor as chief executive, are investing for the "very long term."
"I expect that Greg and his eventual successors will be holding this Japanese position for many decades and that Berkshire will find other ways to work productively with the five companies," Buffett wrote.
"Both of us like their capital deployment, their managements and their attitude in respect to their investors," Buffett added.
Known as "sogo shosha," Japanese trading houses trade in a wide variety of materials, products and food, often serving as intermediaries, and provide logistical support.
They are also deeply involved in the real economy in such areas as commodities, shipping and steel.
Berkshire began investing in the trading houses in 2019, drawn by their finances compared to their low stock prices, and revealed 5% ownership stakes on Buffett's 90th birthday in August 2020.
Buffett prefers to avoid businesses he says he does not understand.
He told Nikkei in 2023 that the trading houses are "really so much similar to Berkshire," the Omaha, Nebraska-based conglomerate he has led since 1965.
Berkshire spent $13.8 billion on its current holdings and expects $812 million of dividend income in 2025, Buffett said in the shareholder letter.
"This was a good value investment when others may have looked at them as value traps," said Cathy Seifert, an analyst at CFRA Research who rates Berkshire a "hold."
She said Buffett's comments show Berkshire has a positive working relationship with the trading houses.
Berkshire has also issued fixed-rate, yen-denominated bonds, but Buffett said it seeks "currency neutrality" and has no view on future currency changes.
The conglomerate on Saturday reported $1.15 billion of foreign currency gains after taxes in 2024 from non-dollar-denominated senior debt.
Warren Buffett's Berkshire Hathaway (BRKa.N) on Saturday joined a growing list of American companies to publicly change their approach to discussing their commitment to diversity and inclusion.
Berkshire's annual report includes a section describing how the conglomerate's 189 operating businesses, which employ about 392,400 people, depend on human capital and resources, and that each establishes practices to attract and retain employees.
Last year's report said the businesses accomplished this in part through hiring practices "intended to identify qualified candidates and promote diversity and inclusion in the workforce."
This year's report omitted the discussion of diversity and inclusion, ending that passage after "candidates."
Buffett's assistant did not immediately respond to a request for comment.
Berkshire has long said its decentralized structure allows individual operating businesses to make their own day-to-day operating decisions without interference from the top.
The company joined dozens of major U.S. companies including Amazon.com (AMZN.O), Boeing (BA.N), Citigroup (C.N), Ford (F.N), McDonald's (MCD.N), Morgan Stanley (MS.N) and Walmart (WMT.N) in curbing public support or initiatives for diversity, equity and inclusion in the workplace.
Such initiatives have been attacked by many conservatives including U.S. President Donald Trump, who has tried to eliminate DEI from the federal government.
At Berkshire's annual meeting last May, shareholders voted down by a nearly 4-1 margin a proposal that Berkshire disclose more about its efforts to promote DEI in the workplace.
Berkshire's board of directors opposed the proposal.
Buffett has run Berkshire since 1965. The Omaha, Nebraska-based company owns Geico car insurance, the BNSF railroad, and an array of energy, industrial, retail, and service businesses.