Warren Buffett's Berkshire Hathaway crushed fourth-quarter earnings estimates on Saturday, aided by strong results from its flagship insurance business. On Monday, Berkshire Hathaway stock broke out to an all-time high.
The Berkshire chief also shared his latest annual letter to shareholder, providing insights into his latest thinking on the business, the economy and investing more broadly.
Berkshire Hathaway Earnings Surge 71%
For Q4, Berkshire reported operating profit soared 71% to $14.5 billion, buoyed by insurance operations and investment income. On a per-share basis, Berkshire's earnings came in at $6.74, blowing past estimates for $4.62, FactSet shows.
For full-year 2024, Berkshire's operating earnings rose 27% from 2023. However, Berkshire's operating earnings per share grew by 28% for the year, "illustrating the value of share repurchases," said Glenview Trust's Bill Stone, a longtime follower of Warren Buffett.
In 2024, the insurance business grew operating earnings by 51%, despite significant catastrophe losses from hurricanes Helene and Milton. Insurance results included a 66% underwriting gain and 43% jump in investment income on higher Treasury yields and a 92% surge in net cash and cash equivalents. Excluding insurance, Berkshire's operating income grew by 11% last year.
Buffett said in his annual letter to shareholders that Geico led insurance results. He credited Geico CEO Todd Combs with improving efficiency "and bringing underwriting practices up to date." Still, Buffett admitted that Geico's overhaul was "not yet complete" as it tries to catch up with Allstate and Progressive.
Operating earnings jumped 60% in 2024 at Berkshire Hathaway Energy. But operating earnings fell 1% last year at Berkshire's Burlington Northern Santa Fe (BNSF) railroad and fell 2% in its diverse manufacturing, retail and service businesses.
Class-B shares of Berkshire Hathaway leapt 4.2% to 498.97 in Monday's stock market trading, hitting a record high intraday. Berkshire stock cleared a 484.72 cup-with-handle buy point in double the average volume, according to a weekly MarketSurge chart. On a daily chart, shares topped a 491.67 cup-base entry.
On Monday, IBD named Progressive as Stock of the Day as shares broke out from a cup base. Allstate shares also gained, trying to regain the 50-day moving average. Investors flocked to defensive-growth insurance stocks amid a flight to safety.
Warren Buffett's Cash Pile At Record, Buybacks Halted
At the end of Q4, Berkshire Hathaway's cash hoard hit a record $334 billion due to strong earnings and stock sales vs. $325.2 billion at the end of Q3. During the final quarter of 2024, Berkshire sold several stocks including its top portfolio holding Bank of America while holding steady on Apple, making the conglomerate a net seller of stocks for the ninth straight quarter.
Buffett has previously bemoaned the lack of attractively priced investment opportunities. On Saturday, he addressed Berkshire's ever-growing cash pile, which has led to hand-wringing among some investors. "Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities," he wrote. "That preference won't change."
Amid ongoing stock sales, Buffett said Berkshire's ownership in "marketable equities" moved down in 2024 from $354 billion to $272 billion. But, he added, "the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio."
Meanwhile, Berkshire Hathaway bought back none of its own shares for a second consecutive quarter.
Berkshire's annual buybacks peaked in 2021 at $27 billion, falling to just $2.9 billion in 2024. Buffett only likes to buy back Berkshire Hathaway stock when its price falls below what he considers its intrinsic value. He dislikes paying inflated prices for any company's shares, including his own.
Other Takeaways From Buffett's Letter To Shareholders
In his latest annual letter to shareholders, Warren Buffett highlighted that Berkshire Hathaway paid $26.8 billion to the IRS in 2024, which was roughly "5% of what all of corporate America paid" (italics are Buffett's own).
He acknowledged that Berkshire's earnings strength was narrow. "In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings," he said.
The Berkshire chief explained further: "We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly liquid short-term securities."
He did not specifically cite the recent Los Angeles wildfires and other catastrophic events, but noted:
"In general, property-casualty ("P/C") insurance pricing strengthened during 2024, reflecting a major increase in damage from convective storms. Climate change may have been announcing its arrival. However, no 'monster' event occurred during 2024."
In a more somber note, the 94-year-old Berkshire chief acknowledged that "it won't be long" before Greg Abel, vice chairman of non-insurance businesses, replaces him as chief executive.
Yet Buffett showed his faith in Abel's ability to run Berkshire Hathaway eventually, Glenview's Stone said. Stone noted that Buffett "compared Abel's ability to act decisively when opportunities presented themselves to Charlie Munger's," his longtime business partner who died at age 99 in November 2023.
