Berkshire’s Operating Profit Jumps on Insurance, Rates Boost

(Bloomberg) — Berkshire Hathaway Inc.’s operating earnings surged 71% in the fourth quarter, as higher interest rates lifted the conglomerate’s investment income and its insurance business improved.

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Operating earnings were $14.5 billion in the three months through December, Warren Buffett’s Omaha, Nebraska-based conglomerate said Saturday in a statement. The increase was driven in part by a 48% jump in insurance investment income, to $4.1 billion, amid higher interest rates.

Earnings also got a significant boost from a strong recovery in the firm’s insurance underwriting business, with operating earnings quadrupling over the period to $3.4 billion.

GEICO was the main contributor to Berkshire’s insurance results, with its pretax underwriting earnings more than doubling to $7.8 billion in 2024. The auto insurer successfully added new clients in the second half, reversing a years-long trend that previously weighed on its performance.

Pretax underwriting earnings for the firm’s collection of reinsurance businesses grew 44% over the past year.

Berkshire said it expects pretax losses of approximately $1.3 billion from the wildfires that ravaged entire parts of Los Angeles last month.

“I don’t think people should expect the same level of performance in 2025, as the firm already has a billion-dollar event in January, ahead of the regular hurricane season,” Cathy Seifert, an analyst for CFRA, said in an interview. “But the turnaround at GEICO, after some pruning of their policies in certain geographies, is impressive and better than expected.”

Rising cash

Buffett’s cash hoard grew for the 10th quarter in a row, to a record $334.2 billion at the end of 2024, as the billionaire continued to refrain from major stock transactions in the fourth quarter. In the period, the firm was a net seller of $6.7 billion worth of shares.

In his annual letter to shareholders, Buffett addressed concerns that Berkshire is hoarding cash and reminded investors that the great majority of the firm’s money remains invested in equities, both public and private, and that this won’t change.

“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” Buffett said in the letter.

Buffett said the value of the Berkshire’s private equity holdings increased and remained “far greater than the value of the marketable portfolio” last year. Over the same period, Berkshire’s ownership of public equities declined 23%, to $272 billion.

The billionaire said Berkshire could increase “over time” its longtime holdings in Itochu, Marubeni, Mitsui, Mitsubishi and Sumitomo, Japan’s five largest trading houses.

While Berkshire initially intended to keep its stake below the 10% threshold, the five companies have agreed to “moderately relax the ceiling” as the conglomerate approaches it.

The firm declined to buy back its own shares for the second quarter in a row, a sign that Buffett believes the stock is currently trading above its intrinsic value.

Berkshire’s market capitalization has been hovering above $1 trillion since late last month.

Despite the large operating earnings gains last year — they rose nearly 27% — Buffett pointed out in his letter that 53% of Berkshire’s 189 operating companies reported a decline in earnings in 2024.

This, combined with Buffett’s position as a net seller of shares, could indicate that the billionaire is concerned about a softening of the US economy, according to Jim Shanahan, who covers Berkshire Hathaway as an equity analyst for Edward Jones.

“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.

(Updates with additional figures and context from fifth paragraph.)