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Jonathan Stempel
(Reuters) – Warren Buffett’s Berkshire Hathaway on Saturday posted a record annual operating profit for the second year in a row, as its insurance business benefited from improved underwriting and higher investment income as interest rates rose.
The stock market rally boosted the value of Berkshire’s $354 billion stock portfolio, half of which is in Apple, and drove its net income to a record $96.2 billion.
In his annual letter to Berkshire shareholders, Buffett called Berkshire’s insurance business “exceptionally strong,” including improvements in Geico’s underwriting quality that helped offset losses in the same period last year. He said he contributed more than reversing the situation.
This was due to lower fourth-quarter and full-year profits at BNSF Railroad, where wage increases and maintenance costs increased as revenue declined, and at Berkshire Hathaway Energy, which has been plagued by wildfire lawsuits and a tougher regulatory environment. It helped to compensate.
Nevertheless, Buffett assured investors about Berkshire’s long-term health, calling the roughly $903 billion conglomerate’s “extreme fiscal conservatism” (including a current high of $167.6 billion in cash and stock) ) was said to be beneficial to investors.
Operating income increased 28% to $8.48 billion (approximately $5,884 per Class A share) in the fourth quarter and 21% for the year to $37.4 billion.
Net income more than doubled in the quarter to $37.57 billion, or $26,043 per Class A share.
Annual profits of $96.2 billion exceeded 2021’s record high of $89.9 billion. Berkshire lost $22.8 billion in 2022 when the stock market fell.
Buffett believes the net results are misleading because they include gains and losses on investments that Berkshire hasn’t sold.
Berkshire also spent about $2.2 billion in stock buybacks in the fourth quarter and $9.2 billion in 2023.
mystery stock
Although many investors and Buffett himself have sometimes lamented his inability to make new large acquisitions, Berkshire has received more investment income from cash contributions as the Federal Reserve has raised short-term interest rates to curb inflation. I was able to get
Cash also increased as Berkshire was a net seller of the stock, selling it for $24.2 billion more than it bought in 2023.
The company secretly built up one or more holdings while Mr. Buffett was making purchases, after obtaining U.S. Securities and Exchange Commission approval for confidentiality to prevent other investors from imitating Mr. Buffett. It’s here.
Some analysts say these holdings could come from the banking, insurance and financial sectors as Berkshire’s cost basis is rising. Berkshire invested about $3.6 billion in the sector in the second half of last year.
Berkshire’s insurance business generated investment income of $9.6 billion, up 38% in the fourth quarter from a year ago and 48% for the full year of 2023.
The results also include a portion of Occidental Petroleum Corporation’s profits, reflecting Berkshire’s approximately 28% stake in the oil company. Buffett said he expects Berkshire to hold the stock “indefinitely.”
Berkshire’s dozens of businesses also include an industrial parts and chemical company, a major real estate brokerage, and retail brands such as Dairy Queen ice cream, Fruit of the Loom underwear and See’s Candy.
The company’s stock outperformed the market in 2024, rising 16% compared to the Standard & Poor’s 500’s 7% rise, setting a record on Friday.
(Reporting by Jonathan Stempel in New York; Editing by Ira Iosebashvili, Tomasz Janowski and Diane Craft)
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