Berkshire Hathaway's Operating Earnings Soar 71% in Q4, Fueled by Higher Interest Rates and Insurance Recovery
Berkshire Hathaway Inc. (BRK-B) reported a 71% surge in operating earnings for the fourth quarter of 2024, driven by rising interest rates and improved performance in its insurance business.
Strong Insurance Income and Underwriting Recovery
Insurance investment income jumped 48% to $4.1 billion, led by higher interest rates. Underwriting earnings also witnessed a remarkable recovery, with operating earnings quadrupling to $3.4 billion, primarily due to GEICO's strong performance. GEICO's pretax underwriting earnings more than doubled to $7.8 billion in 2024, driven by successful client acquisition during the second half.
Growing Cash Hoard and Private Equity Holdings
Berkshire's cash reserves continued to expand, reaching a record $334.2 billion at the end of 2024, marking the 10th consecutive quarter of growth. Despite refraining from major stock transactions in Q4, the company sold $6.7 billion worth of shares.
Buffett reiterated in his annual shareholder letter that the majority of Berkshire's assets remain invested in equities and that this strategy remains unchanged. The value of the company's private equity holdings rose significantly, exceeding the value of its marketable portfolio.
Decline in Public Equity Ownership and Potential Share Buyback
Over the past year, Berkshire's ownership of public equities declined 23% to $272 billion. Buffett indicated the possibility of increasing the company's long-held investments in Japan's five largest trading houses (Itochu, Marubeni, Mitsui, Mitsubishi, and Sumitomo).
Berkshire did not repurchase any of its own shares for the second consecutive quarter, suggesting that Buffett believes the stock is overvalued. Despite a significant gain in operating earnings in 2024, 53% of Berkshire's operating companies reported a decline in earnings. This could indicate concerns about an economic slowdown, according to equity analyst Jim Shanahan.