The conglomerate reported a record-breaking net income of $96.2 billion, attributed in part to the buoyancy of the stock market which elevated the value of Berkshire’s substantial $354 billion equity holdings, notably with half of it invested in Apple.
Buffett, in his annual letter to shareholders, highlighted the exceptional performance of Berkshire’s insurance enterprises, particularly citing Geico’s notable turnaround driven by improved underwriting standards which effectively reversed previous year losses.
Despite challenges faced by its subsidiary businesses such as the BNSF railroad, which experienced diminished profits due to increased labor costs and expenses for maintenance amid a drop in revenue, as well as Berkshire Hathaway Energy grappling with wildfire litigation and a more stringent regulatory environment, Buffett remained steadfast in his commitment to financial prudence.
Berkshire’s operating profit surged by 28% in the fourth quarter, amounting to $8.48 billion, equivalent to roughly $5,884 per Class A share, surpassing the average analyst projection of $5,471 per share as per LSEG IBES data. Over the course of the year, operating profit climbed by 21% to $37.4 billion.
With a robust cash reserve amounting to a historic high of $167.6 billion, Buffett reassured investors of Berkshire’s conservative fiscal approach, emphasizing its resilience and capacity to weather market fluctuations while continuing to generate substantial returns for shareholders.
According to a Reuters report, Edward Jones analyst, Jim Shanahan, said: “Results reflect the value of holding a diversified collection of operating businesses,” He went on to say that Geico experienced advantages by being open to reducing market share through issuing fewer high-risk policies, while simultaneously reducing advertising expenditures.
The substantial cash reserve bolstered Berkshire’s insurance ventures, which possess approximately $169 billion in “float,” leading to a 38% increase in investment income during the quarter, as short-term interest rates were raised by the Federal Reserve to mitigate inflationary pressures.
The reported results also encompassed a portion of Occidental Petroleum’s profits, stemming from Berkshire’s ownership of approximately 28% of the oil corporation.
Buffett indicated that Berkshire intends to maintain its stake in Occidental indefinitely but expressed no desire to acquire the entirety of the company. Additionally, Berkshire holds significant investments in Chevron, another major player in the oil industry.
