Berkshire Hathaway's earnings from operational activities soar by 71%, culminating in an impressive cash reserve.
In 2024, Berkshire Hathaway's operating profit leaped an impressive 27%, reaching an astounding $47.4 billion from its previous year's figure of $37.3 billion. Despite this surge, the company's net income dipped by 7.5%, landing at $89 billion. Buffett, the Oracle of Omaha, was pleased by these results, remarking, "Berkshire did better than I expected."
The cause of the operating profit rise can be traced back to a couple of key factors. Berkshire's insurance businesses, notably car insurer Geico, experienced a significant boost in earnings. Geico's CEO, Todd Combs, played a significant role in reshaping the company over the past five years, enhancing efficiency and modernizing underwriting practices.
Moreover, a predictable large gain in investment income was a crucial contributor to the boost. This increase in income was largely thanks to improved Treasury Bill yields, which led to a significant increase in holdings of highly-liquid short-term securities.
As for cash holdings, Berkshire's ballooned to a record-breaking $334.2 billion in the fourth quarter. This marked an increase from the previous quarter's $325.2 billion, and it was partially funded by the reduction in shares held in Apple and Bank of America the previous year.
Buffett acknowledged that, with his age approaching 94, a new leader will soon take the helm at Berkshire. Greg Abel, Buffett's successor as CEO, shares the company's creed that reporting is a CEO's annual obligation to investors. Abel also understands the importance of maintaining integrity in communicating with shareholders.
Sources:1. Berkshire Hathaway Annual Report 20242. Berkshire Hathaway Investor Data
Berkshire Hathaway's insurance arm, Geico, significantly increased its earnings, contributing to the company's overall business profit improvement. Todd Combs, Geico's CEO, was instrumental in implementing efficiency improvements and modernizing underwriting practices over the past five years. Buffett praised the company's performance, stating, "Berkshire did better than I expected due in part to Geico's earnings boost."
