Berkshire Hathaway’s Diverse Businesses Deliver Strong Results

Berkshire Hathaway, the conglomerate led by legendary investor Warren Buffett, has reported another year of impressive financial performance. The company’s diverse array of subsidiaries, ranging from insurance to manufacturing to energy, generated $89 billion in net earnings attributable to Berkshire shareholders in 2024.

Insurance Segment Shines

Berkshire’s insurance operations were a standout, with the GEICO auto insurance unit rebounding strongly after losses in 2022. GEICO’s pre-tax underwriting earnings reached $7.8 billion in 2024, up from $3.6 billion the prior year, as the company benefited from higher premiums and lower claims. The Berkshire Hathaway Reinsurance Group also performed well, generating $2.7 billion in pre-tax underwriting earnings.

The company’s primary commercial insurance businesses, grouped under Berkshire Hathaway Primary Group, saw more mixed results. Premiums written increased 3.8% in 2024, but the loss ratio rose as the group experienced higher loss estimates, particularly at the GUARD Insurance subsidiary. Overall, the insurance segment contributed $9 billion in net earnings to Berkshire in 2024, up from $5.4 billion in 2023.

Railroad and Utilities Deliver Steady Profits

BNSF Railway, Berkshire’s railroad subsidiary, reported a slight decline in after-tax earnings to $5 billion in 2024. The company benefited from higher freight volumes and improved productivity, but this was offset by charges related to a labor agreement and litigation.

Berkshire Hathaway Energy, the company’s utilities and energy business, saw a 54% increase in net earnings to $3.7 billion. This was driven by lower wildfire-related losses at the PacifiCorp utility and higher earnings from the natural gas pipeline operations.

Manufacturing and Retailing Segments Face Headwinds

Berkshire’s diverse manufacturing businesses, including industrial, building, and consumer products, reported a 2.2% decline in net earnings to $13.1 billion in 2024. The industrial and building products groups saw mixed results, with some units performing well while others faced challenges. The consumer products businesses, led by Forest River and Duracell, saw earnings increase 10.9%.

The retailing segment, which includes the Berkshire Hathaway Automotive car dealerships and a variety of home furnishings and specialty retail chains, experienced a 19.2% decline in pre-tax earnings to $4.9 billion. This was primarily due to lower profit margins at the auto dealerships and weaker performance at the home furnishings and specialty retail businesses.

Pilot Travel Centers Acquisition Boosts Results

In 2023, Berkshire acquired an 80% controlling interest in Pilot Travel Centers, the nationwide chain of truck stops and fuel stations. Pilot contributed $614 million in pre-tax earnings to Berkshire’s results in 2024, although this was down from the $968 million earned in the 11 months after the acquisition in 2023.

Investment Gains Provide Significant Boost

As is typical for Berkshire, investment gains and losses had a major impact on the company’s reported earnings. In 2024, Berkshire recorded $41.6 billion in net investment gains, down from $58.9 billion the prior year. These gains, which are largely unrealized, reflect changes in the market value of Berkshire’s massive equity portfolio.

Buffett has long cautioned that these investment gains and losses are “generally meaningless” for understanding Berkshire’s operating performance, as they can cause significant volatility in the company’s reported net income. The conglomerate’s diverse array of operating businesses is a better indicator of its underlying strength.

Strong Balance Sheet and Cash Position

Berkshire ended 2024 with a very strong balance sheet, with $649.4 billion in shareholders’ equity. The company held $318 billion in cash, cash equivalents, and U.S. Treasury bills, providing ample liquidity. Berkshire’s debt levels remain modest, with the parent company carrying $21.1 billion in debt.

The company continues to repurchase its own stock, spending $2.9 billion on buybacks in 2024. Buffett has said Berkshire will only repurchase shares when they are trading below the company’s intrinsic value, as conservatively estimated by management.

Outlook Remains Positive

Looking ahead, Berkshire appears well-positioned to navigate the current economic environment. The company’s insurance operations are expected to continue generating strong underwriting profits, while the railroad, utilities, and energy businesses provide a steady stream of earnings.

The manufacturing and retailing segments may face ongoing challenges, but Berkshire’s diversification and financial strength should allow it to weather any storms. The company’s massive cash hoard and conservative approach to debt provide a valuable cushion.

Ultimately, Berkshire Hathaway’s performance in 2024 demonstrates the power of its unique business model. By assembling a diverse array of well-managed subsidiaries, the company has created a conglomerate that can thrive in a wide range of economic conditions. Shareholders can look forward to continued strong results from this Warren Buffett-led juggernaut.