Buffett's Berkshire Booms with Record Earnings and Strategic Wins in a Transformative Year

On the evening of February 22nd, Berkshire Hathaway, Inc. released its annual report for the fiscal year 2024. The spotlight was on Warren Buffett’s letter to shareholders for the year 2025, in which the 94-year-old remained candid about the company's performance in 2024.

Buffett reiterated his enduring investment philosophy of heavily allocating funds to equities, suggesting that cash and bonds may falter in the face of inflation, while exceptional companies have the ability to thrive across cycles.

The 2024 fiscal report showcased a significant rise in Berkshire’s operational earnings, reaching $47.4 billion, which marked a 27% increase from $37.35 billion in 2023. Notably, although 53% of the 189 subsidiary companies reported declines in earnings, the insurance sector stood out with substantial gains. The division’s underwriting profit soared from $5.43 billion to $9.02 billion, and investment income jumped from $9.57 billion to $13.67 billion. GEICO, under the leadership of Todd Combs, played a pivotal role by successfully implementing strategic reforms that enhanced both efficiency and underwriting capabilities, driving substantial growth.

Furthermore, Berkshire's energy segment witnessed its income rise from $2.33 billion to $3.73 billion, and the railroad business maintained steady earnings at $5.03 billion. The company completed a full acquisition of a utility subsidiary for $3.9 billion, increasing its ownership stake from 92% to 100%.

Buffett underscored that the insurance business remains at the core of Berkshire's operations. The success of this sector lies not only in its profitability but also in its distinctive business model, which allows the company to collect premiums upfront and settle claims over time. This structure provides Berkshire with a substantial amount of "float," enabling large-scale investments. By the end of 2024, the insurance float stood at $171 billion, with accumulated underwriting profits amounting to $32 billion over the past 20 years.

The company also reported a record contribution to the U.S. Treasury, paying $26.8 billion in federal income taxes for 2024, accounting for 5% of the total corporate income taxes in the nation. Buffett attributes this achievement to Berkshire's long-standing practice of reinvesting shareholder profits, which has led to exponential asset growth since he took control in 1965.

Candidly reflecting on past decisions, Buffett mentioned misjudgments made in recent years, including miscalculations about industry prospects and overestimations of management capabilities. He cited the advice of his late partner, Charlie Munger, emphasizing the importance of taking action to resolve issues.

In a notable success story, Buffett detailed Berkshire's investment strategy in Japan's five largest trading houses. Since initiating its position in 2019, the company acquired shares worth $13.8 billion that are now valued at $23.5 billion, with expected dividend income of $810 million for 2025, while yen-denominated debt interest remains modest at $135 million. Buffett lauded these companies for their sensible capital allocation and humble management, indicating plans to hold and modestly increase these investments in the long term.

Executives at Berkshire emphasized consistently investing heavily in equities, cautioning that cash and bonds may falter with inflation, while strong companies can endure and even prosper through economic fluctuations, irrespective of governmental errors. As Buffett advances in age, the succession plan for Vice Chairman Greg Abel to assume the CEO role progresses. Abel has increasingly been involved in major decision-making, poised to inherit Berkshire's culture of prioritizing shareholders and fostering open communication. In his letter, Buffett stressed the importance of transparency, warning that deceiving shareholders ultimately leads to self-deception.