Buffett’s Berkshire Hits Record Profit as Cash Pile Soars to $334 Billion

Warren Buffett’s Berkshire Hathaway reported a record operating profit for the third consecutive year, driven by strong insurance underwriting and higher investment income. The company’s cash reserves soared to $334.2 billion, aided by $143.4 billion in stock sales, including a major reduction in its Apple and Bank of America holdings. Geico’s profitability improved under CEO Todd Combs, despite significant job cuts. Berkshire refrained from stock buybacks in 2024, as Buffett found few compelling investment opportunities. Other business segments saw mixed results, with gains in energy but declines in retail, railroads, and mobile homes.

Buffett’s Berkshire Hits Record Profit as Cash Pile Soars to $334 Billion

Warren Buffett’s Berkshire Hathaway (BRKa.N) announced on Saturday that it achieved a record operating profit in the fourth quarter, marking the third consecutive year of record-breaking performance. This growth was driven by stronger underwriting and increased investment income from its insurance businesses.

A significant portion of this income stemmed from Berkshire’s massive cash reserves, which reached a record $334.2 billion by the end of 2024—double the amount held a year earlier.

In his annual shareholder letter, Buffett, now 94, reassured investors that the company prioritizes investing in businesses over holding cash. He acknowledged that Berkshire outperformed his expectations, even though 53% of its 189 subsidiaries reported lower earnings.

Buffett credited part of this success to higher returns on U.S. Treasury bills and improvements at Geico, which benefited from better pricing strategies and stricter underwriting, leading to fewer accident-related losses.

Thomas Russo, a partner at Gardner Russo & Quinn, highlighted the strength of Berkshire’s insurance and investment sectors, describing the results as “incredible.”

Geico’s Transformation and Workforce Reduction

Buffett praised Geico CEO Todd Combs, who has led the company since 2020 and also serves as a Berkshire investment manager. Combs has streamlined Geico’s operations and enhanced underwriting efficiency, though further progress is needed.

Geico reduced over 2,300 jobs last year, bringing its total workforce reduction since the end of 2022 to approximately 10,000 employees—a 26% decline.

Surging Profits but No Stock Buybacks

Berkshire’s operating profit surged 71% in Q4 to $14.53 billion and rose 27% for the full year to $47.44 billion.

Net income for the quarter stood at $19.69 billion, or $13,695 per average equivalent share, supported by gains in Berkshire’s holdings of Apple (AAPL.O), American Express (AXP.N), and other stocks. The company’s full-year net income reached $89 billion.

However, Buffett has often cautioned against focusing too much on net income, as it reflects unrealized investment gains and losses, some of which Berkshire may never act upon.

In 2024, Berkshire significantly increased its cash reserves, largely due to $143.4 billion in stock sales. This included selling 62% of its Apple shares and one-third of its Bank of America (BAC.N) stake. The company has now been a net seller of stocks for nine straight quarters.

Despite its substantial cash pile, Berkshire repurchased only $2.9 billion of its own stock in 2024 and has not conducted any buybacks since May.

Bill Smead of Smead Capital Management noted Buffett’s statement in the annual letter that Berkshire “very infrequently” finds appealing investment opportunities, suggesting that current market conditions do not present many compelling deals.

Insurance Growth and Wildfire Losses

Geico’s pretax underwriting profit climbed 29% in Q4 and more than doubled for the year, with the percentage of premiums used for claims dropping to 71.8% from 81% in 2023. Rate increases helped offset a slight decline in policy numbers.

Overall, Berkshire’s insurance underwriting profit quadrupled in Q4. However, the company anticipates a $1.3 billion pre-tax impact from the recent wildfires in Los Angeles.

Mixed Performance in Other Businesses

Berkshire’s BNSF railroad saw profits decline by 6% in Q4 and 1% for the full year. Its retail and service sectors, including Pilot truck stops and Berkshire’s auto dealership businesses, also faced reduced margins.

Clayton Homes, its mobile home division, reported lower profits due to increased insurance claims and anticipated loan losses.

On the other hand, Berkshire Hathaway Energy posted a profit increase of over 50%, benefiting from higher utility margins. Additionally, PacifiCorp, a subsidiary, reduced its litigation reserves related to Oregon and California wildfires from 2020.

Buffett disclosed that Berkshire spent $3.9 billion late last year to acquire the remaining 8% of Berkshire Hathaway Energy that it did not already own.

Diverse Portfolio of Consumer Brands

Beyond insurance and industrial holdings, Berkshire owns well-known consumer brands such as Dairy Queen, Fruit of the Loom, and See’s Candies.