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Investing.com -- Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) reported record operating earnings for 2024, driven by strong performance in its insurance businesses and higher investment income. Meanwhile, the firm’s cash position rose to a new high of $334.20 billion in the fourth quarter.
Buffett told Berkshire investors that it won’t be long before Greg Abel replaces him as CEO and will be writing the annual letter.
Berkshire Class B shares rose more than 1% in premarket trading Monday.
Berkshire’s operating earnings, which exclude investment gains and losses, rose 27% to $47.4 billion in 2024, compared to $37.4 billion in 2023. For the fourth quarter, operating earnings jumped 71% to $14.5 billion. Q4 operating earnings per share (EPS) stood at $10,102, well above the consensus estimate of $6.932.
The conglomerate’s insurance underwriting profit more than doubled to $9 billion in 2024, led by a turnaround at auto insurer GEICO. Insurance investment income surged 43% to $13.7 billion as higher interest rates boosted returns on Berkshire’s cash pile.
Net earnings attributable to shareholders fell 7.5% to $89 billion for the full year, mainly due to lower investment gains compared to 2023.
Analysts at Keefe, Bruyette & Woods said they "expect the EPS beat and GEICO’s strong underwriting results to boost BRK’s shares on Monday." The firm raised its 2025 earnings estimates and the price target for Berkshire Class A shares to $775,000 from $750,000.
Separately, UBS analysts noted they "continue to believe BRK’s shares are an attractive stock in an uncertain macro environment, while insurance fundamentals remain strong and with good margin visibility."
"We estimate BRK shares currently trade at a ~1% premium to intrinsic value," they added.
In terms of performance, the report revealed that in 2024, Berkshire performed better than expected, despite a decline in earnings reported by 53% of its 189 operating businesses. The company was aided by a significant gain in investment income as Treasury Bill yields improved, and its holdings of these short-term securities increased substantially.
Berkshire’s railroad and utility operations, its two largest businesses outside of insurance, saw an increase in aggregate earnings. However, the report noted that there is much left to accomplish in these areas.
Berkshire paid a record $26.8 billion in corporate income taxes to the U.S. government in 2024, which Buffett highlighted as "about 5% of what all of corporate America paid."
In his annual letter to shareholders, Buffett praised GEICO CEO Todd Combs for reshaping the auto insurer: "In five years, Todd Combs has reshaped GEICO in a major way, increasing efficiency and bringing underwriting practices up to date."
Buffett also discussed Berkshire’s growing investments in five major Japanese trading companies, saying the holdings are "for the very long term" and may increase over time.
The 94-year-old CEO reiterated his preference for equity investments over cash, stating "Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned."
Buffett also issued a warning on inflation, saying, "Paper money can see its value evaporate if fiscal folly prevails." He continued, "In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency."