Berkshire Hathaway Q4 Profits Soar 71%, Buffett Says Firm Pays More Taxes Than 'Tech Titans' With Market Value in 'Trillions'

The annual report of Berkshire Hathaway Inc. BRK was released on Saturday morning, shedding light on the company’s robust performance in the insurance sector with a whopping 71% increase in operating earnings for the fourth quarter.

What Happened: According to Berkshire’s report, the Nebraska-based conglomerate, under the leadership of Warren Buffett, attributed this surge to the rise in interest rates that amplified its investment income and an uplift in its insurance business. The company’s operating earnings for the quarter were recorded at $14.5 billion.

A significant portion of the earnings increase was due to a 48% increase in insurance investment income, which amounted to $4.1 billion. The firm’s insurance underwriting business also experienced a strong recovery, with operating earnings multiplying fourfold to $3.4 billion.

GEICO, a major contributor to Berkshire’s insurance results, more than doubled its pretax underwriting earnings to $7.8 billion in 2024. This was achieved by reversing a years-long downward trend and adding new clients in the latter half of the year.

However, despite these positive results, Berkshire expects pretax losses of approximately $1.3 billion due to the wildfires that ravaged parts of Los Angeles last month. Furthermore, Buffett’s cash reserves increased to a record $334.2 billion at the end of 2024, marking the 10th consecutive quarter of growth.

In his letter to shareholders, Warren Buffett revealed the company’s performance exceeded his expectations. He also noted that the company paid more taxes than tech giants with trillion-dollar valuations.

“Berkshire Hathaway – paid far more in corporate income tax than the U.S. government had ever received from any company – even the American tech titans that commanded market values in the trillions. To be precise, Berkshire last year made four payments to the IRS that totaled $26.8 billion. That's about 5% of what all of corporate America paid. In addition, we paid sizable amounts for income taxes to foreign governments and to 44 states,” he mentioned in the letter.

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Berkshire Hathaway’s property-casualty (P/C) insurance remains its core business. The company distinguishes itself in the insurance industry by taking on risks that other private insurers shy away from, while maintaining a disciplined approach to avoid underpriced policies.

Why It Matters: The substantial increase in Berkshire Hathaway’s Q4 operating profits signifies a strong recovery and growth in its insurance and investment sectors. The rise in interest rates played a crucial role in boosting the company’s investment income, contributing to the overall surge in earnings.

The robust recovery of the firm’s insurance underwriting business and the significant contribution from GEICO also played a pivotal role in the earnings increase.

The growth of P/C insurance is directly linked to increasing economic risks. Berkshire Hathaway believes one-year risk assumptions are generally manageable but remains flexible to adapt policies as needed. This strategic approach has allowed the company to stay ahead in the industry and ensure its continued growth.

Berkshire Hathaway’s investment strategy is also noteworthy. The company remains committed to investing the majority of shareholder funds in equities, primarily American companies with significant international operations.

This strategy of prioritizing ownership in strong businesses over holding cash-equivalent assets ensures long-term growth and value for its investors.

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