Berkshire Hathaway Reviews Revenue of $97 Billion Final Yr, a Document

Berkshire Hathaway, the conglomerate run for many years by Warren E. Buffett, recorded its highest-ever annual revenue final 12 months. However its chief government discovered purpose in charge authorities regulation for hurting the outcomes of a few of its largest companies.

In his letter to traders that historically accompanies the annual report, Mr. Buffett additionally paid tribute to Charlie Munger, his longtime lieutenant and Berkshire’s vice chairman till his death in November at age 99.

The corporate — whose divisions embody insurance coverage, the BNSF railroad, an expansive energy utility, Brooks trainers, Dairy Queen and See’s sweet — disclosed $97.1 billion in net earnings final 12 months, a pointy swing from its $22 billion loss in 2022 due to funding declines.

Berkshire additionally reported $37.4 billion in working earnings, the monetary metric that Mr. Buffett prefers as a result of it excludes paper funding features and losses, for the 12 months, up 21 p.c from 2022. (Traders usually see Berkshire as a bellwether of the American economic system, given the breadth of its enterprise.)

These features arose from the highly effective engine on the coronary heart of Berkshire, its huge insurance coverage operations that embody Geico automotive insurance coverage and reinsurance. The division reported $5.3 billion in after-tax earnings for 2023, reversing from a loss within the earlier 12 months due to fewer vital catastrophic occasions, fee will increase and fewer claims at Geico.

The enterprise that Berkshire is finest identified for, inventory investments utilizing the big money that the insurance coverage enterprise throws off, additionally carried out nicely final 12 months. Funding revenue jumped almost 48 p.c amid rising market valuations. (About 79 p.c of the conglomerate’s funding revenue comes from simply 5 corporations: Apple, Financial institution of America, American Categorical, Coca-Cola and Chevron.)

However two of the conglomerate’s largest nonfinancial operations carried out under expectations. BNSF, which operates the nation’s largest freight railroad, reported $5 billion in working revenue for the 12 months, whereas Berkshire’s utilities enterprise earned $2.3 billion. Earnings at each have been considerably under 2022.

Whereas Mr. Buffett famous in his annual letter to traders the challenges that each divisions confronted final 12 months — BNSF was harm primarily by falling cargo volumes and the utility enterprise was battered by extra frequent forest fires — he additionally pointed to authorities laws as challenges.

The criticism contrasts with Mr. Buffett’s common help of presidency regulation, particularly given his backing of Democratic coverage efforts like the hassle to lift taxes on the rich that turned referred to as the “Buffett rule.”

Within the case of BNSF, Mr. Buffett wrote that “wage increases, promulgated in Washington, were far beyond the country’s inflation goals.” And for the utility enterprise, he went on at size about tighter laws in a number of states that crimped the facility utility’s profitability. “The regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy,” he wrote, alluding to California’s Pacific Gasoline & Vitality and Hawaiian Electrical in Hawaii.

Mr. Buffett additional warned that tighter laws on utilities might pose a broader drawback for the business, and prompt that Berkshire Hathaway would possibly curtail its enterprise in sure states. “We will not knowingly throw good money after bad,” he wrote.

Within the annual letter — a must-read publication for his hundreds of thousands of followers that’s peppered together with his customary folksy asides — Mr. Buffett talked up two of Berkshire’s longest-held investments, American Categorical and Coke, as stable monetary performers. He additionally famous newer inventory positions that he mentioned he anticipated to keep up “indefinitely”: the fossil-fuel producer Occidental Petroleum, of which Berkshire owns almost 28 p.c, and stakes in 5 Japanese buying and selling companies, considered a guess on the revival of Japan’s long-moribund economic system.

In selling the Japanese investments, Mr. Buffett took a jab at how a lot American corporations pay their high executives. “The managements of all five companies have been far less aggressive about their own compensation than is typical in the United States,” he wrote.

But once more, Mr. Buffett spent little time speaking about what he has lengthy referred to as Berkshire’s “elephant gun,” the huge money hoard it amasses from its insurance coverage operations that he has used to strike main transactions. Lately, the conglomerate has favored utilizing that cash to purchase again its personal inventory as a greater method to generate greater returns for traders.

That pile grew to $163.3 billion by 12 months finish, however Mr. Buffett mentioned he noticed few alternatives to profitably spend that money at scale. “There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” he wrote. “All in all, we have no possibility of eye-popping performance.”

As a substitute, Mr. Buffett emphasised Berkshire’s monetary resilience. “I believe Berkshire can handle financial disasters of a magnitude beyond any heretofore experienced,” he wrote. “This ability is one we will not relinquish.”

As anticipated, Mr. Buffett supplied a prolonged tribute to Mr. Munger, a fellow Omaha native who shared a love of investing. The 2 males have been Berkshire’s largest ambassadors with an usually comedic buddy act: Mr. Buffett the persistent optimist, Mr. Munger the gimlet-eyed cynic.

In a prolonged introduction, Mr. Buffett praised Mr. Munger because the “architect” of the Berkshire enterprise mannequin of investing in good companies at truthful costs, an strategy that made them billionaires and plenty of of their longtime shareholders millionaires.

“Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades,” he wrote. “Even when he knew he was right, he gave me the reins, and when I blundered he never — never — reminded me of my mistake.”