Berkshire Hathaway, the conglomerate run for decades by Warren E. Buffett, recorded its highest-ever annual profit last year. But its chief executive found reason to blame government regulation for hurting the results of some of its biggest businesses.
In his letter to investors that traditionally accompanies the annual report, Mr. Buffett also paid tribute to Charlie Munger, his longtime lieutenant and Berkshire’s vice chairman until his death in November at age 99.
The company — whose divisions include insurance, the BNSF railroad, an expansive power utility, Brooks running shoes, Dairy Queen and See’s candy — disclosed $97.1 billion in net earnings last year, a sharp swing from its $22 billion loss in 2022 because of investment declines.
Berkshire also reported $37.4 billion in operating earnings, the financial metric that Mr. Buffett prefers because it excludes paper investment gains and losses, for the year, up 21 percent from 2022. (Investors often see Berkshire as a bellwether of the American economy, given the breadth of its business.)
Those gains arose from the powerful engine at the heart of Berkshire, its vast insurance operations that include Geico car insurance and reinsurance. The division reported $5.3 billion in after-tax earnings for 2023, reversing from a loss in the previous year thanks to fewer significant catastrophic events, rate increases and fewer claims at Geico.
The business that Berkshire is best known for, stock investments using the enormous cash that the insurance business throws off, also performed well last year. Investment income jumped nearly 48 percent amid rising market valuations. (About 79 percent of the conglomerate’s investment income comes from just five companies: Apple, Bank of America, American Express, Coca-Cola and Chevron.)
But two of the conglomerate’s biggest nonfinancial operations performed below expectations. BNSF, which operates the nation’s biggest freight railroad, reported $5 billion in operating profit for the year, while Berkshire’s utilities business earned $2.3 billion. Earnings at both were significantly below 2022.
While Mr. Buffett noted in his annual letter to investors the challenges that both divisions faced last year — BNSF was hurt primarily by falling shipment volumes and the utility business was battered by more frequent forest fires — he also pointed to government regulations as challenges.
The criticism contrasts with Mr. Buffett’s general support of government regulation, especially given his backing of Democratic policy efforts like the effort to raise taxes on the wealthy that became known as the “Buffett rule.”
In 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 business, he went on at length about tighter regulations in several states that crimped the power 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 Gas & Energy and Hawaiian Electric in Hawaii.
Mr. Buffett further warned that tighter regulations on utilities could pose a broader problem for the industry, and suggested that Berkshire Hathaway might curtail its business in certain states. “We will not knowingly throw good money after bad,” he wrote.
Source : https://dnyuz.com/2024/02/24/berkshire-hathaway-reports-profit-of-97-billion-last-year-a-record