Berkshire Hathaway Earnings Surge on Strong Insurance Gains

Berkshire Hathaway shareholders walk by a video screen at the company's annual meeting in Omaha, on May 4, 2013. Rick Wilking/Reuters

News Analysis

Once an almost broke company, the Berkshire Hathaway conglomerate delivered $47.4 billion in operating profit in 2024—a nearly 27 percent increase over 2023—thanks to a jump in its property and casualty insurance businesses. The company also paid a record $26.8 billion in federal income taxes.

That’s according to a letter sent to Berkshire Hathaway’s shareholders by its CEO Warren E. Buffett over the weekend. The letter stated that Berkshire Hathaway paid far more federal taxes than any other company, including American tech giants that have market capitalizations in the trillions of dollars.

“Sixty years ago, present management took control of Berkshire. That move was a mistake—my mistake—and one that plagued us for two decades. Charlie, I should emphasize, spotted my obvious error immediately: Though the price I paid for Berkshire looked cheap, its business—a large northern textile operation—was headed for extinction,” the legendary investor said. “The U.S. Treasury, of all places, had already received silent warnings of Berkshire’s destiny. In 1965, the company did not pay a dime of income tax, an embarrassment that had generally prevailed at the company for a decade.”

Charlie refers to Charlie Munger, the former vice chairman of Berkshire Hathaway, who passed away in November 2023.

Berkshire was headed for extinction, as is the case with scores of unprofitable companies annually. Instead, it became an American success story of reformation, turning from a manufacturing company to a conglomerate with a portfolio of highly profitable companies and investments in fixed-income securities.

“Fast forward 60 years and imagine the surprise at the Treasury when that same company—still operating under the name of 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,” Buffett continued.

“If Berkshire had sent the Treasury a $1 million check every 20 minutes throughout all of 2024—visualize 366 days and nights because 2024 was a leap year—we still would have owed the federal government a significant sum at yearend. Indeed, it would be well into January before the Treasury would tell us that we could take a short breather, get some sleep, and prepare for our 2025 tax payments,” the investor said.

At the core of Berkshire Hathaway’s portfolio holdings are property and casualty (P/C) insurance businesses, including 100 percent ownership of GEICO, which delivered most of the operating profit gains in 2024.

P/C insurance businesses have several advantages over other service businesses. First, P/C insurance is usually required by law, which makes the demand for these services inelastic, meaning they are on the top of consumers’ lists at good and bad economic times.

Second, the industry has plenty of “moats,” or barriers to entry, that limit competition and strengthen the pricing power of established insurers.

Third, the P/C insurance industry follows a rare asynchronous financial model, where most revenues are collected well ahead of significant expenses. “When writing P/C insurance, we receive payment upfront and much later learn what our product has cost us—sometimes a moment of truth that is delayed as much as 30 or more years,” Buffett said.

This rare financial model provides insurers with regular underwriting fees and steady investment income, as these fees are invested in low-risk government securities like Treasury Bills and bonds. In 2024, for instance, Berkshire Hathaway made $9.02 trillion from insurance policy underwriting fees and $13.67 trillion in insurance investment income, up from $5.428 and $9.567 trillion, respectively, in 2023.

“Berkshire Hathaway’s 2024 earnings tell a clear story—investment income and insurance drove strong growth,” Georgios Koimisis, associate professor of economics and finance at Manhattan University, said in an email to The Epoch Times.

“While some subsidiaries saw declines, the company’s core areas—insurance, energy, and railroads—remained stable,” Koimisis said. “The focus on long-term investments and strategic decision-making supports growth, even in a challenging economic environment.”

Koimisis observes that Buffett’s investment philosophy in prioritizing ownership of strong businesses over short-term market moves has not changed over the years.

“While Berkshire adjusted its stock portfolio, it continues to generate reliable profits from its controlled companies,” he elaborated. “The company also expanded its presence in Japan, increasing its stakes in major trading firms while carefully managing currency risks.”

Buffett strongly believes in reinvesting earnings instead of paying dividends, contributing to Berkshire Hathaway’s phenomenal growth over its corporate history.

“Berkshire’s large tax payments show the benefits of long-term growth,” Koimisis added. “Even with much cash on hand, the company stays focused on owning profitable businesses rather than letting money sit idle.”