Berkshire Hathaway recently held its annual meeting in Omaha, coinciding with the release of its first-quarter earnings. The meeting was notable as it was the first since the passing of Charlie Munger, a long-time associate of Warren Buffett. The company reported earnings of $12.7 billion for the quarter, a decrease from the previous year, but operating earnings increased by 39%. Berkshire saw positive results in most operating segments, with the insurance business showing significant improvement due to higher investment income and underwriting profits.
The insurance segment, led by Ajit Jain, showed increased investment income and solid underwriting results in the first quarter of 2024. GEICO, a subsidiary of Berkshire, experienced a better quarter thanks to improved premiums and operating efficiencies, although there are still challenges to overcome in terms of claims severity and technology upgrades. Berkshire’s float, a key concept in insurance investing, remained strong in the first quarter, allowing the company to earn an underwriting profit and make money off of investing float.
The railroad segment, including the Burlington Northern Santa Fe (BNSF) railroad, experienced a decline in net operating earnings, attributed to lower revenue per car/unit. The utilities and energy segment, which includes Berkshire Hathaway Energy Company, had a better quarter with lower expenses and a slight increase in electric utility margin. The manufacturing, service, and retailing segment showed mixed results, with some businesses like aerospace and wholesale distributor McLane seeing improvements, while others like automotive and furnishings faced challenges.
Berkshire Hathaway made significant changes to its publicly traded stock portfolio in the first quarter, selling close to $20 billion of its stake in Apple. Despite the sale, Buffett indicated that Apple will likely remain the largest common stock holding for the company. The meeting also addressed concerns about succession planning, with Greg Abel expected to take over as chairman and CEO and be responsible for all capital allocation decisions.
Looking ahead, Berkshire is focused on increasing operating earnings, decreasing shares outstanding through share repurchases, and waiting for occasional big opportunities for investment. The company has a strong financial position with cash and equivalents of almost $182 billion, providing flexibility for future investments. Despite challenges in certain segments, Berkshire’s resilience was evident in its robust first-quarter earnings. Shareholders can take comfort in the company’s long-term strategic goals and leadership succession plan.
