Berkshire Hathaway, led by Warren Buffett, reported a significant year-over-year increase in operating earnings in the first quarter, with a surge of 39% to $11.22 billion. This increase was driven by a 185% rise in insurance underwriting earnings to $2.598 billion and a 32% increase in insurance investment income to over $2.5 billion. The railroad business saw a profit of $1.14 billion, slightly down from the previous year, while the energy division nearly doubled its earnings to $717 million from $416 million.
However, first-quarter net earnings, including fluctuations from Berkshire’s stock investments, fell 64% to $12.7 billion due to large gains in the stock portfolio as the market surged in 2023. Buffett addresses these unrealized investing gains (or losses) as meaningless and misleading, but the company is required to report them based on accounting principles. The company’s cash reserves reached a record high of $188.99 billion, up from $167.6 billion in the fourth quarter, indicating Buffett’s challenge in finding a suitable major acquisition target.
The annual shareholder meeting, dubbed “Woodstock for Capitalists,” is approaching, giving shareholders the opportunity to ask Buffett questions on a variety of topics, including the company’s holdings, investing strategies, and the economy. This will be the first meeting since the passing of Vice Chairman Charlie Munger in November. Year to date, Berkshire Class A shares have increased by more than 11% and reached an all-time high in late February, while Class B stock has risen by over 12% in the same period.
Buffett, known for his long-term investment approach and value investing philosophy, has built Berkshire Hathaway into a diversified conglomerate. The company’s strong performance in the first quarter, particularly in its insurance and energy divisions, reflects its resilience and ability to generate profits in various sectors. The record cash hoard also underscores Buffett’s cautious approach to investment, as he waits for the right opportunity to deploy the company’s excess capital.
Despite the challenges posed by the pandemic and market volatility, Berkshire Hathaway continues to demonstrate its financial strength and ability to adapt to changing economic conditions. The company’s solid performance in the first quarter, along with its high cash reserves, positions it well for potential future acquisitions and investments. Shareholders attending the upcoming annual meeting will have the opportunity to gain insights from Buffett on the company’s strategy and outlook in the current market environment.
