No. of Recommendations: 2
Berkshire Hathaway likely ended a
strong 2024 with good December
periodresults. (Thecompanywasset to
announceresultsshortlyafterwewent to
presswiththisIssue.)Webelievethatop
eratingearningspershare,whichexclude
capital gains and losses fromoperations,
cameinat$5.44,whichwouldrepresenta
nearly 40%gain from the previous-year
tally. Berkshire isn’t your typical P/Cin
surance company. In fact, it is a con
glomerate,withmanybusiness segments.
It alsohasanextensive investment port
foliowithiconic investorWarrenBuffetat
the helm. That being said, 2024 was
generally a good year for theP/C insur
ance industry. While catastrophe losses
werehigher thannormal, sowerepremi
umincreases, largelyresultingfromthree
majorhurricanesthattoucheddowninthe
UnitedStates.Companies that are finan
cially strong, such as Berkshire
Hathaway, shouldmake it throughokay.
Infact, catastrophesareabitofadouble
edged sword for insurers. On one hand,
theycutintoprofitsasclaimsarepaidout.
On the other hand, they give insurers
greater bargaining power during policy
No. of Recommendations: 1
renewalseason.Thisenablescompaniesto
increaseprices inorder tocompensate for
thegreaterriskundertaken.
Earningsmightwell takeastepback
before regaining some momentum
nextyear.Last year, it shouldbenoted,
wasaparticularlystrongone for theP/C
insurance industry, even with the
catastrophes. Hence, we believe this
makes foratoughcomparisonaswe turn
ourattentionto2025.Thatbeingsaid, re
sults should stay fairly strong onanab
solutebasisaspriceincreasesoughttofa
cilitatetop-linegrowth.Berkshire’sinvest
mentportfoliooughttoholdupbetterthan
most, due to its larger cash position.
Short-term interest rates may stay
elevatedforlongerthaninitiallyexpected.
The company iswell positioned for
long-term growth. Acquisitions are a
possibility as well, given Berkshire’s
strongcashhoard.
Thesesharesoffersolidrisk-adjusted
total returnpotential for the 3 to 5
years ahead. Acquisitions, which aren’t
included inour forecast, couldaddmean
ingfullytoourgrowthassumptions.
AlanG.House February28
