Berkshire Earnings & Annual Report Summary

2022 Total Revenue of $302B compared to $228B ~ 32% Growth YoY

2022 Total Net earnings $(22.8) B V $89.8B in 2021

Net Earnings Breakdown:

Insurance – Underwiring: $(90)M ~ (112) % Decline YoY

• Insurance underwriting results included after-tax losses of ~ $2.4B compared to $2.3B in 2021.
• Losses drive by pre-tax (underwriting) loss of $1.8B from GEICO, which reported ~3% premium earned growth offset by ~ 13% increase in losses and expenses YoY caused by the current inflationary environment.
• Claims frequencies in 2022 were higher for all coverages,
• Mixed result among all Insurance segments (Too long to summarized). The growth in premiums and reduction of expenses in some segment mostly offset by higher costs related to claims and unfavorable FX, and vice versa in declining segment.

Insurance – Investing/Float: $6.5B ~ 35% Growth YoY

• 2022 Float approximated at $164B compared to $147B in 2021.
• 186% Growth in Interest/Investment Income driven by increase in interest rates, and inclusion of Alleghany’s income (recent acquisition)
• ·19% Growth in Dividend Income driven by equity portfolio.

Railroad: $5.9B ~ flat YoY

• Operating ratio increase 5 points to 66% driven by higher operating expenses.
• Operating revenue increase 12% YoY. Revenue reflects higher revenue per unit, substantially offset by lower overall freight volume, driven by 8% decline in consumer products, and higher fuel and other operating costs relative to 2021, which reflected higher volume and lower cost.

Utilities and Energy: $3.9B ~ 9.3% Growth YoY

• ~12% Operating revenue growth YoY that is mostly driven by Tax Equity Investments, PowerGrid and Natural Gas businesses.

Manufacturing and Retail: $12.5B ~ 13% Growth YoY

• Revenue [$76B] among the Manufacturing segment products grew 10% YoY, which was mostly driven by Industrial and building products segments
• Revenue [$92B] among Services & Retail products grew 8.6% YoY, which was mostly driven by Services (Aviation Services) and McLane (Supply Chain) segments
• Mixed results among a severely diverse group of businesses with demand weakening in the second half of the year among most of the businesses with growth mainly driven by pricing.

Investment: $(53.6) B ~ (185) % Decline YoY

• Mostly unrealized losses due to changes in equity markets. Irrelevant GAAP metric for Berkshire
• Equities counted for $309B of current assets compared to $351B in 2021

Other: $2B ~ 67% Growth YoY

• Driven by foreign exchange rate gains of $1.3B ~ 30% Gain YoY related to non-US debt issued.

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Importants Lines From Warren:

1. “We will not repurchase our stock if it reduces the total amount of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bill holdings below $30 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire.”
   Currently Berkshire hold $93B in T-Bills, $36B in Cash, and $25B in Fixed Maturity
2. Capitalism has two sides: The system creates an ever-growing pile of losers while concurrently delivering a gusher of improved goods and services. Schumpeter called this phenomenon “creative destruction.”
3. “Efficient” markets exist only in textbooks. In truth, marketable stocks and bonds are baffling, their behavior usually understandable only in retrospect.
4. The Secret Sauce: “Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion–The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. American Express is much the same story. Berkshire’s purchases of Amex were essentially completed in 1995 and, coincidentally, also cost $1.3 billion. Annual dividends received from this investment have grown from $41 million to $302 million. At yearend, our Coke investment was valued at $25 billion while Amex was recorded at $22 billion. Each holding now accounts for roughly 5% of Berkshire’s net worth, akin to its weighting long ago.
5. The lesson for investors: The weeds withers away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.
6. When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).
7. Finally, an important warning: Even the operating earnings figure that we favor can easily be manipulated by managers who wish to do so. Such tampering is often thought of as sophisticated by CEOs, directors and their advisors. Reporters and analysts embrace its existence as well. Beating “expectations” is heralded as a managerial triumph. That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required. “Bold imaginative accounting,” as a CEO once described his deception to me, has become one of the shames of capitalism.
8. I have been investing for 80 years– more than one-third of our country’s lifetime. Despite our citizens’ penchant– almost enthusiasm– for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.
9. Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it

Source: https://www.berkshirehathaway.com/2022ar/linksannual22.html