Warren Buffett 2024 Shareholder Meeting Full Text: "Betting" on Japan, but Still Committed to the United States

It’s that time of year again for the Berkshire Hathaway shareholder letter, and Warren Buffett has once again delivered a rich report to investors. While there are no earth-shattering headlines, the information revealed in the letter is still worth savoring.

Buffett's letter conveys a cautiously optimistic sentiment. Berkshire achieved good results in 2024, but Buffett does not let this lead to complacency; he is acutely aware of the challenges and uncertainties ahead. He continues to adhere to the philosophy of value investing, emphasizing the importance of long-term holding and prudent management. At the same time, he expresses confidence in the U.S. economy and the capitalist system, believing that Berkshire's success is inseparable from the "American miracle."

This letter may not contain much "juicy news," but for long-term investors who have been following Berkshire, it remains a "bible of investment" worth serious study. Here are the key points summarized by Wall Street Insights:

1. Performance exceeds expectations, but not without challenges

• In 2024, Berkshire's operating profit reached $47.437 billion, up from $37.350 billion in 2023. Buffett admitted that this performance exceeded his expectations.
• The insurance business is the main engine of growth, especially after significant reforms at GEICO, which have greatly improved efficiency.
• Investment income also saw substantial growth, thanks to rising treasury yields and Berkshire's increased holdings in short-term highly liquid securities.
• However, not all businesses performed well; 53% of the 189 operating companies under Berkshire reported a decline in profits. While profits in railroads and utilities have improved, there is still room for enhancement.

2. Huge tax payments highlight the "American miracle"

• Buffett proudly announced that Berkshire paid $26.8 billion in corporate income tax to the U.S. Treasury last year, accounting for about 5% of the total corporate income tax in the U.S.
• He emphasized that Berkshire has hardly paid dividends in the past 60 years, and shareholders have consistently supported reinvestment, allowing the company to generate substantial taxable income and contribute to the nation.
• Buffett attributes Berkshire's success to the "American miracle," believing that while the U.S. capitalist system has its flaws, it still creates miracles unmatched by other economic systems.

3. Investment portfolio: heavy stock positions, preference for the U.S.

• Berkshire's investment portfolio is divided into two parts: wholly-owned businesses and tradable stocks.

• The value of wholly-owned businesses is in the hundreds of billions of dollars, including some "rare gems," but there are also some underperforming "laggards."

• In terms of tradable stocks, Berkshire holds small stakes in about a dozen large profitable companies, such as Apple and American Express.

• Buffett clearly stated that Berkshire will always invest the majority of its funds in stocks, primarily U.S. stocks. He believes that businesses and individuals with the necessary skills can usually find ways to cope with currency instability, while fixed-income bonds cannot withstand runaway currency 4. Insurance Business: Core Pillar, Prudent Management

• Property and casualty (P/C) insurance remains Berkshire's core business.

• Buffett elaborated on the P/C insurance model of "collecting money first, paying losses later," emphasizing the importance of prudent underwriting.

• He pointed out that climate change could lead to increased insurance losses, but Berkshire has the capacity to withstand extreme losses and does not rely on reinsurance companies.

• Under the leadership of Ajit Jain, Berkshire's insurance business has become a world leader.

5. Japanese Investments: A Small but Significant Exception

• Berkshire's investments in five Japanese trading companies (Itochu, Marubeni, Mitsubishi, Mitsui, Sumitomo) have been steadily increasing.
• Both Buffett and Greg Abel expressed appreciation for these companies' capital allocation, management, and attitude towards investors.
• Berkshire plans to hold these shares for the long term and has committed to supporting their boards.
• By borrowing in yen, Berkshire has achieved a roughly currency-neutral position.

6. Annual Shareholders Meeting: Minor Adjustments, Same Content

• This year's shareholders meeting will be held on May 3 in Omaha, with a slightly adjusted agenda.
• The meeting will start earlier at 8 AM, with Buffett, Greg, and Ajit answering questions together.
• This year, there will be no movie screening, but a new book titled "Berkshire Hathaway 60 Years" will be launched.

The following is the AI translation of the full text, currently undergoing manual proofreading:

2024 Letter to Shareholders

Last Year's Performance

In 2024, Berkshire's performance exceeded my expectations, despite 53% of our 189 operating businesses reporting a decline in profits. We benefited from a predictable significant increase in investment income, as Treasury yields rose, and we substantially increased our holdings of these highly liquid short-term securities.

Our insurance business also achieved a significant increase in profits, with GEICO performing particularly well. Over the past five years, Todd Combs has implemented major reforms at GEICO, improving efficiency and updating underwriting practices. GEICO is a long-term jewel that required significant renovation, and Todd has been tirelessly completing this work. Although not yet finished, the improvements in 2024 are remarkable.

Overall, P/C insurance pricing strengthened in 2024, reflecting a significant increase in losses caused by storm damage. Climate change may have arrived. However, no "catastrophic" events occurred in 2024. Someday, a truly astonishing insurance loss will happen—and it cannot be guaranteed that it will only occur once a year.

The P/C business is crucial to Berkshire, and further discussion will follow later in the letter.

Berkshire's railroad and utility operations—our two major businesses outside of insurance—saw overall profit improvements. However, both businesses still have much work to do By the end of the year, we increased our stake in utilities from approximately 92% to 100%, at a cost of about $3.9 billion, of which $2.9 billion was paid in cash and the remainder in Berkshire "B" shares.

In 2024, we achieved an operating profit of $47.437 billion. We have consistently—perhaps some readers might complain—emphasized this metric rather than the profit reported on page K-68 in accordance with GAAP requirements.

Our metric excludes capital gains or losses on the stocks and bonds we hold, whether realized or unrealized. Over the long term, we believe that earnings are likely to prevail—otherwise, why would we buy these securities?—although the numbers can fluctuate significantly and be difficult to predict each year. Our time horizon for such commitments is almost always far beyond one year. In many cases, our thinking involves decades. These long-term investments can sometimes yield substantial returns.

Here are the profit details for 2023-2024, from our perspective. All calculations are made after depreciation, amortization, and income taxes. EBITDA is a Wall Street darling, but we do not agree.

(Unit: million dollars)

• Includes certain companies in which Berkshire holds a 20% to 50% stake, such as Kraft Heinz, Occidental Petroleum, and Berkadia. ** Includes foreign exchange gains of approximately $1.1 billion in 2024 and about $211 million in 2023, which arise from our use of non-dollar-denominated debt.

Surprisingly! An important American record has been broken

Sixty years ago, the current management took over Berkshire. This move was a mistake—my mistake—that haunted us for twenty years. Charlie, I must emphasize, immediately saw my obvious error: while the price I paid for Berkshire seemed cheap, its business—a large northern textile company—was doomed to decline.

The U.S. Treasury had received an early silent warning about Berkshire's fate. In 1965, the company paid not a penny in income tax, a situation that had persisted for ten years. This economic behavior might be understandable for those dazzling startups, but if it occurs in a respected American industrial giant, it is a flashing yellow light Berkshire is destined to be thrown into the dustbin of history.

Fast forward sixty years, imagine the astonishment of the Treasury Department when the same company—still operating under the name Berkshire Hathaway—pays more in corporate income taxes than the U.S. government receives from any company—even the trillion-dollar U.S. tech giants.

Specifically, Berkshire paid the Internal Revenue Service (IRS) four payments totaling $26.8 billion last year. This accounts for about 5% of the total paid by all U.S. corporations. (Additionally, we also paid substantial income taxes to foreign governments and 44 states.)

Note a key factor that enables us to make this record payment: during the period from 1965 to 2024, Berkshire's shareholders have received cash dividends only once.

On January 3, 1967, we made the only payment—$101,755, or 10 cents per A share. (I can't recall why I suggested the board take this action. It now seems like a nightmare.)

For sixty years, Berkshire's shareholders have supported continuous reinvestment, allowing the company to build substantial taxable income. In the first decade, cash income taxes paid to the U.S. Treasury were negligible, but now they have accumulated to over $101 billion... and are still increasing.

Large numbers are hard to visualize. Let me rephrase the $26.8 billion we paid last year.

If Berkshire were to send a $1 million check to the Treasury every 20 minutes for the entire year of 2024—imagine 366 days and nights, since 2024 is a leap year—we would still owe the federal government a large sum by the end of the year. In fact, it wouldn't be until January that the Treasury would inform us that we could take a short break, get some sleep, and prepare for the tax payments of 2025.

Where Your Money Is

Berkshire's equity investments are a two-pronged approach. On one hand, we control many businesses, holding at least 80% of the shares of the investee. Typically, we hold 100%. These 189 subsidiaries share similarities with publicly traded common stocks, but they are far from identical. This collection is worth hundreds of billions of dollars, including some rare gems, many decent but far from outstanding businesses, and some disappointing laggards. None of them are a major burden, but I do have a few that I shouldn't have purchased.

On the other hand, we hold small stakes in about a dozen large and highly profitable companies, all of which are household names, such as Apple, American Express, Coca-Cola, and Moody's. Many of these companies achieve very high returns on the net tangible equity required for operations. By the end of the year, the value of these partial stakes we hold was $272 billion. It is understandable that truly outstanding companies rarely sell as a whole, but small portions of these gems can be purchased on Wall Street from Monday to Friday, and occasionally they are sold at low prices We are fair in choosing equity instruments, investing in any form based on where we can best deploy your (and my family's) savings. Often, nothing seems compelling; it is very rare that we find ourselves deep in opportunities. Greg has vividly demonstrated his ability to act in such times, just like Charlie.

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For tradable stocks, it is easier to change direction when I make a mistake. It must be emphasized that Berkshire's current scale diminishes this valuable option. We cannot enter and exit at will. Sometimes it takes a year or longer to establish or divest an investment. Moreover, when we hold minority stakes, we cannot change management or control capital flows if we are dissatisfied with the decisions made.

For holding companies, we can decide on these decisions, but our flexibility to dispose of mistakes is much smaller. In fact, Berkshire almost never sells its controlled enterprises unless we believe we will face endless problems. One compensation is that some business owners seek Berkshire because of our steadfast actions. Occasionally, this is a clear plus for us.

Although some commentators currently believe that Berkshire has a huge cash position, most of your funds are still invested in stocks. This preference will not change.

Although the value of our tradable stocks has decreased from $354 billion last year to $272 billion, the value of our non-listed equity holdings has increased and still far exceeds the value of our tradable portfolio.

Berkshire's shareholders can rest assured that we will always invest most of your funds in stocks—primarily U.S. stocks, although many of them will have significant international business. Berkshire will never prefer holding cash equivalents over owning equity in good businesses, whether wholly owned or partially owned.

The value of paper money can evaporate due to fiscal folly. In some countries, this reckless practice has become habitual, and in the brief history of our country, the U.S. has also come close to the edge. Fixed-income bonds cannot withstand runaway currency.

However, businesses and individuals with the necessary skills often find ways to cope with currency instability, as long as their products or services are welcomed by the citizens of the country. The same goes for personal skills. Due to a lack of athletic talent, a wonderful voice, medical or legal skills, or any other special talents, I have relied on stocks throughout my life. In fact, I rely on the success of American businesses, and I will continue to do so.

In some way, the wise—better yet, imaginative—deployment of savings by citizens is a necessary condition for driving society to continuously produce the goods and services needed. This system is called capitalism. It has its drawbacks and abuses—more severe in some ways than ever before—but it also creates miracles that other economic systems cannot match.

The United States is example A. The progress our country has made in just 235 years of history is unimaginable even to the most optimistic colonists at the time of the Constitution's passage in 1789, when the nation's energy was unleashed Of course, in the early years of our country, we sometimes borrowed from abroad to supplement our own savings. But at the same time, we needed many Americans to continue saving, and then those savers or other Americans needed to wisely deploy that available capital. If America consumed everything it produced, the country would stagnate.

The American process has not always been so rosy—our country has always had many rogues and speculators trying to take advantage of those who mistakenly trust them with their savings. Even with such misconduct—behavior that still exists today—and many capital deployments that ultimately fail due to fierce competition or disruptive innovation, American savings have yielded quantities and qualities of output beyond any colonist's dreams.

Starting from an initial base of just 4 million people—despite an early civil war where Americans killed each other—America changed the world in the blink of an eye.

To a very small extent, Berkshire's shareholders participated in the American miracle by forgoing dividends and choosing to reinvest rather than consume. Initially, this reinvestment was trivial and almost meaningless, but over time, it grew rapidly, reflecting a combination of a sustained savings culture and the magic of long-term compounding.

Berkshire's activities now impact every corner of our country. And we are not done yet. There are many reasons for a company's demise, but unlike humans, aging itself is not fatal. Today's Berkshire is much younger than it was in 1965.

However, as Charlie and I have always acknowledged, Berkshire could only achieve such success in America, and America would achieve the same success even without Berkshire.

So, thank you, Uncle Sam. One day, your Berkshire nephews and nieces will hope to pay you more than in 2024. Use it wisely. Take care of those who are disadvantaged in life through no fault of their own. They deserve better. Never forget, we need you to maintain a stable currency, and that outcome requires your wisdom and vigilance.

Property and Casualty Insurance

P/C insurance remains Berkshire's core business. The financial model of the industry is extremely rare among large enterprises.

Typically, companies incur costs for labor, materials, inventory, plant, and equipment before or simultaneously with selling products or services. Therefore, their CEOs have a good understanding of their costs before selling products. If the selling price is below cost, managers quickly realize they have a problem. Blood loss is hard to ignore.

However, when underwriting P/C insurance, we receive payment upfront, while it takes a long time to understand how much our product costs us—sometimes the truth may not be revealed for 30 years or even longer. (We are still paying large sums for asbestos exposure that occurred over 50 years ago.)

One benefit of this business model is that it allows P/C insurance companies to receive cash in advance before incurring most of the expenses, but it also brings the risk that the company may incur losses—sometimes substantial losses—before the CEO and board realize what is happening Certain insurance lines minimize this mismatch, such as crop insurance or hail damage, where loss reports are quick, assessments are made, and payments are issued. However, other lines of business may allow company management and shareholders to remain blissfully unaware even during a company's bankruptcy. Think of medical malpractice or product liability insurance. In "long-tail" lines of business, P/C insurance companies may report large but fictitious profits in front of their owners and regulators for many years—even decades. This accounting treatment is particularly dangerous if the CEO is an optimist or a fraud. These possibilities are not fanciful: history reveals a significant number of such figures.

Over the past few decades, this "collect money first, pay losses later" model has allowed Berkshire to invest substantial funds ("float") while typically achieving what we consider small underwriting profits. We make estimates for "unexpected" events, and so far, these estimates have been sufficient.

We are not discouraged by the significant increases in losses we incur from our activities. (As I write this, think of wildfires.) It is our job to price in a way that absorbs these losses and to calmly withstand the blows when the unexpected occurs. It is also our job to resist "out-of-control" judgments, baseless lawsuits, and blatant fraud.

Under Ajit's leadership, our insurance business has evolved from an obscure Omaha company into a world leader known for its risk appetite and Gibraltar-like financial strength. Moreover, Greg, our board, and I have substantial investments in Berkshire relative to any compensation we receive. We do not use options or other one-sided forms of compensation; if you lose money, we lose money too. This practice encourages caution but does not guarantee foresight.

P/C insurance growth relies on the increase of economic risks. No risk—no demand for insurance.

Think about just 135 years ago when there were no cars, trucks, or airplanes in the world. Today, there are 300 million cars in the U.S. alone, a massive fleet that causes enormous losses every day. Property losses from hurricanes, tornadoes, and wildfires are significant, growing, and their patterns and ultimate costs are increasingly unpredictable.

Writing ten-year policies to cover these risks is foolish—arguably insane—but we believe that one-year risk-taking is generally manageable. If we change our minds, we will change the contracts we offer. In my lifetime, auto insurers have typically abandoned one-year policies in favor of six-month policies. This change reduces float but allows for more prudent underwriting.

No private insurance company is willing to take on the amount of risk that Berkshire can offer. Sometimes, this advantage is significant. But we also need to scale back when prices are inadequate. We must never underwrite inadequately priced policies just to stay in the game. This policy is corporate suicide.

Correctly pricing P/C insurance is part art, part science, and absolutely not a business for optimists. Mike Goldberg, a Berkshire executive who recruited Ajit, put it best: "We want our underwriters to feel nervous when they come to work every day, but not paralyzed." Considering comprehensively, we favor P/C insurance business. Berkshire can withstand extreme losses both financially and psychologically without blinking. We also do not rely on reinsurance companies, which provides us with significant and lasting cost advantages. Finally, we have outstanding managers (not optimists) who are particularly adept at utilizing the substantial funds generated by P/C insurance for investment.

Over the past twenty years, our insurance business has achieved $32 billion in after-tax underwriting profits, earning approximately 3.3 cents in after-tax profit for every dollar of insurance sold. Meanwhile, our float has grown from $46 billion to $171 billion. The float may experience slight growth over time, and with prudent underwriting (and some luck), there is a reasonable possibility of maintaining it at no cost.

Berkshire Increases Investment in Japan

A small but significant exception to our U.S.-centric investment strategy is our increasing investment in Japan.

Berkshire has been purchasing shares of five Japanese companies for nearly six years, which operate successfully in some way and are very similar to Berkshire itself. These five companies (in alphabetical order) are: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Each of these large enterprises has numerous business interests, many in Japan but also many operating worldwide.

In July 2019, Berkshire first purchased shares of these five companies. We simply looked at their financial records and were surprised by the low prices of their stocks. Over time, our admiration for these companies has grown. Greg has met with them multiple times, and I regularly monitor their progress. We both appreciate their capital allocation, management, and attitude towards investors.

Each of these five companies will increase dividends when appropriate, repurchase their own shares when reasonable, and their executives are far less aggressive in compensation plans compared to their American counterparts.

Our holdings in these five companies are long-term, and we are committed to supporting their boards. From the beginning, we agreed to keep Berkshire's ownership stake below 10% of each company’s shares. However, as we approach this limit, these five companies have agreed to moderately relax the cap. Over time, you may see Berkshire's ownership stake in these five companies increase.

By the end of the year, Berkshire's total cost (in USD) was $13.8 billion, and the total market value of the stocks we hold was $23.5 billion.

Meanwhile, Berkshire has been increasing its yen-denominated borrowings—but not according to any formula. All borrowings are at fixed rates, with no "floating rates." Greg and I have no view on the future trends of foreign exchange rates, so we seek a roughly currency-neutral position. However, under GAAP rules, we are required to regularly account for any gains or losses from the yen we borrowed in our earnings, and by the end of the year, due to the strength of the dollar, we had recognized $2.3 billion in after-tax gains, of which $850 million occurred in 2024 I expect Greg and his successor to hold this Japanese position for decades, and Berkshire will find other ways to engage in productive cooperation with these five companies in the future.

The mathematical calculations of our current yen balance strategy are also quite satisfactory. As of the time I am writing this article, the expected annual dividend income from Japanese investments in 2025 will total approximately $812 million, while the interest cost of our yen-denominated debt will be about $135 million.

Annual Omaha Meeting

I hope you can join us in Omaha on May 3rd. This year we have followed a slightly altered schedule, but the essentials remain unchanged. Our goal is to answer many of your questions, allow you to gather with friends, and have you leave with a good impression of Omaha. The city looks forward to your visit.

We will have the same group of volunteers offering you a variety of Berkshire products that will lighten your wallet and brighten your mood. As usual, we will be open on Friday from 12 PM to 5 PM, offering lovely Squishmallows, Fruit of the Loom underwear, Brooks running shoes, and many other appealing items.

Similarly, we will only sell one book. Last year, we sold "Poor Charlie’s Almanack," which quickly sold out—5,000 copies were snapped up before the market closed on Saturday.

This year, we will launch "Berkshire Hathaway 60 Years." In 2015, I asked Carrie Sova (who has many responsibilities at Berkshire, including managing most of the activities for the annual meeting) to try to write a light history book about Berkshire. I gave her full freedom to use her imagination, and she quickly created a book that amazed me—its creativity, content, and design are impressive.

Subsequently, Carrie left Berkshire to start a family, and now she has three children. But every summer, the Berkshire office team gathers to watch the Omaha Storm Chasers play a game against a Triple-A team. I invite some old employees to join, and Carrie usually brings her family along. At this year's event, I shamelessly asked her if she would be willing to create a 60th-anniversary edition that includes photos, quotes from Charlie, and some rarely shared stories.

Despite having to care for three young children, Carrie readily agreed with a "Sure." Therefore, we will have 5,000 new books available for sale on Friday afternoon and Saturday from 7 AM to 4 PM.

Carrie refused to accept any compensation for the substantial work she did on this "Charlie" special edition. I suggested that she and I co-sign 20 copies to give to any shareholder who donates $5,000 to the Stephen Center in South Omaha. The Stephen Center has been helping homeless adults and children for many years The Kizer family, starting with my long-time friend Carrie’s grandfather Bill Kizer Sr., has supported this esteemed institution for many years. I will match any funds raised from the sale of these 20 signed books.

Becky Quick will be responsible for covering our slightly adjusted gathering this year. Becky knows Berkshire like the back of her hand and always manages to arrange interesting interviews with managers, investors, shareholders, and the occasional celebrity. She and her CNBC team will not only broadcast our meeting worldwide but also archive much of the material related to Berkshire. Thanks to our director Steve Burke for suggesting the idea of archiving.

This year, we will not have a movie screening, but we will start the meeting at 8:00 AM. I will make some opening remarks, and then we will quickly move into the Q&A session, with Becky and the audience alternating in asking questions.

Greg and Ajit will join me in answering questions, and we will take a half-hour break at 10:30 AM. After resuming at 11:00 AM, only Greg will be on stage with me. This year, we will conclude the meeting at 1:00 PM, but the exhibition hall will remain open for shopping until 4:00 PM.

You can find details about the weekend activities on page 16. Pay special attention to the always-popular Brooks running event on Sunday morning. (I will be sleeping that day.)

My clever and beautiful sister Bertie (whom I mentioned in last year's letter) will be attending the meeting, along with her two daughters, who are also very beautiful. Everyone agrees that this charming gene flows only through the women in the family. (Sigh.)

Bertie is now 91 years old, and we talk on the old-fashioned phone every Sunday. We discuss the joys of old age and some exciting topics, like the pros and cons of our canes. In my case, the cane is only used to prevent me from falling.

But Bertie always has the upper hand; she claims that the cane has an additional benefit: when a woman uses a cane, men no longer "pursue" her. Bertie explains that men have strong egos, and an elderly woman with a cane is clearly not a suitable object of pursuit. At the moment, I have no data to refute her claim.

But I have my doubts. From the stage at the meeting, I can't see much, and I hope everyone can help me keep an eye on Bertie. If her cane really works, please let me know. My guess is that she will still be surrounded by men. For those of a certain age, this scene will remind one of Scarlett O'Hara and her suitors in "Gone with the Wind."

The directors of Berkshire and I are very much looking forward to your arrival in Omaha, and I predict you will have a great time and possibly make some new friends.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk