01—Abstract
Summary
Summary of the 10-K filed February 24, 2020. Cited figures are marked; the original filing is the authoritative source.
Berkshire Hathaway Inc. (BRK-B) demonstrated strong financial performance in 2019, driven by significant gains in its investment portfolio, particularly in equity securities.
Total revenues reached $254.6 billiona, with net earnings attributable to shareholders soaring to $81.4 billion. This substantial increase in net earnings was largely due to a significant after-tax unrealized gain of $57.4 billion on investments, reflecting the company's strategic allocation towards a concentrated portfolio of public equities. The insurance businesses, a core pillar of Berkshire's operations, generated positive underwriting results and substantial investment income.
Berkshire's diverse business segments, including railroads (BNSF), utilities (Berkshire Hathaway Energy), manufacturing, service, and retailing, all contributed to the overall financial strength. While BNSF saw a slight revenue dip, its pre-tax earnings increased due to operating efficiencies and cost control. The utilities segment also reported higher earnings, benefiting from favorable regulatory mechanisms and improved operational performance.
The company's capital allocation strategy, including share repurchases, remained a key focus, with $5.0 billionb in shares repurchased in 2019. Berkshire maintained a robust liquidity position, with significant cash and cash equivalents, underscoring its financial resilience.
02—Key points
Key Highlights
- Total revenues increased to $254.6 billion in 2019.
- Net earnings attributable to Berkshire Hathaway shareholders surged to $81.4 billion in 2019, primarily driven by $57.4 billion in after-tax investment and derivative gains.
- The insurance underwriting segment reported a net underwriting gain of $325 million, a decrease from $1.6 billion in 2018 but an improvement from a loss in 2017.
- Investment income from insurance operations grew by 21.4% in 2019 to $5.5 billion.
- BNSF, the railroad business, reported a 5.0% increase in after-tax earnings to $5.5 billion, benefiting from higher rates and cost controls despite lower freight volumes.
- Berkshire Hathaway Energy's after-tax earnings increased by 8.4% to $2.8 billion.
- The company repurchased $5.0 billion of its Class A and Class B common stock in 2019, aligning with its flexible capital allocation strategy.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 24, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $254.62B$247.84B | +2.7% |
| Operating Expenses | $225.70B$219.21B | +3.0% |
| Interest Expense | $3.96B$3.85B | +2.8% |
| Net Income | $81.42B$4.02B | +1924.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of Berkshire Hathaway's net earnings in 2019?
The primary driver of Berkshire Hathaway's net earnings in 2019 was a significant after-tax gain of $57.4 billion from investments and derivatives. This gain was largely attributable to the appreciation of its equity security holdings, which are concentrated in a few large issuers.
How did Berkshire Hathaway's insurance businesses perform in 2019?
Berkshire's insurance businesses showed mixed underwriting results, with a net underwriting gain of $325 million in 2019, down from $1.6 billion in 2018 due to increased catastrophe losses and prior-year reserve adjustments. However, investment income from insurance operations continued to grow, increasing by 21.4% to $5.5 billion.
What is the outlook for the railroad (BNSF) and utilities (Berkshire Hathaway Energy) segments?
BNSF saw a slight decrease in revenues but reported a 5.0% increase in after-tax earnings due to operational efficiencies and cost control initiatives. Berkshire Hathaway Energy also experienced growth, with after-tax earnings increasing by 8.4%, driven by improved earnings across its various utility and energy operations.
What is Berkshire Hathaway's approach to share repurchases?
Berkshire Hathaway's Board of Directors authorized an amendment to its repurchase program in 2018, allowing repurchases at any time the Chairman and Vice Chairman believe the price is below intrinsic value. The company repurchased $5.0 billion of its stock in 2019 and will not repurchase shares if its cash, cash equivalents, and U.S. Treasury Bill holdings fall below $20 billion, emphasizing financial strength and liquidity.
06—Continue