Why did Berkshire's net earnings swing so dramatically from a loss in 2022 to $96 billion in 2023?

The swing was driven primarily by investment and derivative gains. Under GAAP, changes in unrealized gains and losses on equity securities flow through earnings. In 2023 these investment gains were $58.9 billion, compared with losses of $53.6 billion in 2022. Operating earnings, which exclude these items, grew more modestly, from $30.9 billion to $37.4 billion.

What is the difference between net earnings and operating earnings for Berkshire?

Net earnings include all items, including investment and derivative gains or losses and any goodwill or intangible asset impairments. Operating earnings exclude investment and derivative gains and losses and impairments. Management considers operating earnings a better gauge of the performance of the underlying businesses, because investment gains are volatile and often unrelated to business performance.

Why is insurance float important to Berkshire's investment thesis?

Float is the net liability Berkshire assumes under insurance contracts, money it holds before paying claims. Berkshire can invest this capital for its own benefit. Float grew about $5 billion to roughly $169 billion in 2023, and insurance-investment income rose to $9.6 billion, so growing, low-cost float supports future earnings power.

Did Berkshire's businesses perform well in 2023, excluding investment gains?

Results were mixed. Insurance underwriting and investment income improved substantially, and other businesses grew. Railroad and utilities/energy earnings declined year over year. Overall operating earnings still increased about 21%. Investors should consult the 2023 Annual Report for segment detail that this release does not provide.

Should investors rely on this press release alone to make an investment decision?

No. The release itself states that its limited information is not adequate for making an informed investment judgment and directs readers to the 2023 Annual Report. It also cautions that quarterly investment gains or losses can produce per-share figures that are misleading to investors without accounting expertise.

BRK-B/BRK-A 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed February 26, 2024. Cited figures are marked; the original filing is the authoritative source.

Berkshire Hathaway reported fourth-quarter and full-year 2023 results in a February 24, 2024 earnings release, furnished as Exhibit 99.1 to this 8-K.

Full-year 2023 net earnings attributable to Berkshire shareholders were $96.2 billion^a, compared with a loss of $22.8 billion in 2022. That swing was driven mainly by investment and derivative gains of $58.9 billion in 2023 versus losses of $53.6 billion in 2022, so headline GAAP earnings are not a clean measure of operating performance. Operating earnings, which exclude investment and derivative gains/losses, rose about 21% to $37.4 billion from $30.9 billion, a more meaningful indicator of the business's underlying health.

Operating performance was broadly strong. Insurance underwriting swung to $5.4 billion^b of profit from a small loss in 2022, and insurance investment income rose about 48% to $9.6 billion as interest rates remained elevated. Railroad and utilities/energy earnings declined, and other businesses grew to $15.1 billion.

Insurance float reached approximately $169 billion^c, up $5 billion for the year. Berkshire repurchased about $9.2 billion of its shares in 2023, including $2.2 billion in the fourth quarter. The release itself is brief and explicitly directs investors to the 2023 Annual Report for a complete picture.

Management also warns that quarterly investment gains are usually meaningless and can be misleading on a per-share basis. Investors should therefore focus on operating earnings, insurance performance, float growth, and capital allocation rather than the headline net earnings figure.

02—Key points

Key Highlights

Net earnings attributable to Berkshire shareholders of $96.2 billion for FY2023, versus a $22.8 billion loss in FY2022, largely due to investment gains reversing prior-year losses.
Operating earnings rose about 21% to $37.4 billion for FY2023 from $30.9 billion in FY2022; Q4 2023 operating earnings were $8.5 billion versus $6.6 billion a year earlier.
Insurance-underwriting earnings reached $5.4 billion for FY2023, a sharp turnaround from a $30 million loss in FY2022.
Insurance-investment income grew to $9.6 billion for FY2023, up from $6.5 billion, reflecting higher interest rates on the float portfolio.
Insurance float grew to approximately $169 billion at year-end 2023, an increase of $5 billion over 2022.
Berkshire repurchased approximately $9.2 billion of its shares in 2023, including about $2.2 billion in Q4, with 1,441,483 Class A equivalent shares outstanding at year-end.
Railroad earnings declined to $5.1 billion from $5.9 billion, and utilities and energy fell to $2.3 billion from $3.9 billion, while other businesses rose to $15.1 billion from $14.0 billion.

03—Questions

Frequently Asked Questions

Why did Berkshire's net earnings swing so dramatically from a loss in 2022 to $96 billion in 2023?
The swing was driven primarily by investment and derivative gains. Under GAAP, changes in unrealized gains and losses on equity securities flow through earnings. In 2023 these investment gains were $58.9 billion, compared with losses of $53.6 billion in 2022. Operating earnings, which exclude these items, grew more modestly, from $30.9 billion to $37.4 billion.
What is the difference between net earnings and operating earnings for Berkshire?
Net earnings include all items, including investment and derivative gains or losses and any goodwill or intangible asset impairments. Operating earnings exclude investment and derivative gains and losses and impairments. Management considers operating earnings a better gauge of the performance of the underlying businesses, because investment gains are volatile and often unrelated to business performance.
Why is insurance float important to Berkshire's investment thesis?
Float is the net liability Berkshire assumes under insurance contracts, money it holds before paying claims. Berkshire can invest this capital for its own benefit. Float grew about $5 billion to roughly $169 billion in 2023, and insurance-investment income rose to $9.6 billion, so growing, low-cost float supports future earnings power.
Did Berkshire's businesses perform well in 2023, excluding investment gains?
Results were mixed. Insurance underwriting and investment income improved substantially, and other businesses grew. Railroad and utilities/energy earnings declined year over year. Overall operating earnings still increased about 21%. Investors should consult the 2023 Annual Report for segment detail that this release does not provide.
Should investors rely on this press release alone to make an investment decision?
No. The release itself states that its limited information is not adequate for making an informed investment judgment and directs readers to the 2023 Annual Report. It also cautions that quarterly investment gains or losses can produce per-share figures that are misleading to investors without accounting expertise.

04—Continue

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