Why did Berkshire's net earnings decline so much in the second quarter of 2024?

The decline was driven mainly by investment gains, which fell to $18.8 billion from $25.9 billion in Q2 2023. These gains include unrealized changes in the value of equity holdings that GAAP requires to be reported in earnings, so they can swing significantly from period to period. Operating earnings, which exclude these items, actually increased 15%.

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 goodwill impairments. Operating earnings exclude investment and derivative gains or losses and goodwill and intangible asset impairments, giving a clearer view of ongoing business performance. Management believes the quarterly investment gains are usually not meaningful for assessing operations.

What drove the improvement in operating earnings?

The main driver was insurance. Underwriting earnings rose to $4.9 billion in the first half of 2024 from $2.2 billion, and insurance investment income increased to $5.9 billion from $4.3 billion. Foreign currency gains on non-U.S. dollar debt of $1.04 billion in the first half also helped, though lower contributions from BNSF and non-controlled businesses partly offset these gains.

Is Berkshire returning capital to shareholders through buybacks?

Yes. Berkshire repurchased about $345 million of its shares in Q2 2024 and $2.9 billion for the first six months. The release does not explain the pace or the reasons behind the buybacks, so investors should review the 10-Q for details.

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

No. The company itself states that the limited information in the release is not adequate for making an informed investment judgment and directs investors to the full Form 10-Q, which provides the complete financial statements, segment detail, and disclosures.

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

01—Abstract

Summary

Summary of the 8-K filed August 5, 2024. Cited figures are marked; the original filing is the authoritative source.

Berkshire Hathaway's Q2 2024 earnings release (filed August 3, 2024 and furnished via this 8-K) shows that headline net earnings fell sharply year over year, to $30.3 billion^a from $35.9 billion in the second quarter, and to $43.1 billion from $71.4 billion for the first six months.

The decline is almost entirely due to investment gains, which dropped to $18.8 billion^b in Q2 from $25.9 billion and to $20.2 billion for the first half from $53.3 billion. Management explicitly cautions that quarterly investment gains or losses are usually meaningless for evaluating business performance, since they largely reflect changes in unrealized gains on equity holdings required under GAAP. Operating earnings, which exclude investment and derivative gains and losses, rose to $11.6 billion in Q2 from $10.0 billion, a 15% increase, and to $22.8 billion for the first six months from $18.1 billion, up 26%.

The growth was driven by insurance underwriting, which nearly doubled in the first half to $4.9 billion^c, and insurance investment income, which rose to $5.9 billion from $4.3 billion. Results were partly offset by lower contributions from BNSF and non-controlled businesses. Other income also benefited from $1.0 billion in foreign currency gains on non-U.S. dollar debt in the first half.

Capital allocation remained active, with about $345 million^d of Berkshire shares repurchased in Q2 and $2.9 billion year to date. Insurance float reached approximately $169 billion at June 30, 2024. The release is brief by design, and management urges investors to read the full 10-Q for an adequate basis for investment decisions.

02—Key points

Key Highlights

Q2 2024 net earnings attributable to Berkshire shareholders were $30.3 billion, down from $35.9 billion in Q2 2023, primarily due to lower investment gains.
Operating earnings rose 15% to $11.6 billion in Q2 2024 from $10.0 billion, and 26% to $22.8 billion for the first six months from $18.1 billion.
Insurance underwriting earnings more than doubled in the first half of 2024 to $4.9 billion from $2.2 billion, while insurance investment income grew to $5.9 billion from $4.3 billion.
Investment gains fell to $18.8 billion in Q2 from $25.9 billion, and to $20.2 billion for the first six months from $53.3 billion, reflecting lower unrealized gains on equity holdings and realized gains.
BNSF operating earnings declined to $1.2 billion in Q2 from $1.3 billion, and non-controlled businesses fell sharply to $220 million from $535 million.
Berkshire repurchased approximately $345 million of its shares in Q2 2024 and $2.9 billion year to date.
Insurance float was approximately $169 billion at June 30, 2024.

03—Questions

Frequently Asked Questions

Why did Berkshire's net earnings decline so much in the second quarter of 2024?
The decline was driven mainly by investment gains, which fell to $18.8 billion from $25.9 billion in Q2 2023. These gains include unrealized changes in the value of equity holdings that GAAP requires to be reported in earnings, so they can swing significantly from period to period. Operating earnings, which exclude these items, actually increased 15%.
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 goodwill impairments. Operating earnings exclude investment and derivative gains or losses and goodwill and intangible asset impairments, giving a clearer view of ongoing business performance. Management believes the quarterly investment gains are usually not meaningful for assessing operations.
What drove the improvement in operating earnings?
The main driver was insurance. Underwriting earnings rose to $4.9 billion in the first half of 2024 from $2.2 billion, and insurance investment income increased to $5.9 billion from $4.3 billion. Foreign currency gains on non-U.S. dollar debt of $1.04 billion in the first half also helped, though lower contributions from BNSF and non-controlled businesses partly offset these gains.
Is Berkshire returning capital to shareholders through buybacks?
Yes. Berkshire repurchased about $345 million of its shares in Q2 2024 and $2.9 billion for the first six months. The release does not explain the pace or the reasons behind the buybacks, so investors should review the 10-Q for details.
Should investors rely on this press release alone for an investment decision?
No. The company itself states that the limited information in the release is not adequate for making an informed investment judgment and directs investors to the full Form 10-Q, which provides the complete financial statements, segment detail, and disclosures.

04—Continue

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