Author: Buffett; Translated by: Tencent Finance; Source: Xinbang+

< /p>The full text of the 2025 open letter to shareholders

To Berkshire Hathaway shareholders:

Last performance

In 2024, Berkshire's performance exceeded my expectations, although 53% of the 189 operating companies we hold reported a decline in profits. We benefit from a substantial increase in predictable investment income due to increased yields in Treasury bonds, while we significantly increase holdings of these high-liquid short-term securities.

Our insurance business profits have also achieved significant growth, with GEICO (the fourth largest auto insurance company in the United States) being particularly outstanding. Over the past five years, Todd Combs (CEO CEO) has made major reforms to GEICO, improving efficiency and updating underwriting standards. GEICO is a gem worthy of long-term holding, but it needs to be re-sanded, and Todd is working tirelessly for this. Although the reform has not been completed, progress in 2024 is impressive.

Overall, property and accident insurance (P/C) pricing strengthened in 2024, reflecting a significant increase in losses caused by convective storms. Climate change may have arrived quietly. However, no "catastrophic" incident occurred in 2024. But one day, any day, a truly shocking insurance loss can occur—and no one can guarantee that it will only happen once a year.

P/C business is crucial to Berkshire, so I will discuss it further in the second half of the open letter.

Berkshire's total revenue has improved, two of the biggest businesses outside our insurance business. However, these two businesses still have a lot of room for improvement. By the end of 2024, we increased our stake in the utility business from about 92% to 100%, with a cost of about $3.9 billion, of which $2.9 billion is paid in cash and the balance is paid in Berkshire's "B" stocks.

Total, we recorded operating profit of US$47.4 billion in 2024. We often — even tirelessly — emphasize this indicator rather than the gains reported in K-68 based on GAAP.

Our calculations exclude capital gains and losses in stocks and bonds we hold, whether realized or unrealized. In the long run, we think that earnings are likely to prevail, otherwise why would we buy these securities? Although annual data will fluctuate violently and unpredictably. We usually invest in these investments far more than a year, and many times even span decades. These long-term investments sometimes make the cash register ring like a church bell.

The following is a breakdown of income for 2023-2024, with depreciation, amortization and income tax deductions. EBITDA is a favorite indicator on Wall Street, but it is not for us. (Unit: million US dollars)

Picture Note: 1) Including Berkshire Certain companies that hold 20% to 50% of the shares, such as Kraft Heinz, Arcole Petroleum and Becadia. 2) Including foreign currency exchange rate returns, approximately US$1.1 billion in 2024 and approximately US$211 million in 2023, which are derived from our debts denominated in non-USD.

Surprise! An important U.S. record was broken 60 years ago, the current management took over Berkshire. That decision was a mistake—my—and it bothered us for 20 years. Charlie immediately discovered my obvious mistake: Although the price I paid for the acquisition of Berkshire at the time seemed cheap, its business—a large Northern textile business—was heading for demise.

The US Treasury Department has already silently foresaw Berkshire's fate. In 1965, the company did not pay a penny of income tax, and this embarrassing situation lasted for ten years. This behavior may be understandable for some hot start-ups, but for a pillar of the U.S. industrial sector, it is undoubtedly a warning sign that Berkshire is destined to decline.

Sixty years later, we can imagine the Department of Treasury's surprise: the corporate income tax paid by this company, which is still operating under the name of Berkshire Hathaway It far exceeds the taxes the United States receives from any company, and even those American tech giants with a market value of trillions.

To be precise, Berkshire paid four taxes totaling $26.8 billion to the IRS in 2024. This figure accounts for about 5% of all U.S. businesses pay taxes. (In addition, we have paid considerable income taxes to foreign countries and 44 states.)

It is worth noting that this record tax was realized due to a key factor: Berkshire from 1965 to 2024 Er's shareholders have received only one cash dividend. On January 3, 1967, we paid the only dividend - $101,755, or 10 cents per A-share. (I can't remember why this decision was proposed to the Berkshire board of directors at that time, and now it feels like a nightmare in retrospect.)

For 60 years , Berkshire shareholders support an ongoing reinvestment strategy, which allows the company to accumulate taxable income. The cash income tax paid to the U.S. Treasury Department was pitifully small in the first decade, but now it has accumulated more than $101 billion...and is still increasing.

This number is so huge that it is hard for ordinary people to imagine. Let me re-explain the $26.8 billion tax we paid last year.

If Berkshire sends a check of $1 million to the Treasury every 20 minutes throughout 2024 - imagine 366 days and nights Night, because 2024 is a leap year – we still owe a considerable federal tax at the end of the year. In fact, the Treasury may not wait until mid-January to tell us that we can take a break, have a good night's sleep, and prepare for the 2025 tax payment.

Where is your money?

Berkshire has two ways to hold shares. On the one hand, we own controlling stakes in many companies and hold at least 80% of the shares. But generally, we own 100% of the shares.

These 189 subsidiaries have similarities with ordinary stocks on the market, but are not exactly the same. The total value of these businesses is as high as hundreds of billions of dollars, including some rare gems, many well-run but not-so-not-excellent businesses, and some disappointingly lagging businesses. We do not hold any major assets that are dragging us down, but there are some companies I shouldn't have bought.

On the other hand, we hold minority shares in more than a dozen very large and lucrative companies, whose names can be said to be household names, such as Apple , American Express, Coca-Cola and Moody's. These companies have received very high returns on the net tangible equity they need to operate. As of the end of 2024, the value of our tradable stocks is $272 billion. Understandably, really great businesses rarely sell overall, but a small percentage of the shares of these businesses can be bought during Wall Street trading Monday to Friday, andOccasionally it will be sold at a cheap price.

We remain unbiased when choosing stock tools and are always based on where to best deploy your savings (and my family). Normally, we don’t have any attractive investments. But in rare cases, we find ourselves in the middle of opportunities. Greg demonstrates the same abilities as Charlie in these moments.

For tradable stocks, it is easy to change the strategy when I make mistakes. But it should be emphasized that Berkshire's current scale has weakened the ability to make these choices. We cannot buy or sell stocks easily. Sometimes it takes a year or more to build or divest an investment. In addition, for companies holding minority stakes, we cannot change management if needed, nor can we control the flow of funds. Even if we are dissatisfied with these decisions, we cannot intervene effectively.

With the holding companies, we can dominate these decisions, but we have much less flexibility when dealing with error issues. In fact, Berkshire almost never sells holding businesses unless we face problems we think cannot be solved. The benefit of this is that some business owners actively seek Berkshire's help. Sometimes this is a clear advantage for us.

While some analysts currently believe Berkshire's cash position is too large, most of your funds are still used to invest in stocks. This preference will not change. While the value of tradable stocks we hold dropped from $354 billion in 2024 to $272 billion, the value of the non-listed controlling stake held increased and remains well above the value of the tradable stock portfolio.

Berkshire shareholders can rest assured that we will always invest the vast majority of their funds in stocks, mainly in U.S. stocks, although many of them Have important international business. Berkshire will never give priority to holding cash-equivalent assets, but tend to own good businesses, whether they are holding or partially held.

The value of paper money may disappear quickly in the event of financial errors. In some cases, this irresponsible practice has become a habit, and has faced this risk in the short history of the United States. Fixed interest bonds cannot prevent currency depreciation.

However, as long as the goods or services of a business or individual are welcomed by citizens, they can usually find ways to deal with currency instability. Personal skills are the samein this way. I had to rely on investing in stocks for my life due to a lack of athletic talent, a wonderful voice, medical or legal skills, or any special talent. In fact, I have always relied on the success of American companies and will continue to do so in the future.

In any case, citizens rationally (preferably in an imaginative way) use savings is a necessary condition for driving the continuous growth of social output. This system is called capitalism. It has its own flaws, and it is even very serious in some ways, but it can also create miracles that other economic systems cannot match. The United States is the best example. The progress we have made in just 235 years of history is unimaginable even the most optimistic colonists when the 1789 Constitution was enacted.

Authentic, in the early days of our establishment, foreign funds were occasionally borrowed to supplement our country's savings. But at the same time, we need many Americans to continue savings and those savings or other Americans to use these funds wisely. If the United States consumes all its output, this will remain the same.

America progress is not always beautiful, and we always have many villains and salespeople trying to exploit those who mistakenly entrust their savings to them. But even with such wrongdoing—and still exists today—and many capital inputs that ultimately failed due to cruel competition or disruptive innovation, American savings have achieved quantities and quality of output that no colonist could imagine.

The United States initially had only 4 million people. Despite the cruel civil war in the early days and the Americans had killed each other, the United States changed in the blink of an eye World pattern.

To some extent, Berkshire shareholders participated in creating the American miracle by giving up dividends and choosing to reinvest their income rather than spending. Initially, this reinvestment was trivial and almost meaningless, but it grew rapidly over time, the result of a combination of a culture of sustained savings with long-term compounding magic.

Berkshire's investment activities now affect every corner of us and continue. Enterprises die for a variety of reasons, but unlike human destiny, the aging of enterprises itself is not fatal. Berkshire is more dynamic today than in 1965.

However, as Charlie and I have always admitted, Berkshire cannot achieve its current achievements anywhere else in the world except in the United States. And even if Berkshire never existed, the United States will have the same success.

So, thank you, Uncle Sam (American nickname). One day, people from Berkshire hope to pay you more taxes than they did in 2024. Please use them wisely and take care of those who are unlucky in life who deserve a better life. At the same time, never forget that we need you to maintain a stable currency, which requires your wisdom and always be alert. Property and accident insurance

Property-accident insurance (P/C) remains Berkshire's core business, and the financial model followed by this industry in large enterprises Very rare.

Usually, a company incurs costs such as labor, materials, inventory, factory buildings and equipment before or at the same time as selling products or services. So their CEOs have a good understanding of the cost of the product before selling it. If the sale price is below the cost, managers will soon find the problem. After all, cash loss is hard to ignore.

When underwriting property-accident insurance, we will receive payment in advance, and it takes a long time to know how much our product costs - sometimes this kind of " The moment of truth will be delayed for 30 years or more. (We are still paying huge compensation for the asbestos exposure incident that occurred more than 50 years ago.) This operating model has the ideal effect of obtaining cash before the insurer incurs most of the expenses, but also bringing the company's potential in chief executives. The officials and directors realized that they had been in losses before, sometimes even huge losses.

Certain insurance categories can minimize such mismatch, such as crop insurance or hail damage insurance, which are reported, evaluated and paid quickly. However, other categories of insurance may cause executives and shareholders to relax their guard and not even notice that the company is going bankrupt. For example, medical malpractice insurance or product liability insurance. In "long-term liability" insurance types, P/C insurers may report huge false profits to regulators for years (or even decades). This accounting approach is especially dangerous if the CEO is an optimist or a liar. These possibilities are not fantasy: there have been a lot of such situations in history.

In recent decades, this "collect money first, then pay" model has enabled Berkshire to invest large amounts of funds ("floating money" ) , and at the same time, we usually achieve what we think is small underwriting profits. We will make estimates for "accidents", and so far, these estimates have been sufficient.

We are not discouraged by the huge losses we have suffered. (When I wrote this article,You can think of disasters such as wildfires. ) Our job is to price these accidents and to take the loss calmly when the accident occurs. Our work also includes fighting “out of control” judgments, false litigation and outright fraud.

Under Ajit (Ajit, Vice Chairman of Berkshire and CEO of Reinsurance Business), our insurance business has grown from a name The unknown Omaha company grew up to be a world leader and is known for its ability to deal with risks and strong financial resources. In addition, myself, Greg and our board members, investing in Berkshire far more than anything we get. We do not use options or other unilateral forms of compensation; if you lose money, we will also lose money. This practice encourages caution but does not ensure forward-lookingness.

The growth of P/C insurance depends on the increase in economic risks. After all, without risk, there is no need for insurance.

Recalling 135 years ago, there were no cars, trucks or planes in the world. And now, there are 300 million cars in the United States alone, and this huge fleet is causing huge losses every day. Property damage caused by hurricanes, tornados and wildfires is also growing and is increasingly unpredictable in terms of their model and ultimate cost.

It is foolish—even crazy—to cover ten-year policies for these insurances, but we believe that one-year risk coverage is usually controllable of. If we change our mind, we will modify the contract we provide. In my life, auto insurance companies have usually given up on one-year policies in favor of six-month policies. This change reduces floating deposits, but also allows for more flexible underwriting.

No private insurer is willing to bear the amount of risk that Berkshire can provide. Sometimes, this advantage can be crucial. But when the price is not right, we also need to shrink. We must never cover policies that are inappropriate in order to stay in the game. That approach is tantamount to suicide in a company.

Correctly pricing P/C insurance is a science that is both an art and a science, and is definitely not an optimist business. Berkshire executive Mike Goldberg – who recruited Ajit – once said: “We want our underwriters to feel nervous every day when they go to work, but not paralyzed.” /p>

In general, we like P/C insurance business. Berkshire can handle extreme losses financially and psychologically without hesitation. Nor do weRelying on reinsurance companies gives us substantial and lasting cost advantages. Finally, we have excellent managers (no optimists) and are particularly good at investing with the huge amount of money provided by P/C insurance.

Our insurance business has earned $32 billion in after-tax profits from underwriting, accounting for approximately 3.3 per dollar of sales cents. Meanwhile, our floating deposits grew from $46 billion to $171 billion. Floating funds may grow slightly over time, and with wise underwriting (and some luck), there is a possibility of zero cost.

Berkshire is increasing its investment in Japan

In addition to its focus on domestic American businesses, our investment in Japan is also growing.

It has been nearly six years since Berkshire began buying stocks in five Japanese companies, which are similar to Berkshire itself. Operation successfully. The five companies are arranged alphabetically in English: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. Each company has a wide range of businesses, many of which are located in Japan, but others operate globally.

Berkshire first purchased shares in these five companies in July 2019. We just looked at their financial records and were surprised at how low their stock prices were. Over time, our appreciation for these companies has increased day by day. Greg met them many times and I regularly follow their progress. We both like their capital operations, management and attitudes towards investors.

These five companies increase dividends at the right time and buy back stocks at the right time, and their senior management's compensation plans are far less radical than their American counterparts. .

Our holdings in these five companies are long-term and we are committed to supporting their board of directors. From the outset, we agreed to keep Berkshire's shareholding below 10% of each company's shares. But as we approach this ceiling, the five companies agreed to moderately relax restrictions. As time goes by, you may see Berkshire's shareholding in these five companies increases. As of the end of 2024, Berkshire's total investment cost was US$13.8 billion, and the total holding value was US$23.5 billion.

At the same time, Berkshire has been increasing its yen-denominated borrowing. All borrowings are fixed interest rates and there is no "floating interest rate". Greg and I have no future foreign exchange ratesExpected, therefore we seek a position that is approximately currency neutral. However, under the GAAP rules, we must regularly recognize any profit or loss of the yen we borrowed in earnings, and as of the end of 2024, we have included $2.3 billion in after-tax gains, of which $850 million occurred due to the strength of the US dollar, due to the US dollar's strength, as of which $850 million occurred In 2024.

I expect Greg and his successor to hold this Japanese portfolio for decades to come, and Berkshire will find other ways in the future , cooperate more productively with these five companies.

We also like the mathematical logic of the current yen balance strategy. As I write this, we expect the annual dividend income from Japanese investments to total about $812 million in 2025, while the interest cost on our yen-denominated debt is approximately $135 million.

Omaha Annual Gathering

I hope you will join us in Omaha on May 3. Our schedule has been adjusted this year, but the basic content remains the same. Our goal is to answer many of your questions, support you in connecting with your friends, and leave with a good impression of Omaha. This city is looking forward to your arrival.

We will continue to provide you with the same team of volunteers, which can easily empty your wallets and Make your days a lot happier. As in previous years, we will be open from 12 noon to 5pm on Fridays, offering lovely Squishmallows, Fruit of the Loom underwear, Brooks running shoes and many other all sorts of tempting merchandise.

This year we will only sell one book. Last year we launched the Poor Charlie’s Almanack and sold out quickly – 5,000 copies sold all before the end of Saturday’s business. This year we will launch the book "60 Years of Berkshire Hathaway". In 2015, I asked Carrie Sova (formerly Buffett assistant) to try to write a light and fun Berkshire history book, who also takes charge of many other tasks while managing annual conference events. I gave her the space to fully freely use her imagination, and she quickly wrote a book that was amazed by the creativity, content and design.

Later, Sova left Berkshire to start a family, and now she has three children. But every summer, Berkshire's office team gets together to watch Omaha Storm Chasers (Omaha Storm Chasers) baseball game against Triple A opponent. I invited some old employees to join us, and Sova usually brings her family to attend. During this year's event, I boldly asked her if she would write a 60th anniversary edition about Berkshire, showing Charlie's photos, quotes and little-known stories.

Although there were three young children to take care of, Sova agreed immediately. Therefore, we will sell 5,000 new books on Friday afternoon and Saturday from 7 a.m. to 4 p.m. during the shareholders' meeting.

Sova refused to get any reward for her efforts to write her new book. I suggest she and I sign 20 new books to any shareholder who donates $5,000 to Stephen Center in South Omaha, which serves homeless adults and children. Kizer, the old friend of his own, has been helping the agency for decades, like Sova's grandfather. No matter how much it raises through the sale of these 20 signature books I will make equal donations for the funds.

Becky Quick will cover our party that made a little adjustment on Saturday. Kelshire knows it well and always arranges interesting interviews with managers, investors, shareholders, and celebrities. She and the CNBC team have done a great job of spreading our meetings to the world and archiving a large amount of Berkshire-related materials . The idea of ​​archives is credited to our director Steve Burke.

This year we will not have a movie screening, but will start a little earlier at 8 a.m. I will give a brief opening speech and then we will quickly get into the Q&A session, by Kui Ke and the audience alternately ask questions.

Greg and Ajit will answer questions with me, and we will take a half-hour break at 10:30 a.m. When we are in the morning Only Greg will stay on stage with me when it starts again at 11 o'clock. This year we will end at 2 p.m., but shopping in the exhibition area will be open until 4 p.m.

You can find complete details about weekend activities on page 16. Pay special attention to the Brooks running activities that are always popular on Sunday mornings. (I will sleep.)

My smart and beautiful sister Bertie, I wrote about her last year and will be as beautiful as her twoMy daughter attended the meeting together. Observers all agree that the genes that produce this dazzling result only come from the female party in the family. (Cry)

Berty is now 91 years old and we talk on old-fashioned phone every Sunday. We talk about the joys of old age and discuss exciting topics like the advantages of crutches. In my case, the utility of the crutch is limited to preventing me from falling face down. But Bertie often uses the extra benefits she enjoys to press me: she told me that when a woman uses a cane, men no longer "chat" her Now. Bertie's explanation is that male self-esteem makes the young old lady with a cane not a suitable target at all. At present, I have no data to refute her statement.

But I have doubts. I couldn't see much from the stage at the conference and would be greatly appreciated if the attendees could keep an eye out for Bertie. Let me know if the crutches really work. I bet she will be surrounded by men. For some ages, this scene will remind you of Scarlett O’Hara in Gone with her large group of male admirers.

Berkshire's directors and I welcome you to Omaha very much, and I hope you can have a good time and possibly make some new friends .