Key Insights from Buffett's 2025 Shareholder Letter

Berkshire’s insurance operations, particularly in the property and casualty (P/C) segment, remained a cornerstone of its business. The letter details how the P/C business recorded improvements in pricing in the face of increased losses from convective storms while acknowledging the unpredictable nature of insurance claims and the risk of a catastrophic event occurring at any time. Berkshire's strategy centers on carefully pricing risks and being prepared to absorb large losses when they occur, a challenge inherent in the "collect first, pay later" model of insurance. Over the past 20 years, the insurance business has contributed approximately $32 billion in after-tax underwriting profits, while the float has grown from $46 billion to $171 billion. This not only provides a cash resource for investments but also signifies an operational strength that differentiates Berkshire from many other insurers^[1].

The letter outlines Berkshire Hathaway’s dual investment approach. On one side, the company holds controlling interests in numerous businesses, and on the other, it maintains minority stakes in well-known companies such as Apple, American Express, and Coca-Cola. While the marketable stock portfolio has decreased in value from $354 billion to $272 billion in 2024, the underlying value of non-listed, controlling interests has continued to grow. An important takeaway is the emphasis on maintaining investments predominantly in U.S. stocks, while still seeking opportunities abroad, reflecting the company’s philosophy of keeping most shareholder money invested in productive assets rather than cash equivalents. The strategic decision of not preferring cash and instead focusing on quality businesses has been fundamental in weathering both economic and market uncertainties^[1].

A remarkable highlight of the letter is Buffett's reflection on the evolution of Berkshire’s tax contributions over time. He notes that in 1965 the company paid no income taxes, but things have dramatically changed over six decades. In 2024, Berkshire made four tax payments totaling $26.8 billion to the IRS, which amounts to about 5% of all taxes paid by U.S. corporations. This considerable tax contribution is largely a consequence of a long-standing policy to reinvest earnings rather than paying out dividends. In fact, from 1965 through 2024, shareholders received only a single dividend of 10 cents per Class A share. Buffett emphasizes that reinvestment, aided by the power of compounding, has allowed the company to accumulate substantial taxable income over the years. This reinvestment strategy is presented as a key driver behind the growth and success of both Berkshire Hathaway and, more broadly, American capitalism^[1].

Berkshire Hathaway’s capital deployment extends beyond U.S. borders, with a significant focus on Japan. For nearly six years, the company has bought shares in five major Japanese trading companies – Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo – which operate similarly to Berkshire’s own businesses. Initially acquired at bargain prices in 2019, these investments have grown in appreciation as Buffett and his team have maintained regular engagement with the management of these firms. These Japanese companies are characterized by practices that include balanced dividend increases and share repurchases, with less aggressive executive compensation compared to many U.S. counterparts. Currently, the total investment cost in these companies stands at $13.8 billion, with market holdings valued at $23.5 billion. Additionally, Berkshire has increased its yen-denominated borrowings as part of a yield-driven, currency-neutral strategy that has generated significant after-tax gains, further contributing to the international diversification of its portfolio^[1].

Beyond the numbers and strategies, the letter paints a picture of community and shareholder engagement. The annual meeting in Omaha remains a key event where shareholders are directly involved with Buffett, Charlie, Greg, Ajit, and other company leaders. The schedule for the meeting includes opportunities for Q&A sessions, interactive discussions, and even social events such as the popular Brooks Run. Notably, the event has incorporated charitable activities, as seen in the initiative where signed copies of a new book are tied to donations benefiting the Stephen Center in South Omaha. This focus on community involvement is depicted as integral to Berkshire Hathaway’s values, reflecting a blend of business success and social responsibility. The letter also reminds shareholders that Berkshire’s investment approach is built on long-term relationships, be it with the companies they invest in or with individual shareholders who continuously support the company by forgoing dividends in favor of reinvestment benefits^[1].