Buffett hands in his paper! Abel releases his first letter to shareholders; Berkshire's Q4 operating profit drops 30%

Warren Buffett’s Final Report Card

On February 28th, local time, Berkshire Hathaway released its financial results for Q4 and the full year of 2025. The report shows that the company’s operating profit in Q4 declined sharply by over 29% year-over-year, marking the last quarterly report during Warren Buffett’s tenure as CEO. Starting in 2026, Greg Abel officially takes over as CEO, while Buffett continues to serve as Chairman of the Board.

In terms of market performance, Buffett’s leadership has created unparalleled wealth for shareholders. Data indicates that since 1965, Berkshire Hathaway’s compound annual growth rate has reached 19.7%, nearly double the S&P 500’s compound growth rate during the same period. Over this timeframe, the company’s overall increase has exceeded 6,099,294%, while the S&P 500, including dividends, has risen only 46,061%.

Buffett’s Final Data Is Not Perfect

Financial data shows that Berkshire Hathaway’s operating profit in Q4 2025 was $10.2 billion, down more than 29% from $14.527 billion in the same period of 2024. The core reason for the performance decline is the significant weakness in the company’s insurance business. Insurance underwriting profit plummeted 54% year-over-year, from $3.41 billion last year to $1.56 billion; investment income from insurance also fell nearly 25%, from $4.088 billion to $3.1 billion.

Looking at the full year, the company’s operating profit in 2025 was $44.49 billion, down from $47.44 billion in 2024. The insurance business also faced pressure throughout the year, with underwriting profit dropping from $9 billion in 2024 to $7.26 billion, and insurance investment income decreasing from $13.6 billion to $12.5 billion.

In terms of overall net profit, including gains and losses from stock market investments, Q4 recorded $19.2 billion, a slight decrease from $19.7 billion in 2024. The total net profit for 2025 was $66.97 billion, significantly down from $89 billion in 2024.

In this regard, Berkshire Hathaway reminded investors in the earnings report that quarterly investment gains and losses often lack practical significance. Such data can cause serious misunderstandings among investors unfamiliar with accounting rules regarding earnings per share. The company recommends that the market focus more on operating profit, which reflects the company’s core business performance.

The report also disclosed the company’s capital operations and cash flow. In Q4 2025, Buffett did not conduct any share repurchases. Despite no buybacks, the company’s cash reserves slightly decreased from the record high of $381.6 billion in Q3 to $373.3 billion.

In market performance, Berkshire Hathaway Class A shares increased by 10.9% in 2025, lagging behind the S&P 500’s 17.9% (including dividends). However, Buffett’s leadership has generated incomparable wealth for shareholders. In his first annual letter to shareholders, new CEO Greg Abel pointed out that since 1965, Berkshire Hathaway’s compound annual growth rate has been 19.7%, nearly twice that of the S&P 500; during this period, the company’s overall increase exceeded 6,099,294%, while the S&P 500, including dividends, rose only 46,061%.

First Letter to Shareholders from the New CEO

As Buffett’s final financial report, this performance announcement also marks Berkshire Hathaway’s official transition into the “Abel Era.” In his annual letter accompanying the earnings release, new CEO Greg Abel pledged to continue the company culture built by Buffett, centered on financial strength and capital discipline, and to uphold Berkshire Hathaway’s long-term value investing philosophy.

He described Warren Buffett as the greatest investor of all time, whose investment wisdom has benefited generations. Since acquiring National Indemnity Insurance in 1967, Buffett has been committed to building top-tier insurance operations, leveraging float to successfully invest across key economic sectors in the U.S… Buffett and Charlie Munger have worked together to make Berkshire Hathaway a sustainable enterprise, combining world-class capital allocation with forward-looking leadership, enabling the company to smoothly transition from its founder’s leadership to a stable, long-term enterprise for the next 60 years. Over these six decades, Berkshire Hathaway has always regarded shareholders as true partners, a philosophy that remains its most valuable asset.

However, Abel acknowledged that as the company’s scale continues to grow, the marginal diminishing returns of compound interest have become an objective reality, which the company has always recognized. Moving forward, the core goal is no longer high-speed growth but steady per-share intrinsic value growth, while actively managing downside risks to protect shareholders’ wealth.

In his letter, Abel summarized the company’s fundamental advantages into six points:

1. Decentralized model: selecting top managers, granting full autonomy, minimizing bureaucracy, requiring managers to be responsible and uphold integrity; decision-making at the operational level is a key competitive advantage.

2. Integrity first: consistent words and actions, transparency, fulfilling commitments; Buffett’s famous motto “It’s understandable if the company loses money, but damaging the company’s reputation will be severely punished” is the core principle, with zero tolerance for misconduct.

3. Financial strength: maintaining a “fortress” balance sheet, cautious use of debt, with cash and U.S. Treasury holdings exceeding $370 billion, providing resilience and investment ammunition.

4. Capital discipline: focusing capital allocation on opportunities that offer risk-adjusted returns, evaluated by “long-term per-share intrinsic value growth”; sticking to the circle of competence, investing in understandable companies with durable competitive advantages.

5. Risk management: the CEO also serves as Chief Risk Officer, a core responsibility; insurance operations led by Ajit, with industry-leading risk pricing capabilities, ensuring the company does not assume unreasonable pricing risks.

6. Operational excellence: evaluating businesses based on long-term competitive position rather than short-term performance; employees consistently exceed customer expectations and improve efficiency; maintaining high execution under pressure is a key requirement.

Regarding cash dividends, Abel stated that Berkshire Hathaway’s attitude has always been: as long as each dollar retained has a reasonable chance to create more than one dollar of market value for shareholders, the company will not pay dividends. The board reviews this policy annually.

Overall, in his first letter to investors, Abel emphasized that he will steadfastly inherit Buffett and Munger’s culture, values, and capital discipline—fundamentals of Berkshire Hathaway’s success. He also candidly acknowledged the short-term pressure on 2025 performance, objectively analyzing industry cycles and internal issues, and clarifying the direction for each business segment. Abel clearly defined his role and the company’s future development logic, facing the challenges of scale and compound growth with the goal of “long-term growth in intrinsic value per share,” maintaining the insurance core, strengthening non-insurance operations, and exercising prudent capital allocation to ensure a smooth transition and future stability. Finally, he conveyed confidence to shareholders: Berkshire Hathaway’s core competitiveness remains unchanged, and the management team will continue to prioritize fiduciary responsibility, safeguarding shareholder interests, and ensuring the company’s enduring legacy.

(Source: Securities Times)