Berkshire Hathaway, the conglomerate run for decades by Warren E. Buffett, posted its biggest annual profit in its history last year. But its CEO found reasons to blame government regulation for hurting the bottom lines of some of its biggest companies.

In his letter to investors that traditionally accompanies the annual report, Buffett also paid tribute to Charlie Munger, his former lieutenant and vice chairman of Berkshire until his death in November at age 99.

The company, whose divisions include insurance, BNSF railroad, a major electric power company, Brooks running shoes, Dairy Queen and See’s Candy, revealed $97.1 billion in net profits last year, a sharp turnaround from its $22 billion loss in 2022 due to falling investment.

Berkshire also reported $37.4 billion in operating profits — the financial metric Buffett prefers because it excludes paper investment gains and losses — for the year, up 21 percent from 2022. (Investors often view Berkshire as a benchmark for the American economy, given the breadth of its business.)

Those profits emerged from the powerful engine at the heart of Berkshire, its vast insurance operations that include Geico auto insurance and reinsurance. The division reported $5.3 billion in after-tax profits for 2023, reversing the prior year’s loss thanks to fewer major catastrophic events, rate increases and fewer claims at Geico.

The business for which Berkshire is best known, stock investments using the huge cash thrown in by the insurance business, also performed well last year. Investment income rose nearly 48 percent amid rising market valuations. (About 79 percent of the conglomerate’s investment income comes from just five companies: Apple, Bank of America, American Express, Coca-Cola and Chevron.)

But two of the conglomerate’s largest non-financial operations underperformed expectations. BNSF, which operates the nation’s largest freight railroad, reported $5 billion in operating profits for the year, while Berkshire’s utilities business earned $2.3 billion. Earnings in both were significantly below 2022.

While Buffett noted in his annual letter to investors the challenges both divisions faced last year (BNSF was hit primarily by falling shipping volumes and the utilities business was hit by more frequent wildfires), he also pointed to government regulations as challenges.

The criticism contrasts with Buffett’s general support for government regulation, especially given his support for Democratic policy efforts such as the attempt to raise taxes on the wealthy that became known as the “Buffett rule.”

In the case of BNSF, Buffett wrote that “the wage increases, enacted in Washington, were well beyond the country’s inflation goals.” And as for the utility business, he spoke at length about stricter regulations in several states that affected the energy company’s profitability. “The regulatory climate in some states has raised the specter of zero profitability or even bankruptcy,” he wrote, referring to Pacific Gas & Energy in California and Hawaiian Electric in Hawaii.

Buffett also warned that stricter regulations on utilities could pose a broader problem for the industry and suggested that Berkshire Hathaway could reduce its business in certain states. “We do not knowingly Throwing good money after bad,” he wrote.

In the annual letter – a must-read publication for his millions of followers that is peppered with his usual folksy comments – Buffett spoke of two of Berkshire’s oldest investments, American Express and Coca-Cola, as having strong financial performance. He also highlighted new stock positions that he said he expected to hold “indefinitely”: fossil fuel producer Occidental Petroleum, of which Berkshire owns nearly 28 percent, and stakes in five Japanese trading companies, seen as a bet on reviving the economy. Japanese. long moribund economy.

In promoting Japanese investments, Buffett criticized how much American companies pay their top executives. “The addresses of the five companies have been far less aggressive about their own compensation than is typical in the United States,” he wrote.

Once again, Buffett spent little time talking about what he has long called Berkshire’s “elephant gun,” the vast trove of cash it has accumulated from its insurance operations and has used to close major transactions. In recent years, the conglomerate has favored using that money to buy back its own shares as a better way to generate higher returns for investors.

That pile grew to $163.3 billion by the end of the year, but Buffett said he saw few opportunities to spend that cash profitably at scale. “There are only a handful of companies left in this country capable of truly turning things around in Berkshire, and we and others have chosen them endlessly,” he wrote. “In short, we have No possibility of surprising performance.”

Instead, Buffett emphasized Berkshire’s financial resilience. “I believe Berkshire can handle financial disasters of a magnitude beyond anything we have ever experienced,” he wrote. “We will not give up this ability.”

As expected, Buffett offered a lengthy tribute to Munger, a fellow Omaha native who shared a love of investing. The two men were Berkshire’s greatest ambassadors with an often comical act of collegiality: Mr. Buffett the persistent optimist, Mr. Munger the bright-eyed cynic.

In a lengthy introduction, Buffett praised Munger as the “architect” of Berkshire’s business model of investing in good businesses at fair prices, an approach that made them billionaires and many of their longtime shareholders millionaires.

“Charlie never sought to take credit for his role as creator, but rather let me take the bows and receive the praise,” he wrote. “Even when he knew he was right, he gave me the reins, and when I made a mistake, he never, ever reminded me of my mistake.”