By Jonathan Stempel
Feb 28 (Reuters) - Berkshire Hathaway's new Chief Executive Greg Abel moved to put his stamp on the conglomerate with his first annual letter to shareholders on Saturday, pledging to maintain its "fortress-like" balance sheet and uphold the values of his predecessor and mentor, Warren Buffett.
Abel, 63, said he wouldn't rush to deploy Berkshire's near-record $373.3 billion cash stake, though he said it gave the company plenty of "dry powder" and that he had no plans to begin paying
dividends, which Buffett also opposed. Berkshire has not repurchased its own stock since the spring of 2024.
"I recognize how you want us to succeed together, and to do so in the right way," Abel wrote in an 18-page, single-spaced letter. "My role is to ensure our liquidity levels and capital deployment remain intentional and deliberate."
Abel also paid homage to Buffett, 95, who remains chairman and goes to Berkshire's offices five days a week, calling him a "remarkable" CEO.
"Warren Buffett is arguably the greatest investor of all time, with generations benefiting from his investment acumen," Abel wrote. "To invest in Berkshire has long been a vote of trust in our founder – a trust that now rests with Berkshire."
Berkshire shares have significantly underperformed the Standard & Poor's 500 index since Buffett announced unexpectedly in May he was stepping aside as CEO.
Though Abel's letter lacked Buffett's writing flair, CFRA Research analyst Cathy Seifert said it might prove reassuring to investors.
"He needed to show a degree of continuity, that the Berkshire franchise would continue despite the change in leadership, and it would be business as usual," she said. "In my opinion, he hit the mark."
The letter also signaled that Abel wouldn't upend Buffett's 60 years of work transforming Berkshire from a failing textile company into a more than $1 trillion conglomerate that owns car insurer Geico, BNSF railroad and dozens of other insurance, manufacturing, energy and retail businesses.
"If there were any doubts about whether Greg was the right individual to take the reins, the letter should dispel them," said Dan Hanson, who oversees more than $6 billion as head of the quality equity team at Neuberger Berman.
PROFIT DECLINES
Berkshire also reported declining profit, after taking writedowns for its approximately 27% stakes in both Kraft Heinz and oil company Occidental Petroleum.
Fourth-quarter operating profit fell 30% to $10.2 billion as income from insurance operations such as Geico declined.
Net income fell 3% to $19.2 billion, reflecting a $4.5 billion writedown for Occidental, despite gains from equity holdings led by Apple and American Express.
For all of 2025, operating profit fell 6% to $44.49 billion, while net income fell 25% to $66.97 billion. Buffett had long urged investors to ignore fluctuations in Berkshire's net income, which reflect accounting rules for equity investments.
Full-year revenue was essentially unchanged at $371.44 billion, and Seifert said Abel "teed up an expectation that reinsurance and commercial insurance growth may be nonexistent" in 2026."
One of Berkshire's best-known businesses, Fruit of the Loom, shed 6,000 jobs last year as revenue fell, Berkshire said.
WILDFIRE-BATTERED PACIFICORP UTILITY 'NOT A DEEP POCKET'
Abel said Berkshire's culture and values will continue "in perpetuity," and signaled no changes in its decentralized structure in which its dozens of businesses operate largely without interference from the top.
He also signaled a willingness to stick around, suggesting that in 20 years he will have had "just a fraction of the tenure that Warren had."
Abel pledged to invest in durable, well-managed businesses that Berkshire understands and "avoid businesses that undermine the fabric of society or could jeopardize Berkshire's reputation."
He didn't elaborate, but Seifert said he could have been referring to artificial intelligence.
Abel acknowledged pressures on its PacifiCorp utility from litigation over Oregon and California wildfires that burned more than 500,000 acres in 2020.
Many victims blame PacifiCorp, saying it failed to shut off power lines. The utility has reached more than $2.2 billion of settlements, but faces $50 billion of additional wildfire claims. Abel said Berkshire accepts responsibility when it causes wildfires, but will fight unjustified claims in court.
"PacifiCorp is not an insurer of last resort and should not be treated as a deep pocket," Abel said. "Accountability, paired with principled opposition to unwarranted liability, is essential to preserving the regulatory compact that governs utilities."
TED WESCHLER STAYS ON
Abel was more critical than Buffett of Berkshire businesses that could perform better.
He said the performance gap between BNSF and industry-leading rivals is "too wide," while "self-inflicted" difficulties at the Shaw flooring company hurt quality and service.
"Each business is accountable to its CEO, who is expected to pursue operational excellence relentlessly and close performance gaps," Abel said, referring to Berkshire's non-insurance businesses.
Hanson, the Neuberger Berman investment manager, said: "Those are fighting words."
Berkshire has not named a chief investment officer to replace Buffett, though Abel said responsibility for equity investments "ultimately resides with me as CEO."
Abel signaled that longtime portfolio manager Ted Weschler, who manages about 6% of Berkshire's equity investments, will continue playing a "broader role" assessing significant investment opportunities and supporting Berkshire in other ways.
(Reporting by Jonathan Stempel in New York, Editing by Megan Davies, Louise Heavens and Cynthia Osterman)
