There was little in wide-moat Berkshire Hathaway's fourth-quarter and full-year results that would alter our long-term view of the firm. We do not expect to make any changes to our fair value estimate, or in our moat rating.
Fourth-quarter pretax operating earnings declined 19.2% when compared with the prior year's period, as investment and derivative gains/losses declined from $1.9 billion in the fourth quarter of 2013 to $311 million in the current year's period (as Berkshire was hit with both realized and unrealized losses on its equity investment portfolio during 2014). This contributed to a 2.4% decline in pretax operating earnings for the full year. Excluding the impact of the investment and derivative gains/losses (as well as other eliminations and adjustments), the company's pretax operating earnings increased 2.9% during the fourth quarter, with the same measure up 5.5% for the full year.
We remain impressed with Berkshire's ability to continue to increase its book value per Class A equivalent share--which rose 8.3% year over year to $146,186--even when faced with difficulties. While the firm's end-of-year book value per share was slightly below our expectations (of $147,433), much of the difference can be attributed to changes in Berkshire's equity investment portfolio during the year. The company closed out the fourth quarter of 2014 with $63.3 billion in cash on its books, up from $62.4 billion at the end of September and $48.2 billion at the end of 2013. With CEO Warren Buffett preferring to keep around $20 billion in cash on hand as a backstop for Berkshire's insurance operations, and the cash allocated to its other operations assumed to be off-limits for acquisitions, the firm entered 2015 with about $38 billion in dry powder that could be allocated to deals (including acquisitions like the Van Tuyl Group that were initiated during the fourth quarter).
Fourth-quarter revenue increased just 2.6% to $48.3 billion, which left full-year revenue growth at 6.9% (and full-year revenue at $194.7 billion). This was slightly below our forecast of $196.3 billion for all of 2014. Excluding the impact of investments, derivatives, and eliminations, fourth-quarter and full-year revenue increased 6.8% and 8.9%, respectively.
As we noted above, fourth-quarter and full-year pretax operating earnings declined 19.2% and 2.4%, respectively, when compared with the prior year's period, but were up 2.9% and 5.5%, respectively, when excluding the impact of investments, derivatives, and eliminations. Reported net earnings per Class A equivalent share were $2,529 during the fourth quarter, which represented a 16.7% decline year over year. Full-year earnings were $12,092 per Class A equivalent share, an increase of 2.0% when compared with 2013. Excluding the impact of investments, derivatives, and eliminations, fourth-quarter and full-year earnings per Class A equivalent share increased 5.3% and 9.3%, respectively.
Insurance operations
Non-insurance business
