Berkshire 1Q Net Falls 58% To $1.51 Billion On Catastrophes, Investments

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NEW YORK -(Dow Jones)- First-quarter profit at Warren Buffett's Berkshire
Hathaway Inc. (BRKA, BRKB) fell 58% to $1.51 billion, driven by investment
losses and costly disasters that hurt the company's insurance operations.


Operating earnings, which exclude some investment results, fell 28% to $1.59
billion, Buffett said at the company's annual meeting in Omaha, Neb. on
Saturday. The figures are preliminary, with final results to be released in
coming days.


The insurance operations had an underwriting loss of $821 million in the
quarter, compared to a gain of $226 million a year earlier. The loss was a
result of massive earthquakes in Japan and New Zealand and storms in Australia,
which combined to produce $1.67 billion in catastrophe losses.


Buffett, addressing shareholders at the start of the meeting, said the first-
quarter result meant it was unlikely Berkshire would have an underwriting profit
for the full year.


Almost half the disaster costs were from an agreement Berkshire has to share
20% of the profits and losses from the property-casualty business of Swiss
Reinsurance Co. (RUKN.VX). Buffett said the Swiss Re agreement was unlikely to
continue when it expires in coming years.


Berkshire's insurance operations provide Buffett with premiums he can invest
immediately until the money is needed to pay claims months or years in the
future. In the first quarter, investment income from the funds held at the
insurance operations fell 3.6% to $952 million.


During the financial crisis, Buffett used money from the insurance operations
to make highly profitable bets on companies including Goldman Sachs Group Inc. (
GS) and General Electric Co. (GE), but those investments are rolling off--and
Buffett warned that investment income would suffer as a result.


Profit at Berkshire's collection of manufacturing, service and retailing
operations rose 17% to $558 million, buoyed by improving economic conditions.
The increase comes on top of the 85% rise in those operations' results in last
year's first quarter, as the company and the economy were picking themselves off
the floor after the recession and financial crisis.


"Pretty much all of our businesses, with the exception of those related to
residential housing, are getting better," Buffett said. "We are a cross-section
of not only the American economy, but to some extent we see a fair amount of
what's happening internationally."


Berkshire's 70-plus businesses include outfits that make underwear and kitchen
knives, sell jewelry and furniture, and manufacture machine parts and tools. The
company leases furniture, tractor-trailers and jets.


The company's regulated businesses, the segment that includes recently
acquired railroad Burlington Northern Santa Fe and the MidAmerican power
company, saw profit rise 80% to $908 million. Part of the improvement came
because Berkshire owned Burlington for just part of last year's first quarter.


Berkshire also saw investment and derivative gains and losses reverse to a $82
million net loss compared with last year's gain of $1.41 billion. Buffett has
urged shareholders to look past that line item, which can fluctuate wildly from
quarter to quarter, and instead examine operating results to measure the
company's financial accomplishments.



-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com



(END) Dow Jones Newswires
04-30-11 1155ET
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