Berkshire Hathaway Inc said its first-quarter profit fell 64 percent because it recorded an unrealized US$1.6 billion pretax loss on its derivative contracts, and its insurance businesses generated lower profits.
On Friday, the company reported net income of US$940 million, or US$607 per share, in the quarter ended March 31.
That’s decreased significantly from the net income of US$2.6 billion that Berkshire generated a year ago.
Chairman and CEO Warren Buffett warned shareholders in his annual letter that the derivatives could make the company’s earnings volatile.
But he predicted that the derivatives would ultimately be profitable.
The four analysts surveyed by Thomson Financial expected earnings per share of US$1,476.99 on average.
Including the derivative losses, Berkshire’s net investment losses in the quarter totaled US$991 million.
A year ago, the Omaha-based company recorded a US$382 million investment gain.
Berkshire said that its operating earnings are a better measure of how the company is performing in any given period because those figures exclude derivatives and investment gains or losses.
Berkshire reported US$1.93 billion in operating earnings during the first quarter, which was down significantly from US$2.21 billion in operating earnings a year earlier.
Officials at Berkshire typically do not comment on quarterly earnings reports.
The first-quarter report was released just ahead of the company’s annual shareholders meeting, which was expected to attract more than 30,000 people yesterday.
Berkshire’s insurance group, which includes Geico, reinsurance giant General Re and several other firms, contributed US$181 million to net income from underwriting new policies.
A year ago, Berkshire’s insurance companies generated a US$601 million underwriting profit.
“Berkshire’s property and casualty reinsurance operations have benefited during the past two years from relatively low levels of catastrophic losses, which investors should not assume will recur in 2008,” Berkshire’s chief financial officer Marc Hamburg wrote in the quarterly report.
Berkshire generated US$25.2 billion in revenue during the first quarter, down from the US$32.9 billion it generated in last year’s first quarter.
Berkshire owns more than 60 subsidiaries that range from insurance to clothing, furniture, and candy companies, restaurants, natural gas and corporate jet firms.
Berkshire also has major investments in such companies as Coca-Cola Co, Anheuser-Busch Cos and Wells Fargo & Co.