Warren Buffett’s company said on Friday its first-quarter profit more than doubled because Berkshire Hathaway Inc’s insurance units avoided major disaster losses and the paper value of its derivative contracts improved.
Berkshire said it generated US$3.245 billion in net income, or US$1,966 per Class A share. That is up from last year’s net income of US$1.511 billion, or US$917 per Class A share. The earnings report was released as thousands of Berkshire shareholders were gathering in Omaha yesterday’s annual meeting.
Last year’s results were hurt by US$1.1 billion in insurance losses from the Japanese earthquake and tsunami, Australian floods and the New Zealand earthquake.
The overall results fell short of what the four analysts surveyed by FactSet expected.
They had forecast Berkshire would report earnings per Class A share of US$2,297.50 on US$39.154 billion in revenue.
Berkshire says its revenue grew 13 percent to US$38.1 billion from last year’s US$33.7 billion.
Berkshire’s insurance division, which includes Geico and General Reinsurance, contributed US$54 million to the Omaha-based company’s profits. That was much better than last year’s US$821 million loss, but slower than past years. Two years ago, Berkshire reported a US$226 million underwriting gain in the first quarter.
Berkshire said Geico’s expenses grew as it began to comply with new accounting standards for certain policies and losses were slightly higher.
Price competition remained tough in reinsurance, so Berkshire said its companies continued to refuse to write policies when they considered the premiums inadequate.
The Burlington Northern Santa Fe (BNSF) railroad contributed US$701 million to Berkshire’s net income, up from US$607 million a year ago.
BNSF said it hauled 3 percent more carloads in the first quarter of this year than it did last year. The railroad said growth in the number of consumer and industrial products it carried offset decreases in coal and agricultural goods.
Last year’s acquisition of specialty chemical maker Lubrizol boosted Berkshire’s manufacturing, retail and service unit. That diverse group of businesses added US$854 million net income, up from US$558 million a year ago.
Several of Berkshire’s manufacturing companies, such as Acme brick, Shaw carpeting and Benjamin Moore paint, make building products, so their performance continues to be hurt by the slow pace of housing construction.
Berkshire’s utility unit, MidAmerican Energy, added US$338 million, up from last year’s US$301 million.
Berkshire estimated that its derivative contracts were worth US$650 million at the end of the first quarter, well ahead of last year when they were worth US$176 million.