Berkshire Hathaway Reports Mixed First Quarter

On the eve Berkshire Hathaway’s annual meeting, the company reported mixed results across its myriad of businesses, with particular weakness at the important insurance subsidiaries.

Premiums significantly increased at Berkshire’s Reinsurance group from a single transaction of about $10 billion with American International Group in January. Earned Premiums of $21.8 billion compared to $11.1 billion in the previous year. The company’s two reinsurance divisions recorded underwriting losses of $743 million compared to a loss of less than $40 million last year. That was only partially offset by the primary insurers’ underwriting profit of $364 million. Last yar, the primary insurers recorded an underwriting profit of $385 million. The AIG transaction produced amortization expenses that contributed to the rise in underwriting losses. For the full year amortization of the contract is expected to be near $1 billion.

Burlington Northern Santa Fe, the railroad acquired in 2010, posted strong results indicating a recovery in the rail sector. Revenues increased by 9%, in large part due to higher coal shipments. The other capital intensive business owned by Berkshire, its utility companies, also posted increased incomes.

Altogether, Berkshire reported a 13% decline in pre-tax income.

Berkshire Hathaway Q1 Earnings before taxes and minority interests.

Insurance float, the money the company takes in as premiums but has yet to disburse in claims, swelled to $105 billion at quarter’s end from $91 billion three months before, primarily because of the AIG contract. The increase in float also increased the cash balances CEO Warren Buffett will have to work with. Cash held in the insurance subsidiaries now total about $80 billion.

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