Berkshire Hathaway 1Q Net Income Up 12%; Equitas Deal Boosts Insurance

By | May 8, 2007

Billionaire Warren Buffett’s holding company reported Friday that its net income jumped 12 percent during the first quarter because of strong performances in its insurance and utility divisions.

Berkshire Hathaway Inc. said it earned $2.6 billion (euro1.92 billion), or $1,682 (euro1,240) per Class A share, during the quarter which ended March 31. That’s up from $2.3 billion (euro1.7 billion), or $1,501 (euro1,107) per share, last year.

Berkshire said its companies and investments generated $32.9 billion (euro24.3 billion) in revenue during the quarter, up from $22.8 billion in the same period a year ago.

Berkshire said its insurance businesses collected $13.5 billion (euro9.9 billion) in premiums during the quarter, up from $5.5 billion a year ago. That helped the companies, which include Geico auto insurance and General Re reinsurance, record a $601 million (euro443.2 million) underwriting profit during the quarter, up from $330 million in 2006.

But a significant portion of the increase in underwriting profit was related to the arrangement Berkshire reached last fall to take on the liabilities of Equitas Holdings Ltd., the reinsurer set up by Lloyd’s of London.

Berkshire received a $7.1 billion (euro5.2 billion) premium as part the Equitas deal’s closing March 30.

Berkshire’s utility businesses benefited from colder weather in 2007 that drove demand higher and helped the division report a $293 million (euro216 million) profit, up from last year’s $233 million in the first quarter.

The utility division was also helped by the acquisition of PacifiCorp, which closed during last year’s first quarter.

Berkshire’s Class A shares are the most expensive U.S. stock, and they have traded above $100,000 (euro73,741) a share since last fall. The stock gained $650 (euro479) Friday to close at $109,250 (euro80,562) before Berkshire’s earnings report was released

The earnings report was released on the eve of Berkshire’s annual meeting.

Berkshire said it had $46 billion (euro33.9 billion) cash on hand at the end of the quarter, up from $42.9 billion at the end of last year’s first quarter. That figure will likely fuel shareholder speculation about major acquisitions the company might make.

Between 25,000 and 28,000 Berkshire shareholders are expected to attend Saturday’s annual meeting, where Buffett and vice chairman Charlie Munger field questions for nearly six hours.

Berkshire owns more than 60 companies, including insurance, clothing, furniture, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co.


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