Insurance dampens Berkshire results before annual meeting | Reuters

OMAHA, Neb. Berkshire Hathaway Inc (BRKa.N), the conglomerate run by billionaire investor Warren Buffett, on Friday reported a 27 percent decline in first-quarter profit, and said a loss from insurance underwriting contributed to operating results that fell short of forecasts.

The results were released one day before Berkshire’s annual meeting in Omaha, Nebraska, where Buffett, 86, and Berkshire Vice Chairman Charlie Munger, 93, will answer five hours of questions from shareholders, journalists and analysts.

That meeting is part of a weekend of events throughout Omaha expected to draw more than 37,000 shareholders.

Net income fell to $4.06 billion, or $2,469 per Class A share, from $5.59 billion, or $3,401, a year earlier.

Operating profit, which excludes investment and derivative gains and losses, fell 5 percent to $3.56 billion, or $2,163 per Class A share, from $3.74 billion, or $2,274.

Analysts on average expected operating profit of about $2,666 per Class A share, according to Thomson Reuters I/B/E/S.

Last year’s results, meanwhile, included a $1.9 billion gain when Berkshire exchanged most of its Procter & Gamble Co (PG.N) stock for that company’s Duracell battery business, plus cash.

Buffett believes Berkshire’s investment and derivative gains in any given quarter are often meaningless, but accounting rules require Berkshire to report them in its earnings statements.

His preferred measure of growth for Berkshire, book value per Class A share, or assets minus liabilities, rose 3.5 percent from the end of the year to $178,073.

Berkshire has more than 90 operating units in insurance, chemical, energy, food and clothing, railroad and other sectors, and also has large investments in stocks of companies such as Apple Inc (AAPL.O) and Wells Fargo & Co (WFC.N).

Berkshire said its insurance businesses swung to a $267 million underwriting loss from a year-earlier profit of $213 million.

It said this reflected higher losses from catastrophes in 2017, including an Australian cyclone in March, and unexpectedly high losses related to hurricanes and earthquakes in 2016.

Berkshire said the loss also reflected the amortization of deferred charges related to its January agreement to take on many long-term risks in American International Group Inc’s (AIG.N) property and casualty portfolio, in exchange for a $10.2 billion upfront payment.

That payment helped push float, or the amount of insurance premiums collected before claims are paid and which help funds Berkshire’s growth, up to about $105 billion from $91 billion at the end of 2016, Berkshire said.

(Reporting by Jonathan Stempel in Omaha, Nebraska; Editing by Nick Zieminski)