OMAHA, Nebraska - Berkshire Hathaway profits first quarter fell 58 percent by 1.7 billion in losses before income taxes of major disasters in the Japan the Australia and the United States.
CEO Warren Buffett believes that Berkshire will report 1.5 billion in net income, down $ 3.6 billion the previous year. He did not offer net earnings per share figures.
Buffett offered a preview of gains at Saturday annual shareholders meeting. Berkshire full earnings report is expected to be published Friday.
Buffett said the most important factor in the fall of earnings losses related to damage by the Japanese and tsunami, Australian floods earthquake and the earthquake of New Zealand.
"We had probably one-quarter second-worst in terms of disaster insurance industry worldwide", said Buffett.
Business of reinsurance as of Berkshire General Re and National Indemnity, sell backup insurance to primary insurers so that industry can cover the big losses.
Berkshire expects to register a 821 million underwriting loss in its insurance companies during the quarter, due to the disaster. That compares with a 226 million underwriting gain in the first quarter of last year.
Business insurance from Berkshire will contribute still 131 million of net income for the first quarter, due to investment earnings. It is considerably less than a year ago, when the businesses of Berkshire, which include auto and insurer Geico home, added insurance net income $ 1.2 billion.
Buffett said that most of the companies of the Berkshire continues to improve gradually with the whole of the economy - except for those related to residential construction. Berkshire subsidiaries which are particularly sensitive to real estate, such as rug from Shaw and Johns Manville, Acme brick have not improved since the recession violently the residential construction industry.
Utility division, which includes the Burlington Northern Santa Fe railroad and energy Weather, and the Berkshire railroad displayed a large jump in profits. This unit will add 908 million dollars of net income of Berkshire in the quarter, up to $ 505 million last year.
Berkshire recorded a loss of $ 82 million on investments and derivatives in the first quarter. In 2010, Berkshire has posted a gain of $ 1.4 billion.
The real value of the derivatives will not clear at least several years, because they grow up to at least a decade now average. But Berkshire is required to estimate their value whenever the company declares a profit. Buffett told investors he believes that the contracts will be ultimately profitable because the premiums are invested.
Earnings this operation Berkshire was 1.59 billion in the first quarter, down 28% from a year ago. Buffett said the operating profit of Berkshire is a better measure of how the company performs in a given period, because these figures exclude the value of the derivatives and investment gains or losses.
Berkshire has approximately 80 subsidiaries, including businesses of clothing, furniture and jewellery. Its utility and insurance companies are generally more than half the net income of the company. He also has major investments in companies such as Coca-Cola Co. and Wells Fargo & Co.
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