Berkshire Hathway's Q1 net plunges 64 per cent to $940 million

03 May 2008

Warren Buffett's insurance and investment company Berkshire Hathaway Inc has reported a 64 per cent fall in first quarter (Jan-March 2008) net profit, due mainly to losses in derivatives contracts and a steep fall in insurance premiums.

Net income fell to $940 million, or $607 per class A share, from $2.6 billion, or $1,682, a year earlier. Operating profit fell 13 per cent to $1.93 billion, or $1,247 per share, from $2.21 billion, or $1,434. Revenue fell 24 per cent to $25.18 billion.

The company attributed the fall in profits to a $991 million after-tax losses tied to junk bond and stock index derivatives. Insurance underwriting profit fell 70 per cent to $181 million, and earned premiums dropped 54 per cent to $6.21 billion.

Berkshire said it made a $1.2 billion pre-tax loss on put options it wrote on the Standard & Poor's 500 and other stock indexes. It also lost $490 million on contracts on some high-yield bonds.

Berkshire ended 2007 with $40 billion of exposure to 94 derivative contracts.

Berkshire's Class A shares fell $300 to $133,600, while its Class B shares fell $12 to $4,448 on Friday.