10-QPeriod: Q1 FY2011

BERKSHIRE HATHAWAY INC Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 6, 2011For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway's first quarter 2011 report shows a net earnings decline to $1.51 billion from $3.63 billion in the prior year's first quarter. This decrease was largely driven by significant catastrophe losses in the insurance and reinsurance segments, totaling approximately $1.1 billion after tax, impacting underwriting results. Despite the headline earnings drop, core operating businesses demonstrated resilience. GEICO saw premium growth and improved loss ratios, while BNSF reported strong revenue increases driven by higher volumes and surcharges. The company's financial position remains robust with consolidated shareholders' equity increasing to $160.1 billion. Berkshire continued to actively manage its investment portfolio, recognizing $506 million in other-than-temporary impairment losses on equity securities, primarily related to Kraft Foods and Wells Fargo, while also benefiting from the upcoming redemption of its Goldman Sachs preferred stock. The company also announced its intention to acquire The Lubrizol Corporation for approximately $9.0 billion, signaling continued strategic growth initiatives.

Financial Highlights

28 data points
Beta

Revenue

$33.72B

Net Income

$1.51B

4.5% Net Margin

EPS (Diluted)

$917.00

Total Assets

$376.50B

Cash & Equivalents

$41.18B

Free Cash Flow

$2.02B

Financial Statements
Beta
Revenue$33.72B
Operating Expenses$31.49B
Operating Income$2.54B
Net Income$1.51B
EPS (Basic)$917.00
Shares Outstanding (Basic)1648.41B

Key Highlights

  • 1Net earnings attributable to Berkshire Hathaway shareholders decreased to $1.51 billion in Q1 2011 from $3.63 billion in Q1 2010, primarily due to significant catastrophe losses.
  • 2Insurance underwriting segment experienced a net loss of $821 million, heavily impacted by $1.7 billion in estimated catastrophe losses from events in Japan, New Zealand, and Australia.
  • 3GEICO demonstrated solid performance with a 6.4% increase in premiums earned and a reduced loss ratio of 72.2%.
  • 4Burlington Northern Santa Fe (BNSF) reported a substantial 17% increase in revenues to $4.53 billion, driven by higher average revenues per unit and an 8% increase in handled units.
  • 5Consolidated shareholders' equity grew to $160.1 billion as of March 31, 2011, indicating a strong capital base.
  • 6Berkshire Hathaway announced plans to acquire The Lubrizol Corporation for approximately $9.0 billion, expected to close in Q3 2011.
  • 7Other-than-temporary impairment losses on equity securities amounted to $506 million, with significant portions attributed to Kraft Foods and Wells Fargo.

Frequently Asked Questions

The primary driver for the decrease in net earnings was a significant increase in losses from catastrophe events, particularly the earthquakes in Japan and New Zealand, and floods in Australia. These events resulted in an estimated $1.7 billion in pre-tax catastrophe losses for the insurance and reinsurance businesses.

The acquisition of BNSF was completed in February 2010, and its results were fully consolidated for the entirety of the first quarter of 2011. BNSF contributed positively, with revenues increasing by 17% year-over-year, driven by higher volumes and fuel surcharges. The acquisition also generated a one-time holding gain of approximately $1 billion in the first quarter of 2010.

Management anticipates that the combined insurance operations will likely not achieve an underwriting profit for the full year 2011. This outlook is due to the significant catastrophe losses already incurred in the first quarter and the potential for additional hurricane-related losses in the latter half of the year.

Berkshire Hathaway announced an agreement to acquire The Lubrizol Corporation for approximately $9.0 billion in cash. The transaction is subject to shareholder and regulatory approvals and is expected to close in the third quarter of 2011. Lubrizol is a specialty chemical company.