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The Wall Street Journal: Berkshire Hathaway returns to quarterly profit on insurance and stock-market gains

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Warren Buffett’s Berkshire Hathaway swung to a quarterly profit on stock-market gains and better results from its insurance business.

Berkshire
BRK.B,
-0.95%

BRK.A,
-1.29%

on Saturday reported first-quarter net income of $11.7 billion, or $7,638 per Class A share equivalent, compared to a loss of $49.7 billion, or $30,653 per Class A share equivalent, in the year-earlier period. Operating earnings, which exclude some investment results, rose to $7.02 billion from $5.87 billion in the year prior. Berkshire held some $145.4 billion in cash at the end of the first quarter, up from about $138.3 billion at the end of 2020.

The conglomerate runs a large insurance operation as well as railroad, utilities, industrial manufacturers, retailers and even auto dealerships. It also holds large investments, especially in the stock market. An accounting rule change in recent years has meant that Berkshire’s earnings often reflect the larger performance of the stock market, while operating earnings more accurately reflect the firm’s vast business operations.

Berkshire’s insurance-underwriting business had operating earnings of $764 million in the first quarter, up from $363 million a year ago. Insurance-investment income slipped to $1.21 billion, from $1.39 billion. The company’s railroad, utilities and energy units earned $1.95 billion, up from $1.75 billion.

The major U.S. stock indexes closed the Berkshire reporting period near record highs. The S&P 500 climbed 5.8% in the first quarter this year, while the Dow Jones Industrial Average rose 7.8%. Berkshire’s Class A shares fell $4,300 to $412,500 on Friday. They have gained 20% so far this year. The company was a big buyer of its own stock last year, and spent some $6.6 billion on share repurchases during the first quarter.

The company produced annualized gains of 20% from 1965 to 2020, outperforming the S&P 500’s 10.2% gains, including dividends. In recent years, Berkshire’s performance has dipped. The company’s total returns over the past five years were 14%, compared with 18% for the S&P 500. The slump has made Berkshire an easier target for money managers seeking governance changes at the company. While shareholder proposals urging disclosures on climate change and staff diversity are expected to fail this year, institutional investors’ calls for changes may grow louder in the years to come.

Berkshire will hold its annual meeting for shareholders later Saturday.

An expanded version of this story appears on WSJ.com.

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