OMAHA, Nebraska Warren Buffett's Berkshire Hathaway Inc on Friday said quarterly profit rose nearly 51 percent on a solid performance in insurance and by many of its other businesses, as well as gains from investments and derivatives.
The results topped expectations and were released after Berkshire shares closed at a record high.
Berkshire's more than 80 businesses are benefiting from a strengthening economy, as illustrated by increased traffic on its Burlington Northern railroad unit, new customers for its McLane food distribution business, and stepped-up demand for its Forest River recreational vehicles, to name just a few.
Profit from insurance operations, including the Geico car insurance unit and a business that provides protection against major catastrophes, roughly doubled.
"The happy fact right now is that the growth areas in the economy are right in Berkshire's wheelhouse," said Jeff Matthews, founder of the RAM Partners LP hedge fund and author of "Pilgrimage to Warren Buffett's Omaha."
Berkshire released its results a day before Buffett and Berkshire Vice Chairman Charlie Munger will field five hours of shareholder questions at the company's annual meeting in its hometown of Omaha, Nebraska.
PROFIT TOPS FORECASTS
Net income increased to $4.89 billion, or $2,977 per Class A share, from $3.25 billion, or $1,966 per share, a year earlier.
Quarterly operating profit rose 42 percent to $3.78 billion, or $2,302 per share, from $2.67 billion, or $1,615 per share.
Analysts on average expected profit of $1,996 per share, according to Thomson Reuters I/B/E/S.
Book value per share, Buffett's preferred measure of growth, increased 5.5 percent from year end to $120,525 per Class A share, and Berkshire's cash stake grew over that period to $49.09 billion from $46.99 billion.
About $12.1 billion is being used to fund a purchase by Berkshire and Brazilian investment firm 3G Capital of ketchup maker H.J. Heinz Co.
Revenue rose 15 percent from a year ago to $43.87 billion.
Operating profit from insurance operations rose to $1.7 billion from $845 million.
Nearly all the improvement came from underwriting, where profit rose to $901 million from $54 million, in part because of a $255 million pre-tax reinsurance gain, as well as currency fluctuations. Underwriting profit at Geico more than doubled.
"The backbone of Berkshire is its world class collection of insurance companies," said David Rolfe, chief investment officer at Wedgewood Partners Inc, which invests 6.5 percent of its $4 billion of assets in Berkshire stock.
Operating profit from noninsurance business rose 12 percent to $2.25 billion.
This included increases of 14 percent at Burlington Northern to $798 million, and a little over 10 percent from manufacturing, service and retail operations to $944 million.
Profit generated by MidAmerican Energy, a utility unit that Berkshire owns most of, rose 17 percent to $394 million.
Investment and derivatives gains nearly doubled to $1.11 billion, in part because of gains related to Berkshire's warrants for General Electric Co and Goldman Sachs Group Inc .
Berkshire also owns tens of billions of dollars of common stocks such as Coca-Cola Co, International Business Machines Corp and Wells Fargo & Co.
Gains from derivatives increased 20 percent before taxes, mainly because of Berkshire's long-term contracts related to performance in stock indexes such as the Standard & Poor's 500, which rose 10 percent in the first quarter.
Investors are used to that volatility, and Berkshire accepts it as part of its focus on the long term.
"If we cope well every day with what's on our desk, the future will take care of itself," Munger said in an interview on Friday.
In Friday trading, Berkshire Class A shares closed up $1,993, or 1.2 percent, at $162,850. Its Class B shares closed up $1.34, or 1.2 percent, at $108.64.
(Reporting by Jonathan Stempel and Jennifer Ablan in Omaha, Nebraska; Editing by Bob Burgdorfer)