Berkshire records loss of $1.1 billion in first quarter

OMAHA, Neb. — Berkshire Hathaway Inc. on Saturday reported a $1.1 billion first-quarter loss as new accounting rules forced it to change the way it accounts for the value of its investments.

Later, at the company’s shareholder meeting, billionaire Warren Buffett deflected questions about his eventual successor at Berkshire Hathaway and instead encouraged the thousands of people at his annual meeting to focus more on big-picture investing principles than day-to-day events.

Buffett’s conglomerate reported the loss of 46 cents per Class B share shortly before its annual meeting in Omaha, Neb. A year ago, Berkshire reported $4.06 billion in net income, or $1.65 per Class B share.

Buffett has long said Berkshire’s operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely.

By that measure, Berkshire reported operating earnings of $5.3 billion, or about $2.14 per Class B share. That’s up from $3.6 billion, or about $1.78 per B share, a year ago.

Analysts surveyed by FactSet expected operating earnings of $2.08.

The biggest factor in the quarterly loss was that Berkshire recorded a $6.3 billion loss on the paper value of its investments in the quarter.

Berkshire’s revenue declined to $58.47 billion in the quarter from last year’s $64.37 billion. But Buffett said Saturday that most Berkshire businesses are performing well and the economy remains strong.

“We have jobs available one way or another at most of our companies,” Buffett said.

Berkshire’s insurance unit, which includes Geico and several large reinsurance firms, reported a $407 million underwriting profit, compared to a $267 million loss a year ago.

BNSF railroad added $1.1 billion to Berkshire’s profit, up from $838 million last year.

Berkshire’s assorted manufacturing, service and retail businesses generated $1.8 billion net income, up from $1.3 billion a year ago.

The shareholder meeting celebrates the successes of the conglomerate that Buffett built with Berkshire Vice Chairman Charlie Munger while offering a chance to learn from the two accomplished businessmen.

Buffett doesn’t plan to retire, even though he’s 87 years old, but he invited more questions about his eventual successor earlier this year when he promoted Greg Abel and Ajit Jain to vice chairmen and expanded their responsibilities. Both men now oversee about half of Berkshire’s operating companies.

Buffett and Munger both said little has changed because Berkshire’s businesses largely run themselves day-to-day. Buffett said he still spends most of his time reading about businesses, thinking and fielding the occasional phone call.

“Part of the Berkshire secret is that when there is nothing to do, Warren is very good at doing nothing,” Munger said.

Dairy Queen Chief Executive Officer Troy Bader was promoted to lead the restaurant chain this year, and he said Berkshire’s overall philosophy hasn’t changed just because Buffett isn’t directly overseeing the companies now.

“Warren preaches that we should manage it as if it’s our own business and protect reputation,” Bader said.

Many shareholders say they trust that Buffett has a solid succession plan in place.

“He’s done a phenomenal job for his shareholders,” said Gary Gocken of Lincoln, Neb. “I think they’ve got it all taken care of as far as what will happen when they eventually retire or move on.”

Berkshire investors are also eager to see how Buffett might spend the company’s $116 billion in cash and short-term investments. Buffett reiterated Saturday that he thinks shareholders will be better off if that cash is reinvested in the business, not used for dividends.

Buffett encouraged everyone in the crowd to make long-term investments without worrying about headlines, such as trade disputes, Federal Reserve actions or the economy. He used the example of World War II headlines from 1942 to illustrate how investing can pay off over time even if conditions seem bleak.

“The overriding question is: How is American business going to do in your lifetime?” Buffett said.

Berkshire Hathaway owns 10 percent of Wells Fargo’s stock, and Buffett reiterated his support for the bank Saturday despite its recent scandals.

Buffett said Wells Fargo appears to have learned a valuable lesson from the scandals and that he thinks it’s likely to avoid future problems. Wells Fargo had been trying to repair its reputation after admitting in 2016 that employees opened as many as 2 million accounts without getting customers’ permission to meet aggressive sales targets.

“I have no reason to think that Wells Fargo, going forward, will be anything other than a large, well-run bank,” Buffett said.

Berkshire Hathaway Inc. owns more than 90 companies, including railroad, clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company’s net income. The company also has major investments in such companies as American Express, IBM and Wells Fargo & Co.