Warren Buffett on Berkshire’s Q1 Earnings and Derivatives
Posted on 15. May, 2009 by Admin in Interviews
Via: CNBC
“What I call our operating earnings, which would be the earnings before any gains or losses from securities or derivatives or any other transactions of that sort, the operating earnings will be, after tax, about $1.7 billion against $1.9 billion last year.
And as I told you, we’re lucky in this particular period to be in the insurance and utility business. They are relatively unaffected by the recession, whereas most of our other businesses are anywhere from significantly to drastically affected by the recession.
We had an underwriting profit in our insurance business. It was a little larger than last year. Our float increased a couple of billion. That was primarily due to a transaction that was announced with Swiss Re which occurred in March in which they bought what’s known as an adverse loss development cover and gave us 2 billion Swiss francs for that. And that’s very very long float. The probability is that we will not pay out on that probably for at least 15 years and maybe a bit longer. So that’s long duration float. And that’s what accounts for the $2 billion, roughly, $2 billion gain in float.
The utility business earnings are reported down somewhat, but there were two items that account for that. One is that, on our Constellation Energy deal, which blew up last year, we reported a significant gain on it, we’ve got a bunch of Constellation stock. And that is marked to market and goes through our income account every day in theory, but certainly every quarter. And Constellation was down somewhat during the quarter. So that got charged against the utility earnings.
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