Sunday, May 3, 2009

Insurance still pillar of Berkshire empire. And: Buffett Says Bets May Cost His Company Money (BRK.A)

First up, from Reuters:
Being a big insurer will cost Berkshire Hathaway Inc (BRKa.N) (BRKb.N) dearly when severe catastrophes strike, but it is a good place to be in the midst of an economic downturn, Chairman Warren Buffett said.

"We are lucky," said Buffett, as he addressed thousands of shareholders at Berkshire's annual meeting in his hometown of Omaha on Saturday. Insurance, along with utilities, another big business for Berkshire, are sectors "relatively unaffected by the recession," he said.

Berkshire operates roughly 80 businesses, including See's Candies, Fruit of the Loom underwear and manufactured homebuilder Clayton Homes, but generates about half its results from insurance.

U.S. insurers have been badly battered since last year by investment losses, compounded now by weakened demand amid the economic recession.

Among Berkshire's insurance companies are the auto insurer Geico Corp, reinsurer General Re and bond insurer Berkshire Hathaway Assurance.

"The earnings power of (Berkshire's insurance) businesses was not as good last year as normal," Buffett conceded. "And it won't be as good this year. But most of them will do well, and many of them will do exceptionally. Insurance gives us a lot of earnings power that we are going to increase over time.">>>MORE

From the New York Times:

Warren E. Buffett acknowledged Saturday that his company, Berkshire Hathaway, would probably lose money on some of the derivatives contracts that have prompted some analysts to speculate that the world’s most famous investor has lost his touch.

At Berkshire’s annual shareholder meeting, Mr. Buffett offered a gloomy forecast for parts of the American economy and Berkshire itself, and he said federal efforts to stimulate activity could pay off at a possible cost of higher inflation.

“It has been a very extraordinary year,” Mr. Buffett said. “When the American public pulls back the way they have, the government does need to step in.” He added, “It is the right thing to do, but it won’t be a free ride.”>>>MORE