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Buffett’s Berkshire Hathaway gains as insurance lifts first-quarter profit and cash nears $200 billion

Warren Buffett poses with Martin, the Geico gecko, ahead of the Berkshire Hathaway Annual Shareholder’s Meeting in Omaha, Nebraska on May 3rd, 2024.
David A. Grogan | CNBC

Berkshire Hathaway shares rose in premarket trading Monday after Warren Buffett’s conglomerate reported a surge in operating earnings as well as a record cash hoard.

Berkshire’s Class A shares were higher by 1.5% in the premarket. Meanwhile, Class B shares last gained about 1.2%.

Those moves come after the conglomerate posted first-quarter operating profit of $11.22 billion, up 39% from the year-ago period, mainly driven by an increase in insurance underwriting earnings. Operating profit measures earnings encompassing all of Berkshire’s businesses.

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Berkshire Hathaway Class B

The strength in the insurance businesses, particularly its crown jewel Geico, comes as the sector as a whole benefits from stronger demand and increased pricing power. Insurance underwriting earnings rose to $2.598 billion, a 185% increase from $911 million in the year-earlier quarter. Geico earnings swelled 174% to $1.928 billion from $703 million a year prior.

Berkshire’s cash hoard swelled to a record, partly due to the holding company’s inability in recent years to find a suitable acquisition target. Cash soared to a record $188.99 billion in the first quarter, up from $167.6 billion in the fourth quarter.

“We had much-improved earnings in insurance underwriting. And then our investment income was almost certain to increase,” Buffett said Saturday at the conglomerate’s annual shareholder meeting in Omaha, Nebraska. “And I said that in the annual report because yields are so much higher than they were last year. And we have a lot of fixed, short-term investments that are very responsive to the changes in interest rates.”

Berkshire Hathaway shares have already outperformed this year, with each share class having advanced more than 10%. The S&P 500 is up by more than 7% this year.

Class A shares marked an all-time closing high this year, reaching $634,440 in March; it closed at $603,000 on Friday. Class B shares were last priced at about $400 a share, or about 5% below its record close of $420.52, also set in March.

But Wall Street analysts continue to be positive on the company’s outlook. UBS analyst Brian Meredith has a buy rating on Berkshire, citing the earnings beat and noting that Geico is on pace to catch up to competitors Progressive and others on data analytics by 2025. His $734,820 price target, raised from $722,234, is 17% above where shares closed Friday.

Elsewhere, Edward Jones’ analyst James Shanahan has a hold rating on Berkshire, saying the current stock price is already fairly priced. However, he said he continues to “expect solid earnings from BRK’s diverse group of operating companies.”