Buffett made the following statements on Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial)'s first-quarter earnings at the company's annual shareholder meeting in Omaha Saturday.
The realized investment gains really mean nothing. We can take a lot of gains if we wanted to; we could take a lot of losses if we wanted to. We do not make earnings forecasts. On March 31, we have over $90 billion of net unrealized gains, so we could make any number we wanted to.
There was a very slight preference this year if everything else were equal. We’d rather take losses than gains because of the tax effect. If two securities were equally valued. More emphasis this year because we’re taxed on gains of 35% and some chance of that later being lower, meaning the losses would have less tax losses to us than they would this year. It’s not that big a deal. It would be more of a factor in deferring any gains than perhaps accelerating any losses.
In the first quarter, insurance underwriting was the swing factor. There is a lot more about this in our 10-Q. There were two factors: in the first four months, GEICO has had a net gain of 700,000 policy holders. This has been a wonderful period for us at GEICO because many of our competitors have intentionally cut back on new business because nobody comes new business comes with it a significant loss in the first year. Plus loss ratio, strangely enough, on the first year tends to run 10 times higher than on renewal business. On new business you’re going to lose money on the first year.
Two competitors were lightening up because they wanted to lighten up on first-year losses.
The second factor: we increased our float year-over-year to $16 billion. Fourteen billion came in the first quarter this year. It’s nice to have $14 billion more. It’s one reason our cash and equivalents are no well over $90 billion. We feel good about operating earnings in the first quarter. One quarter means nothing over time. What really counts is we’re building the value of our business over time.
