Berkshire Hathaway posts gains as insurance boosts first-quarter earnings and cash flow approaches $200 billion

Warren Buffett tours the grounds during Berkshire Hathaway's annual shareholder meeting in Omaha Nebraska.

David A. Grogan | CNBC

Shares of Berkshire Hathaway rose in premarket trading Monday after Warren Buffett's conglomerate reported a rise in operating profits and record cash.

Berkshires Class A Shares were up 1.5% in the premarket. In the meantime, Class B shares last gained about 1.2%.

The moves come after the conglomerate posted first-quarter operating profit of $11.22 billion, up 39% from the same period last year, mainly due to a rise in underwriting revenue. Operating profit measures the profit that includes all of Berkshire's operations.

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Berkshire Hathaway Class B

The strength of the insurance business, and in particular its crown jewel Geico, comes as the industry as a whole benefits from stronger demand and greater pricing power. Insurance revenues rose to $2.598 billion, up 185% from $911 million in the year-ago quarter. Geico's revenues rose 174% to $1.928 billion, compared to $703 million a year earlier.

Berkshire's cash hoard grew to a record, partly due to the holding company's inability in recent years to find a suitable takeover target. Cash rose to a record $188.99 billion in the first quarter, up from $167.6 billion in the fourth quarter.

“We had much better income from the insurance business. And then our investment income would almost certainly 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 last year. And we have a lot of short-term fixed investments that are very responsive to changes in interest rates.”

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

Class A shares hit an all-time high this year, hitting $634,440 in March; it closed Friday at $603,000. Class B shares were last priced at about $400 per share, or about 5% below the record close of $420.52, also in March.

But Wall Street analysts remain bullish on the company's prospects. UBS analyst Brian Meredith has a buy rating on Berkshire, citing its profit margin and noting that Geico is on track to overtake rival Progressive and others in data analytics by 2025. His price target of $734,820, up 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 share price is already reasonably priced. However, he said he “continues to expect solid revenues from BRK's diverse group of operating companies.”

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