Berkshire Hathaway advances as insurance increases first-quarter profit and cash nears $200 billion

Shares of Berkshire Hathaway rose premarket Monday after Warren Buffett’s conglomerate reported a rise in operating profit as well as a record cash reserve.

from Berkshire Class A shares were higher by 1.5% in pre-marketing. In the meantime, Class B shares last gained about 1.2%.

The moves come after the conglomerate reported an operating profit of $11.22 billion in the first quarter, up 39% from the same period last year, mainly driven by an increase in profits from insurance subscription. Operating profit measures profits encompassing all of Berkshire’s businesses.

The strength in the insurance business, particularly its crown jewel Geico, comes as the sector as a whole benefits from stronger demand and increased pricing power. Insurance underwriting profit reached $2.598 billion, an increase of 185% from $911 million in the prior-year quarter. Geico’s profits rose 174% to $1.928 billion, up from $703 million a year earlier.

Berkshire’s cash flow is at a record high, in part due to the holding company’s inability in recent years to find a suitable acquisition target. Liquidity reached a record $188.99 billion in the first quarter, up from $167.6 billion in the fourth quarter.

“We had significantly improved insurance underwriting profits. 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 the yields are much higher than last year. And we have a lot of short-term fixed investments that respond very well to changes in interest rates.”

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

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

But Wall Street analysts remain optimistic about the company’s prospects. UBS analyst Brian Meredith has a buy rating on Berkshire, citing rising profits and noting that Geico is on track to catch up with competitors Progressive and others in data analytics by 2025. Its price target of $734,820, up from $722,234, is 17% above where shares closed on Friday.

Separately, Edward Jones analyst James Shanahan has a hold rating on Berkshire, saying the stock’s current price is already reasonably priced. However, it said it continued to “expect strong earnings from BRK’s diverse group of operating companies.”