Insurance still pillar of Berkshire empire: Buffett

By Lilla Zuill and Jonathan Stempel

OMAHA, Nebraska (Reuters) - Being a big insurer will cost Berkshire Hathaway Inc 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."

Buffett said Berkshire's insurance businesses had a first-quarter, underwriting profit that was "a little better than last year," but the recession hurt results at many other businesses, pushing overall operating profit down about 12 percent from a year ago.

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