Berkshire's Quarterly Earnings Fall

Berkshire Hathaway (BRK.A Quote), Warren Buffett's investment vehicle, said earnings for the fourth quarter fell year over year, but profits climbed for all of 2007.

For the quarter, Berkshire earned $2.95 billion, or $1,904 per Class A share, down from $3.58 billion and $2,323 a share in the final quarter of 2006. Operating earnings declined to $2.35 billion from $2.87 billion.

During the year, the company made $13.21 billion, or $8,548 a share, up from the previous year's $11.02 billion, or $7,144 a share. Operating earnings rose to $9.63 billion from $9.31 billion.

"Overall, our 76 operating businesses did well last year," Buffett wrote in a letter to shareholders. "The few that had problems were primarily those linked to housing, among them our brick, carpet and real estate brokerage operations. Their setbacks are minor and temporary. Our competitive position in these businesses remains strong, and we have first-class CEOs who run them right, in good times or bad."

Also in the letter, Buffett said Berkshire's insurance business had an "excellent" year. He attributed that partly to the units' managers, while also crediting a lack of major insured catastrophes for the second year in a row.

However, he warned, that won't be the case in the current year.

"It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008," he wrote. "Prices are down, and exposures inexorably rise. Even if the U.S. has its third consecutive catastrophe-light year, industry profit margins will probably shrink by four percentage points or so. If the winds roar or the earth trembles, results could be far worse. So be prepared for lower insurance earnings during the next few years."

As for Berkshire's succession plans, Buffett said the board knows who will take over as CEO if he should die or become unable to run the company, because it has three internal candidates.

Four external candidates have been identified who could succeed him in managing investments, and one or more could be eventually hired.