Berkshire Hathaway's

first-quarter profit fell 10% from a year ago as a well-timed Treasury bond divestiture last summer resulted in lower investment income in the three months to March 31. CEO Warren Buffett's highly publicized bet against the U.S. dollar helped cushion the fall.

The company, whose main operation is insurance, earned $1.55 billion, or $1,008 a Class A share, in the latest quarter, compared with earnings of $1.73 billion, or $1,127 a Class A share, last year. Revenue jumped 51% to $17.18 billion in the quarter, reflecting the acquisition of the McLane grocery distribution company. Berkshire's shares, which have never split, closed Friday at $91,400.

The prime culprit in Berkshire's lower earnings in the March 2004 quarter was a decline in investment income that resulted from Buffett's decision to unload a huge portfolio of Treasury securities in the 2003 second quarter. Net investment income in Berkshire's sprawling insurance operations was $455 million in the latest quarter, compared with $592 million a year ago. While the bond sale lowered current-quarter earnings the proceeds helped boost cash and equivalents from $15.3 billion at the end of March 2003 to $33.3 billion at the end of the March 2004 quarter.

"Absent an increase in short-term rates or new opportunities to reinvest in long-term instruments where yields are perceived as adequate to compensate for interest rate risk and credit risk, the comparative amount of investment income earned over the remainder of 2004 from assets of Berkshire's insurance business will decline significantly in comparison with 2003," the company noted.

While Berkshire noted price pressure in several insurance markets, the company still saw its underwriting income grow to $192 million in the latest quarter from $188 million a year ago. Income at Geico rose to $223 million from $105 million, while income from General Re rose to $42 million from $32 million. Income at Berkshire Hathaway Reinsurance fell to $22 million from $143 million.

Premiums earned at General Re fell to $1.82 billion in the latest quarter from $2.05 billion a year ago, with the decrease attributable to "maintaining underwriting discipline" amid growing price competition, the company said. "Barring a change in the market conditions, management expects written and earned premiums to decline over the remainder of 2004 when compared with 2003 premium volume."

Berkshires bet against the U.S. dollar added $156 million of after-tax realized gains to the latest quarter compared with $68 million of gains a year ago. The company noted, however, that recent appreciation in the currency has reduced the fair value of its open forward dollar contracts by $390 million after-tax, a situation that would result in a second-quarter charge if the gains are maintained.