Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) reported operating earnings that declined about 5% in the first quarter of 2017, as its insurers reported a sizable underwriting loss compared to an underwriting gain in the year-ago period.

The skinny on its insurers

Berkshire Hathaway's insurers are known for the consistency with which they generate an underwriting profit, earning more in premiums than the payout in losses and expenses. But earnings over single calendar quarters can be volatile, particularly for Berkshire's reinsurance subsidiaries, both of which recorded an underwriting loss this quarter.

GEICO and BH Primary Group both posted an underwriting profit. BH Reinsurance Group and General Re recorded underwriting losses, which resulted in a $379 million dollar pre-tax loss from underwriting across its insurance businesses.

Berkshire Hathaway explained in its 10-Q filing that losses were primarily due to increased loss estimates for prior-year losses, higher losses from current-year catastrophe events, and an accounting quirk stemming from its $10 billion reinsurance deal with AIG. Berkshire's float leaped to $105 billion, up from $91 billion at the end of the fourth quarter, helped in no small part by its new arrangement with AIG. 

A jar filled with coins.

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Riding profits on the rails

The railroad is bouncing back. BNSF reported that its pre-tax earnings grew 7% year over year, helped by a 6.4% increase in volume and a 2.7% increase in revenue per car. Growth in revenue per car was driven by higher fuel costs, which flow through as a revenue item (fuel surcharges) and an expense (fuel costs).

Not surprisingly, commodity-related shipments grew at the fastest pace, thanks to higher coal, natural gas, and oil prices. The company reported that freight revenue from coal grew at an astonishing pace, rising 23.2% from the year-ago period, driven by an 18.5% increase in volume. Higher natural gas prices are good for companies that transport coal, as they're used interchangeably as an energy source for electric generation.

Manufacturing and energy

Pre-tax profits from its vast manufacturing businesses were mostly flat year over year, dragged down by a $184 million pre-tax loss from the sale of a previous bolt-on acquisition at Lubrizol. Without this charge, pre-tax earnings would have grown by about 12.7% compared to the prior-year period.

Pre-tax profits at Berkshire's vast collection of energy companies and projects grew 8% year over year. The quarterly report refers to higher natural gas prices lifting profits at many of its units, particularly MidAmerican Energy.

The investment portfolio

Buffett often directs attention to Berkshire's operating earnings rather than its net income, which was affected by mark-to-market swings in the value of its investment portfolio and derivatives positions. But the scale of the investment portfolio is truly remarkable. 

In all, more than half a billion dollars flowed into net income from its investments and derivatives. The contribution of $1.1 billion in pre-tax profits, earned by investing the insurance companies' combined floats, is within the company's operating income. Investments are a very meaningful contributor from quarter to quarter. 

With the first quarter out of the way, investors can now look ahead to Berkshire Hathaway's annual meeting, where Warren Buffett and Charlie Munger have carved out a full six hours for a question-and-answer session with shareholders in Omaha and around the world. Perhaps no question and answer will be as important as what Buffett plans to do with all of Berkshire's cash, which grew to a whopping $96.5 billion in the first quarter.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.