NU Online News Service, May 2, 2:27 p.m.EDT

Berkshire Hathaway saw its 2011 first-quarter net income dropmore than 58 percent to $1.5 billion after catastrophes in thequarter caused estimated losses of nearly $1.7 billion.

In the 2010 first quarter, Berkshire reported net income of $3.6billion.

According to a Berkshire Hathaway statement, the losses include$195 million from January floods and Cyclone Yasi in Australia,$412 million from the February earthquake in New Zealand, and $1.1billion from the March 11 Japan earthquake and tsunami. Berkshiresays the losses also include $700 million from the company's 20percent quota share of Swiss Re's business.

Berkshire reported an $821 million insurance underwriting lossfor the quarter, compared to a gain of $226 million a year ago.Total insurance income was $131 million compared to $1.2 billion inthe 2010 first quarter.

Berkshire also reported investment and derivative losses of $82million in the quarter, compared to gains of $1.4 billion in the2010 first quarter.

The company released questions and answers from its AnnualShareholders Meeting that related to the recent resignation ofDavid Sokol.

Sokol resigned a month ago after it was learned he made stocktrades in chemical company Lubrizol before Berkshire announced its$9 billion acquisition of the company. Sokol had been chairman ofBerkshire's MidAmerican Energy, NetJets and Johns Manvilleunits

Berkshire CEO Warren Buffett says Sokol violated Berkshire'sinsider-trading rules as well as principles Buffett outlines everytwo years in letters to managers.

Buffett notes that Sokol has a net worth “in very high numbers”and earned $24 million from Berkshire last year. He adds that in1999, Sokol was eligible for $50 million as part of a specialcompensation arrangement for him and a partner of his, Greg Abel,relating to an acquisition at the time. Sokol had said thecompensation should be split evenly with Abel at $37.5 millionapiece, rather than $50 million for Sokol and $25 million forAbel.

“So I witnessed…Dave voluntarily…transfer over $12.5 million,getting no fanfare, no credit whatsoever, to his, in effect, juniorpartner,” Buffett says. “And I thought that was ratherextraordinary, and what really makes it extraordinary is that $3million…10 or so years later would have led to the kind of troublesthat it's led to.”

Buffett says when Sokol told him about Lubrizol, Sokol mentionedthat he owned shares in the company and believed it would be a goodfit for Berkshire. Buffett says he “obviously made a big mistake”by not asking Sokol when he bought shares in Lubrizol, but he sayshe did not suspect at the time that the shares had been purchasedjust the previous week.

Asked about the company's succession plans in the wake of theSokol resignation, Buffett says, “I think the odds of us making amistake are very, very low.”

He says of the person he believes to be the leading candidate toreplace him, “I would lay a lot of money on the fact that he isstraight as an arrow.”

“But,” he acknowledges, “mistakes can be made. You know, theBible says the meek shall inherit the earth, but the question is,will they stay meek?”

He says he supports the idea of having a separate chairman andCEO, noting that it is “not an easy job to displace a sitting CEOwho also holds the chairman's position and controls the agenda andall of that.

“So I think an independent chairman, particularly one thatrepresents a very large block of stock and has no designs himselfon taking over the place, is a safety measure for the possibility,however remote, that the wrong decision is made.”