May 6 (Bloomberg) -- Berkshire Hathaway Inc., the insurance and investment company run by billionaire Warren Buffett, said first-quarter profit fell 12 percent as it lost money on a $21.8 billion bet against the U.S. dollar.

Net income fell to $1.36 billion, or $886 a share, from $1.55 billion, or $1,008, a year earlier, the company said in a statement today. Excluding the dollar bet and other investment gains and losses, profit rose 27 percent to $936 a share, beating the $906 estimate by Fox-Pitt Kelton Inc. analyst Gary Ransom.

Buffett, who has bet on a slumping dollar since 2002 on concerns about the U.S. trade deficit, increased his position in the quarter as the currency's gain caused a $307 million pretax loss. Speaking at Berkshire's shareholder meeting on April 30, Buffett said his insurance units were earning more than he'd expected. The company's subsidiaries include auto insurer Geico and reinsurer General Re.

``Particularly in insurance underwriting, it's been a considerably better quarter than I would anticipate,'' Buffett, 74, told about 20,000 investors and admirers in Omaha, Nebraska last week. ``We won't earn at the rate of the first quarter throughout the year.''

Berkshire's insurers are increasing their profits even as the company faces the most regulatory scrutiny in more than a decade. The Securities and Exchange Commission informed a senior vice president of General Re's U.S. unit on May 2 that SEC staff is considering a civil suit and penalties against the individual, Berkshire said today.

Wells Notice

The so-called Wells notice was sent in connection with the SEC's probe of reinsurance accounting, the company said. General Re Chief Executive Officer Joseph Brandon declined to identify the individual or comment on the possible SEC action.

The SEC, New York Attorney General Eliot Spitzer and other regulators are looking at the accounting of at least three Berkshire reinsurance clients. American International Group Inc. ousted Chairman Maurice ``Hank'' Greenberg in March as a probe uncovered an improper transaction done with General Re four years ago.

Investigators are looking at non-traditional insurance that may be improperly used to mask losses or smooth profit. Berkshire, based in Omaha, sells most of the non-traditional insurance policies at businesses run by Ajit Jain in Stamford, Connecticut. In the first quarter, Jain didn't sell any non- traditional policies, today's statement said. The first-quarter of 2004 also had no activity.

Premium income at Jain's businesses rose 23 percent to $985 million, while pretax underwriting profit climbed more than six- fold to $143 million from a year ago, when the company had a $100 million loss on a single policy.

Geico

Underwriting profit at Geico, the fifth-largest U.S. auto insurer, rose 40 percent to $312 million. The company has cut prices in some states in the last year, and those lower rates will likely reduce profitability in future quarters, Berkshire said.

Overall, Berkshire's bet against the dollar has resulted in $2.65 billion in gains since 2002. Credit Suisse First Boston analyst Charles Gates estimated first-quarter earnings of $914 a share, excluding the currency bet and the change in the value of Berkshire's other investments. Gates and Ransom are the only two Berkshire analysts polled by Thomson Financial.

The company's cash swelled to $46.7 billion as Buffett saw few values in stocks and bonds, and said buy-out and hedge funds drove up the price of assets. Cash excluding funds held in his financing businesses was $44.1 billion.

Berkshire earlier today agreed to buy General Electric Co.'s medical malpractice insurer for about $825 million. Last month, Anheuser-Busch Cos., the world's biggest brewer, said Berkshire had bought a ``significant'' stake.

Shares of Berkshire fell $200.10 to $83,999.90 in New York Stock Exchange composite trading today. The results were announced after the close of regular trading.

To contact the reporter on the story: David Plumb in New York at dplumb@bloomberg.net

Last Updated: May 6, 2005 21:03 EDT