Warren Buffettâ??s Berkshire Hathaway was hit by a $1.6bn first-quarter non-cash loss on derivatives contracts.

The investment loss, announced on the eve of Berkshireâ??s annual meeting, caused a 64 per cent drop in first quarter profits to $940m, from $2.6bn in the same period last year.

The losses were concentrated in two areas. The company recorded a $1.2bn unrealised loss on put contracts on the S&P 500 index and three other indexes. Under these contracts, Berkshire will have to pay investors between 2019 and 2028 if indexes are below a pre-determined level. The recent decline in world stock markets forced it to take an accounting loss on the contracts