NEW YORK: Warren Buffett’s Berkshire Hathaway Inc posted a 29 percent jump in third-quarter profit as it recorded big gains on investments made during the financial crisis, but operating results missed forecasts amid weakness in insurance operations.
Quarterly results included $1.4bn of gains from investments that Buffett made in October 2008, including in General Electric Co and Goldman Sachs Group Inc warrants, and bonds related to candy maker Mars Inc’s purchase of rival Wrigley. Such investments helped give Buffett a reputation as a lender of last resort.
But investment and derivative gains do not factor into operating results, and while profit rose at Berkshire’s Burlington Northern Santa Fe railroad and MidAmerican energy and utility units, insurance underwriting results deteriorated.
Net income rose to $5.05bn, or $3,074 per Class A share, from $3.92bn, or $2,373 per share, a year earlier, Berkshire said on Friday. Operating profit rose just 8 percent to $3.66bn, or $2,228 per Class A share, from $3.4bn, or $2,057 per share. Michael Yoshikami, president of Destination Wealth Management in Walnut Creek, California, which invests $1.3bn and owns Berkshire stock, said the company can boost investment results if bond yields rise once the US Federal Reserve pulls back on efforts to prop up the nation’s economy.
“The US economy is rather stumbling, and that is positive actually for their infrastructure investments such as railroads,” he said. “All things considered, we are fairly pleased with the results.” Book value, Buffett’s preferred measure of the Omaha, Nebraska-based company’s worth, rose 11 percent this year to $126,766 per Class A share as of September 30, 2013.
Net insurance underwriting premiums fell 57 percent to $170m. Results weakened at the Geico auto insurance unit, which paid out a higher percentage of premiums to cover claims than a year earlier, and the General Re reinsurance unit, which had a $400m underwriting loss from a European hailstorm. Reuters
