Warren Buffett’s Berkshire Hathaway Inc. said second-quarter profit fell 37 per cent, missing analysts’ estimates, as investment gains narrowed and the insurance operation posted an underwriting loss.
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Berkshire Hathaway Inc.’s results are always watched closely because of Buffett’s remarkable record of success during more than five decades of leading the conglomerate. Those results were helped by a $US1.1 billion paper gain on a stock exchange deal.
Analysts surveyed by Thomson Reuters projected operating earnings of $3,038 a share.
The company estimated it will take a US$7 billion non-cash pretax gain in the third quarter related to its 26.9 per cent stake in Kraft Heinz Co. Operating profit, which excludes some investment results, fell to $3.89 billion, or $2,367 a share, from $4.33 billion, or $2,634 a share.
The price of Berkshire’s Class A stock hit an all-time high of $229,374 on December 8.
Book value per Class A equivalent share has increased by 2.4% to $US149,735, and insurance float (the net liabilities the company assumes under insurance contracts) totaled $US85.1 billion at June 30. Claims frequencies increased in the first half of the year in all major policy areas, including collision policies, which were up about 4% and property damage and bodily injury policies, up 6%, Berkshire Hathaway said.
Berkshire Hathaway Reinsurance Group, another of Berkshire’s large insurance operations that insures against large disasters, saw an underwriting loss of $411 million stemming from a storm loss in Australia as well as foreign currency transaction losses.
Berkshire teamed up with the Brazilian investment firm 3G Capital to acquire Kraft through their ketchup maker H.J. Heinz.
The stake is worth about US$25.5 billion, more than double what Buffett has said was Berkshire’s US$9.5 billion investment.
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Berkshire’s BNSF railroad generated $963 million net income, up from $916 a year ago, despite relatively flat volume and weaker demand for coal and crude oil shipments. It also has major investments in such companies as Coca-Cola, IBM and Wells Fargo & Co. A 50-to-one stock split in 2010 set the current ratio at one-1,500th the price of a Class A share.
