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Berkshire Profit Declines 37 Percent, Insurance Underwriting Segment Loses $38 million

Written by on August 7, 2015

Warren Buffett’s Berkshire Hathaway Inc. reported a 37% fall in 2Q2015 profits, including a loss of $38 million in insurance underwriting operations.

Berkshire Hathaway reported net income of $4.1 billion in the second quarter, or $2,442 per share, compared to $6.4 billion, or $3,889 per share, a year earlier. The diversified Berkshire group has interests across insurance, railroads, utilities and more with major holdings in Gillette, Coca-Coca, Kraft Heinz and others.

Bloomberg Business reports that:

Berkshire’s net income soared to a record in last year’s second quarter as the company posted profit of more than $2 billion from derivatives and investments.

Another of Buffett’s investments will probably benefit the company’s results this year. After backing H.J. Heinz’s merger with Kraft Foods Group Inc. in July, Berkshire holds common shares in Kraft Heinz Co. valued at about $26 billion. That’s more than twice what Buffett paid.

Buffett And Gates

Warrent Buffett And Bill Gates

 

Operating profit dropped well below analysts’ forecasts, declining 10 percent to $3.89 billion, or $2,367 per share, from $4.33 billion, or $2,634 per share, despite improvements at the BNSF railroad and Berkshire Hathaway Energy units.

 

The New York Times reports via Reuters:

Revenue rose 3 percent to $51.37 billion. Book value per share, Buffett’s preferred measure of growth, rose 2 percent from the end of March to $149,735.

Net investment and derivative gains plummeted 94 percent to $123 million from $2.06 billion a year earlier, when Berkshire shed its 40-year stake in former Washington Post publisher Graham Holdings Co.

At Geico, part of Berkshire’s key insurance portfolio, “pretax underwriting gain fell 87 percent to $53 million as it paid out more of the premiums it collected to cover losses. Berkshire is boosting premium rates as a result.”

Meanwhile, a Berkshire business that insures against major catastrophes suffered a $411 million pretax underwriting loss, reflecting currency fluctuations and a storm loss in Australia.

Berkshire Hathaway Energy, a utility mostly owned by Berkshire, saw profit rise 34 percent to $502 million, helped by higher retail rates and a lower income tax rate.

U.S. President Obama awards the Medal of Freedom to recipient Buffett during ceremony at White House in Washington

U.S. President Barack Obama awards the Medal of Freedom to recipient Warren Buffett during a ceremony to present the awards at the White House in Washington February 15, 2011. REUTERS/Larry Downing

The company estimated a $7 billion non-cash pretax gain in the third quarter related to its 26.9 percent stake in Kraft Heinz Co.

Berkshire ended the quarter with $66.59 billion of cash which is about the same as Google’s cash holding but only about one-third the cash available to Apple.

Berkshire’s other products include “Benjamin Moore paint, Borsheim’s jewelry, Dairy Queen ice cream, Fruit of the Loom underwear, Johns Manville insulation and See’s candies.”

Berkshire Class A shares closed down $187.24 at $215,462.76, and its Class B shares rose 20 cents to $143.55 on Friday’s close of trade.