Warren Buffett’s conglomerate Berkshire Hathaway Inc. reported a larger second-quarter profit Friday, as favourable investment results and strength in the rail and manufacturing businesses offset another underwriting loss in insurance.
The 80-year-old “Oracle of Omaha” warned in April that the insurance business was probably going to post an underwriting loss for the year because of the severe earthquakes in Japan and New Zealand in the first quarter.
Berkshire reported a net profit of $3.42-billion (U.S.), or $2,072 per share, compared with a year-earlier profit of $1.97-billion, or $1,195 per share.
Book value per share, Buffett’s preferred measure of the conglomerate’s worth, rose 3.4 per cent to $98,716 per class A-equivalent share.
Revenues at the insurance business rose by roughly $2-billion from a year earlier, driven by an asbestos reinsurance contract with AIG . On a net basis, though, the unit had an underwriting loss of $7-million due to natural disasters.
Revenue also was up sharply at the railroad Burlington Northern Santa Fe, and earnings rose nearly 15 per cent year-on-year. Berkshire said it managed to handle more rail cars and to get higher revenue per car.
Profits also were sharply higher in the manufacturing, service and retailing segment, reflecting a wide array of stronger results in lines including engineered products, metalworking and building products.
One of the downsides in the quarter was manufactured housing business Clayton Homes, where revenue from home sales declined 30 per cent and the average price per home sold also fell.
Besides the operating results, the company also benefited from better investment results than in prior periods.
Berkshire recorded smaller losses on a derivative position linked to stock markets, $184-million against a loss of $2.18-billion a year earlier. Though he has condemned derivatives generally, Mr. Buffett has said this particular investment could be lucrative for the company over time.
The company also had no writedowns in the second quarter for other-than-temporary losses on stocks. Berkshire has been under pressure from securities regulators to more quickly recognize losses on shareholdings when those stocks have been in a loss position for more than a year.
Berkshire ended the quarter with $47.89-billion in cash, nearly $20-billion more than a year ago and $6.7-billion more than at the end of the first quarter.