Berkshire Hathaway Inc. said Friday that third-quarter profit rose 29 percent on higher investment and derivatives income. Results from insurance underwriting fell.
Net income was $5 billion, or $3,074 a share, compared with $3.9 billion, or $2,373 a share, a year earlier. Revenue for the Omaha-based conglomerate led by Chairman and Chief Executive Warren Buffett rose 13.4 percent to $46.5 billion.
Operating earnings, which strip out some investing gains and losses, rose 8 percent to $3.6 billion. Berkshire owns and operates dozens of businesses employing almost 300,000 people making and selling furniture, candy, food products, boots, jewelry, bricks and electricity, to name a few.
On a per-share basis, operating earnings were $2,228 a share, missing the $2,403 average estimate of three analysts surveyed by Bloomberg News.
Gains from underwriting at Geico fell 29 percent to $307 million. Total insurance pretax operating earnings, which include companies such as General Re that assume risks from catastrophes, fell 15 percent to $1.3 billion.
“There were no hurricanes or natural disasters,” said David Kass, a Berkshire shareholder and University of Maryland finance professor, “but pricing can be very competitive in the insurance industry.”
In its quarterly filing with the Securities and Exchange Commission, Berkshire attributed the results at Geico to 20 percent higher losses of $611 million during the quarter.
“In the first nine months of 2013, claims frequencies for property damage and collision coverages generally increased in the two to three percent range compared to the first nine months of 2012,” Berkshire wrote. “Physical damage claim severities increased in the three to five percent range in 2013.”
Berkshire's investment income more than doubled to $1.2 billion after taxes. After-tax income from derivatives, or insurance-like contracts with a counterparty whose value is derived from the performance of an underlying instrument such as interest rates, was $277 million, up from a loss a year earlier.
Earnings were as follows in the major categories:
>> $2.8 billion at non-insurance businesses such as Pittsburgh-based H.J. Heinz Co., bought this year for $12.3 billion, a 12 percent increase.
>> $861 million from investing cash held by insurers such as Geico, a 17 percent increase.
>> $586 million at MidAmerican Energy, the operator of Iowa's largest electric utility, an increase of 8 percent.
Cash on hand fell 17 percent to $35.3 billion, after Berkshire agreed to spend $5.6 billion to buy a Nevada electric utility in May. Buffett, shareholder Kass said, likes to keep about $20 billion on hand at all times.
“He certainly has room for another large acquisition in the range of $15 billion,” Kass said.
Berkshire in August disclosed an $89 billion portfolio of stocks, led by a $19 billion stake in San Francisco-based bank Wells Fargo & Co. An updated look at the basket of marketable securities is expected again this month with a new SEC filing.
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
Examine the earnings report: