DOW JONES NEWSWIRES
Berkshire Hathaway Inc.'s (BRKA, BRKB) third-quarter earnings tripled as the company posted a revenue increase and benefited from rising stock markets.
On Friday, Berkshire posted a quarterly profit of $3.24 billion, or $2,087 a Class A share, compared with $1.06 billion, or $682 a share, a year earlier.
Per-share operating earnings, which exclude realized investment gains and losses, fell slightly to $1,325 from $1,335, compared with the $1,308 projected by a Thomson Reuters analyst poll.
With the worst of the economic downturn apparently past, Chairman and Chief Executive Warren Buffett is making a big bet on a recovery with his purchase of the remaining 77% of Burlington Northern Santa Fe Corp. (BNI) in a deal that values the railroad at $34 billion, plus $10 billion in assumed debt. In some ways, the deal is classic Buffett--Burlington Northern is a decidedly unglamorous cash cow--but the railroad is hardly the hidden treasure he typically favors. Though Buffett has a history of backing winners, the size of the wager is putting Berkshire's last remaining AAA rating on the line, while the decision to split the company's Class B shares 50-for-1 to avoid issuing fractional shares in the deal may dent the company's high-priced mystique.
Berkshire said Friday it would fund half of the Burlington Northern deal with internally generated cash and half with borrowings to be repaid over three years.
The company's insurance operations have gotten a lift from the rally on Wall Street, but weakness on Main Street is still providing lucrative opportunities. Berkshire is working on joint bids to buy $2.6 billion in tax credits from Fannie Mae (FNM) and loan-servicing operations from struggling Capmark Financial Corp., though neither deal is a fait accompli.
Investment and derivative gains totaled $1.18 billion versus a $1.01 billion loss a year earlier. Accounting rules require derivative gains and losses to be reported, leading to volatility in earnings, but most observers expect Berkshire ultimately to profit from the derivatives unless stock markets crumble over the next two decades.
Revenue rose 7.1% to $29.9 billion, with insurance operations posting a 5.5% rise and utilities a 15% fall. Finance and financial products operations posted positive revenue of $2.87 billion, compared with a negative $5 million.
Operating earnings from insurance underwriting more than quadrupled to $363 million. On the same basis, investment earnings in the insurance operations rose 21% to $976 million, while noninsurance businesses posted a 28% decline to $774 million.
Earnings excluding taxes and minority interests at the company's Geico car insurance unit fell 19%. Premiums earned rose 9.5%, while policies in force rose 10%.
Reinsurance unit General Re's operating profit more than tripled as premiums edged up 1.2%.
Book value at the end of the quarter was $81,247 a Class A share, up 15% from year-end and 10% from June 30.
In after-hours trading, Berkshire's Class B shares were down 0.2% at $3,419. The stock has risen by more than half since late February, but they remain down about more than 10% over the past year.
-By Jay Miller, Dow Jones Newswires; 212-416-2355; jay.miller@dowjones.com