By Erik Holm 
 

Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) said second-quarter profit fell 9% to $3.11 billion amid declining results in its derivative portfolio and a failure to repeat a big investment gain it chalked up a year ago.

But operating earnings, Buffett's preferred metric for evaluating his company, jumped 38% to $3.72 billion, or $2,252 per Class A Share, the company said in a statement Friday. Analysts surveyed by Thomson Reuters had expected operating profit of about $1,777 a share.

Berkshire's insurance operations provided much of the boost in the operating results. The company's insurance operations, which include car insurer Geico Corp., posted an underwriting profit of $619 million, compared to a loss of $7 million in the same period a year earlier, when natural disasters devastated the insurance industry's profits.

Buffett has said he likes the insurance business because he can invest the policyholder premiums until the money is needed to pay claims. Berkshire's insurance units earned $1.07 billion in investment income in the latest period, a 7.3% increase from last year's second quarter.

The noninsurance businesses also contributed to the improved operating result. Operating profit at those units rose 22% to $2.2 billion.

Buffett, one of the world's richest people, has built Berkshire over four decades into a massive conglomerate with more than 70 distinct units, including Dairy Queen, Fruit of the Loom and a chain of newspapers. Berkshire owns a railroad and a trucking company, operates power plants and gas pipelines, sells farm supplies and furniture, and manufactures machine parts and mobile homes.

The derivative book, which includes massive puts whose value rises and falls with major indexes, had a $693 million loss, five time larger than a year earlier. But Mr. Buffett, as always, warned that the figure is "often meaningless," since any losses won't have to be paid for several years, if at all.

A year ago, Berkshire booked $833 million for an investment gain when Goldman Sachs Group Inc. (GS) redeemed Berkshire's crisis-era investment in the investment bank. This time, Berkshire's investment gains were a scant $81 million. Neither the derivative losses nor the investment gains are included in operating income.

Berkshire had $40.7 billion in cash as of June 30, compared with $37.8 billion three months earlier.

Berkshire, which announced an unprecedented share buyback program last September, didn't repurchase any shares during the second quarter. Its shares have risen 12% in the year to date, versus a 10.6% gain in the Standard & Poor's 500 stock index.

Berkshire's Class A closed at $128,479 in regular trading Friday, their highest point since March 2011. The stock's post-2008 high is $131,300, reached in February 2011.

--Serena Ng contributed to this article.

Write to Erik Holm at erik.holm@dowjones.com

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