Berkshire Hathaway Posts Weaker Results on $3 Billion in Disaster Losses
November 03 2017 - 5:06PM
Dow Jones News
By Maria Armental and Nicole Friedman
Warren Buffett's Berkshire Hathaway Inc. reported a 43% drop in
quarterly profit as costly disasters drove the company's insurance
operations to a loss.
The insurance underwriting operations swung to a $1.44 billion
operating loss, from a year-earlier profit of $272 million, on
pretax losses of about $3 billion related to hurricanes Harvey,
Irma and Maria and an earthquake in Mexico.
Berkshire's insurance business sits at the core of its
moneymaking machine, bringing in billions of dollars of so-called
float, upfront premiums customers pay that Berkshire invests for
its own gain.
This year, it reached a reinsurance agreement with American
International Group Inc., a deal that added to Berkshire's
float.
Insurance float rose to $113 billion as of Sept. 30, up about
$22 billion for the year.
The conglomerate runs a large insurance operation as well as
railroad, utilities, industrial manufacturers and retailers. Its
holdings include recognizable names like Dairy Queen, Duracell,
Fruit of the Loom, Geico and See's Candies.
Berkshire also holds large investments, especially in the stock
market. This summer, Berkshire became Bank of America Corp.'s
largest shareholder after exercising warrants to buy 700 million
shares at below-market prices.
In addition, the 87-year-old Mr. Buffett, whose shrewd
investments have earned him the nickname "the Oracle of Omaha,"
still has plenty of cash on hand for future acquisitions as a way
to drive profit. Berkshire held $109.3 billion in cash at the end
of the third quarter, crossing the $100 billion mark for the first
time.
Berkshire bought nearly 40% of truck-stop operator Pilot Flying
J in October, with plans to increase the stake to 80% in 2023.
Berkshire also tried to buy Texas-based power-transmission company
Oncor, but was outbid by Sempra Energy.
Book value, Mr. Buffett's preferred yardstick for measuring net
worth, reached $187,435 a Class A as of Sept. 30, up 8.9% over the
first nine months of the year. Last year, Berkshire reported a 5.3%
increase in book value for the nine months of the year.
Overall, Berkshire's third-quarter profit fell to $4.07 billion,
or $2,473 a Class A share, from $7.2 billion, or $4,379 a share, in
the year-earlier period. Operating earnings, which exclude some
investment results, fell to $3.44 billion, or $2,094 a Class A
share, from $4.85 billion, or $2,951 a Class A share, a year
earlier.
Class A shares closed Friday at $280,470.01, up 15% for the
year.
Write to Maria Armental at maria.armental@wsj.com and Nicole
Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
November 03, 2017 16:51 ET (20:51 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Berkshire Hathaway (NYSE:BRK.A)
Historical Stock Chart
From Aug 2024 to Sep 2024
Berkshire Hathaway (NYSE:BRK.A)
Historical Stock Chart
From Sep 2023 to Sep 2024