Berkshire Hathaway Posts Weaker Results on $3 Billion in Disaster Losses

By Maria Armental and Nicole Friedman Features Dow Jones Newswires

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.

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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.

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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)