Berkshire Hathaway Q3 Profit Falls on Derivatives

Warren Buffett's conglomerate Berkshire Hathaway reported a smaller third-quarter profit Friday after recording losses of more than $2 billion on derivatives related to stock market performance.

That was nearly three times what Berkshire lost on the same instruments a year ago. Buffett has sharply criticized derivatives in general but has said these particular contracts were safe and would ultimately be lucrative.

Berkshire reported a net profit of $2.28 billion, or $1,380 per Class A share, compared with a year-earlier profit of $2.99 billion, or $1,814 per share.

Book value rose to $96,876 per Class A share. Berkshire recently launched a share buyback program, its first ever, with an upper price limit set at 110 percent of book value.

That would suggest a ceiling of roughly $106,560, whereas Class A shares closed at $115,806 on Friday.

Cash at the end of the quarter was $34.78 billion, down from $47.89 billion at the end of June. During the third quarter Berkshire funded the purchase of chemical maker Lubrizol and a $5 billion investment in Bank of America , which accounted for the decline.

Operating income rose across segments, except for the company's finance business, where it fell slightly.

Profits in the insurance business rose as a rebound in reinsurance results offset sharp declines at auto insurer Geico. Earnings were also nearly 10 percent higher at Berkshire's next-biggest unit, the Burlington Northern railroad. (Reporting by Ben Berkowitz, editing by Bernard Orr)