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Berkshire profit soars 41% to a record on investment gains

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(Reuters) — Warren Buffett’s Berkshire Hathaway Inc. on Friday said second-quarter profit soared 41% to a record high, reflecting substantial investment gains and improved results in manufacturing, service and retail businesses, despite sluggish insurance sector returns.

Berkshire’s diversification helped in the quarter. While profit fell 8% in insurance, the company’s best known business sector, earnings from other businesses grew 20%.

Many Berkshire insurance businesses posted improved results, with larger underwriting gains from Geico auto insurance and General Re reinsurance, and in a business that provides commercial and worker’s compensation insurance.

The insurance results were hurt by a small underwriting loss in a business that insures against major catastrophes, which Berkshire attributed mainly to currency fluctuations.

“Insurance profit looked a little weak,” said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. “The rest of the business looked pretty good, which matches the slow-but-steady economic growth we keep hearing about.”

Berkshire owns more than 80 businesses in sectors including insurance, railroads, energy, chemicals, food and clothing.

“It’s clear that Warren Buffett’s bet on the U.S. economy is paying off,” said Michael Yoshikami, president of Destination Wealth Management in Walnut Creek, California, and a longtime Berkshire investor.

Net income rose to $6.4 billion, or $3,889 per Class A share, from $4.54 billion, or $2,763 per share, a year earlier.

Quarterly operating profit rose 11% to $4.33 billion, or $2,634 per Class A share, from $3.92 billion, or $2,384 per share.

Analysts on average expected operating profit of $2,482 per Class A share, according to Thomson Reuters I/B/E/S.

Book value per share, Buffett’s preferred measure of growth, has risen 5.6% this year to $142,483.

Results included $1.96 billion of investment gains.

Analysts have said the company’s increasing diversification over the years has made its fortunes more closely tied to the overall economy. The Commerce Department reported the U.S. economy grew at a 4% annual rate from April to June.

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