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Berkshire Hathaway insurance results deteriorate

Posted On: Nov. 7, 2016 8:48 AM CST

Berkshire Hathaway insurance results deteriorate

(Reuters) -- Berkshire Hathaway Inc. on Friday said third-quarter profit dropped 24% percent from a year earlier, including a more than 10% drop in insurance profit, but acquisitions helped boost operating profit at the conglomerate run by billionaire Warren Buffett.

The company also reported a $22.1 billion stake in Wells Fargo & Co as of Sept. 30, suggesting it kept its 10% ownership position even as the bank became embroiled in a scandal over its creation of unauthorized customer accounts.

Berkshire is Wells Fargo's largest shareholder.

Quarterly net income for Omaha, Nebraska-based Berkshire fell to $7.2 billion from $9.43 billion a year earlier.

Operating profit, which excludes investment and derivative gains and losses, rose 7% to $4.85 billion.

That missed analysts’ forecasts, in part reflecting weaker results at the GEICO auto insurer and BNSF railroad, and falling demand from customers in industrial sectors.

Revenue was nearly unchanged at $59.1 billion.

Berkshire also ended September with $84.8 billion of cash, despite having completed a $32.1 billion purchase of aircraft parts maker Precision Castparts Corp in January that was a key factor behind the boost in operating profit.

In a change, Buffett highlighted the cash hoard in Berkshire's press release accompanying results.

“He has $85 billion of cash earning nothing,” said Steven Check, who invests $1.1 billion, of which 30% is in Berkshire, at Check Capital Management Inc. in Costa Mesa, California. “It gives Berkshire a lot of pent-up firepower for more acquisitions.”

Overall insurance profit fell 11% to $1.12 billion, and included a 34% drop from underwriting.

GEICO saw pre-tax underwriting gains slide by 47% in the quarter, as higher losses from storms and accidents offset increases in premium rates.

But float, or the amount of insurance premiums collected before claims are paid and which help fund Berkshire’s growth, rose to $91 billion from $90 billion at the end of June.