Berkshire Q3 operating profit doubles
NEW YORK: Berkshire Hathaway Inc, the conglomerate run by billionaire Warren Buffett, on Saturday said its quarterly operating profit doubled as its insurance business dodged hurricanes and benefited from lower taxes.
The strong result gives Buffett more cash to deploy even as the well-known bargain-hunting “value” investor has admitted struggling to find a place to put those earnings to work and resorted to buying back US$928 million (RM3.87 billion) in his own company’s stock in the latest quarter.
Operating profit in the third quarter doubled to US$6.88 billion from US$3.44 billion a year earlier, and higher than the US$6.11 billion expected by Wall Street, according to IBES data from Refinitiv.
Helping the company’s insurance operations were lower estimated liabilities from property and casualty insurance in prior years and lower taxes. The year prior included major losses due to three United States hurricanes and an earthquake in Mexico.
Insurance underwriting income was US$441 million in the third quarter, compared to a loss of US$1.4 billion in the year-ago period.
“This is absolutely one of the biggest quarterly earnings reports that has ever come out of a US corporation,” said Bill Smead, chief executive of Smead Capital Management, a Berkshire shareholder.
Berkshire said thirdquarter net income rose more than 355 per cent to US$18.5 billion, though that reflected a new accounting rule requiring it to report unrealised investment gains with earnings.
Buffett said the rule could lead to “wild and capricious” results and could mislead investors, who should look at operating profit instead.
Berkshire’s effective tax rate for the third quarter was 19.2 per cent, compared with 25.3 per cent in the year-ago period, following a reduction of the corporate tax rate that President Donald Trump signed into law in December. Many US companies’ reported results have been skewed by the law’s impact.
Insurance provides a stream of cash that Berkshire can invest around the world. Float, or insurance premiums collected before claims are paid and which help fund Berkshire’s growth, ended September at US$118 billion. The company has US$103.6 billion in cash, short-term Treasuries and other similar investments.
Berkshire is based in Omaha, Nebraska, and has more than 90 businesses in the insurance, chemicals, energy, food and retail, industrial parts, railroad and other sectors.
Their day-to-day operations are overseen by Greg Abel and Ajit Jain, each seen by investors as a possible successor to Buffett, 88, as chief executive. Buffett and vice-chairman Charlie Munger, 94, handle major capital allocation decisions.
Berkshire’s Class A shares closed Friday at US$308,411.01 per share, delivering a total return of 3.6 per cent for the year, a bit ahead of the S&P 500’s 3.4 per cent return.