Insurance units put dents in profit

WARREN Buffett’s Berkshire Hathaway posted second-quarter profit that missed analysts’ estimates because of higher claims costs at insurance units including Geico.

Net income fell 37 percent to $4.01 billion (R50.9bn), or $2 442 a share, from $6.4bn, or $3 889, a year earlier, the company said on Friday. Operating earnings, which exclude some investment results, were $2 367 a share, compared with the average $3 038 estimate of three analysts in a survey.

Berkshire’s insurance units posted a net underwriting loss of $38 million, compared with a gain of $411m a year earlier, driven by lower profit at auto insurer Geico and a wider loss at the company’s namesake reinsurance operation, run by Ajit Jain.

Geico contributed $53m to earnings, compared with $393m a year earlier because of an increase in the frequency and cost of claims. The company reiterated in a regulatory filing that it was raising premiums to account for the higher losses.

Berkshire Hathaway Reinsurance Group’s loss widened to $411m from $9m on storm costs in Australia and foreign currency fluctuations.

The decline in net income was primarily driven by narrower investment gains. Berkshire’s profit soared to a record in last year’s second quarter as the company had a benefit of more than $2bn from derivatives and investments.

Last year’s total included a one-time contribution from a share-and-asset swap with Graham Holdings, the former Washington Post publisher. In this year’s second quarter, the investment and derivative figure was $123m.