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Berkshire profit rises 35%

Berkshire Hathaway Inc said second-quarter profit rose 35 percent as its insurance units raised prices and had fewer claims.

The company is owned by Billionaire investor Warren Buffett.

Net income rose to US$1.05 billion, or US$681 a share, from US$773 million, or US$506, a year ago, the company said in a statement. Underwriting results improved in each of the insurance businesses as realized investment gains from selling securities fell 97 percent to US$13 million from US$420 million a year earlier.

Units General Reinsurance Corp, the third-largest reinsurer, and Geico Corp, the fourth-largest US car insurer, are benefiting from higher rates in the wake of the Sept. 11 terrorist attacks. The attacks generated US$58 billion in claims and cost Berkshire US$2.28 billion.

"Considering that there were no investment gains and it all came from operations, the results are terrific," said Keith Trauner, an analyst at Fairholme Capital Management, which manages US$750 million and owns 2,019 Berkshire shares.

Price increases since Sept. 11 will take about 15 months to be fully reflected in the company's earnings, Trauner said.

"Barring another mega catastrophe, Berkshire's insurance results should continue to improve over the next two years," he said.

Earnings excluding gains from sales of securities were US$1.03 billion, or US$673 a share, compared with US$353 million, or US$231, beating the US$550 average estimate of analysts surveyed by Thomson First Call.

Shares of Berkshire gained US$110 to US$71,000 Friday in New York Stock Exchange composite trading. They've fallen 6 percent this year as the Standard & Poor's 500 Index fell 21 percent.

"The stock has held up quite well," said Tom Davis, an analyst at Loomis Sayles & Co, which manages US$70 billion and owns 203 Berkshire shares. "If the insurance businesses continue to improve, there's considerable upside in the stock."

The Omaha, Nebraska-based company increased the cash it collects from insurance premiums and non-insurance revenue before claims and expenses to US$38.5 billion in the second quarter, up US$1.2 billion. That cash is the so-called "float" that Buffett uses to purchase securities and make acquisitions.

Buffett has said he's looking for acquisitions in the US$5 billion to US$20 billion range. He hasn't specified the companies he is targeting. Marc Hamburg, Berkshire's treasurer, couldn't immediately be reached to comment.

Losses from natural disasters were "light" in the second quarter, Davis said.
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