Sun, Aug 05, 2007 - Page 11 News List

Berkshire Hathaway nets 33% jump in income

SOLID SECOND QUARTER Warren Buffett's holding company posted net earnings of US$2,018 per share as its firms and investments generated US$27.3 billion in revenue


Billionaire Warren Buffett's holding company Berkshire Hathaway Inc reported on Friday that its net income jumped nearly 33 percent during the second quarter because of a strong performance from its insurance division.

Berkshire said it earned US$3.1 billion, or US$2,018 per Class A share, during the quarter that ended June 30. That is up from US$2.3 billion, or US$1,522 per share, in the same period last year.

Berkshire said its companies and investments generated US$27.3 billion in revenue for the quarter, up from US$24.1 billion a year ago.

Berkshire's insurance business pulled in nearly US$6 billion in premiums during the quarter, up from US$5.8 billion a year ago.

Companies including Geico and Berkshire Hathaway Reinsurance Group recorded a US$632 million underwriting profit during the quarter, up from US$371 million last year.

Geico also continued to gain new customers and add to its profits. The auto insurer reported a US$325 million pretax underwriting profit in the second quarter, up from US$288 million a year ago.

And Geico had 381,000 more car insurance policies in force at the end of June than it did at the end of last year. Plus the car insurance company's cavemen commercial pitchmen inspired a sitcom on ABC this fall.

The underwriting profit also includes US$356 million from the Reinsurance Group, up from US$137 million last year.

But Berkshire cautions that those numbers could be misleading, because last year's underwriting results for the first six months were weighed down by about US$245 million in losses from earlier catastrophes, primarily Hurricane Wilma.

And the number of policies in the first half of this year declined about 50 percent compared with the first half of last year, mostly because of increased competition for catastrophe reinsurance.

Through the first half of the year, Berkshire recorded a net income of US$5.7 billion, on revenue of US$60.3 billion. That is up from last year, when the company earned US$4.7 billion on revenue of US$46.9 billion.

Berkshire said it had nearly US$47 billion cash on hand, up from US$46 billion at the end of the first quarter.

The amount continues to fuel expectations that Buffett is about to buy something big.

"It's a lot, but the thing that sets them apart is their patience and discipline to wait of the big one," said Justin Fuller, a Morningstar analyst.

Berkshire did announce plans to buy two gold jewelry manufacturers, Bel-Oro International Inc and Aurafin LLC, during the quarter, but the deal did not close until July 3 just after the quarter ended. The two jewelry makers generate more than US$500 million in revenue annually.

Berkshire Hathaway's Class A shares fell US$100 on Friday to close at US$109,900 before the report was released. Its Class B shares gained US$11 to close at US$3,599.

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