Buffett's Berkshire profit almost quintuples
Firm's insurance operations rebound from last year.
November 3 2006: 6:53 PM EST
NEW YORK (Reuters) -- Warren Buffett's Berkshire Hathaway Inc. said Friday third-quarter profit nearly quintupled, as its insurance operations rebounded a year after paying out billions of dollars in hurricane claims.
Net income for the Omaha, Neb.-based insurance and investment company rose to $2.77 billion, or $1,797 per Class A share, from $586 million, or $381, a year earlier.
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Excluding investment gains, profit totaled $2.6 billion, or $1,687 per share. Analysts polled by Reuters Estimates on average had forecast profit of $1,244 per share.
"Clearly, these are highly satisfactory ... earnings," said Buffett, the world's second-richest person, in a statement. "Just as clearly, our insurance business has benefited in a major way from the absence of catastrophe losses. This is due not to managerial brilliance but rather to good luck."
Buffett was not available for an interview, but his assistant Debbie Bosanek confirmed he wrote the statement.
Revenue rose 24 percent to $25.36 billion, helped by acquisitions and improved results at its Geico Corp. auto insurance unit and General Re Corp. reinsurance unit.
Expenses fell 6 percent to $17.66 billion from last year, when Berkshire suffered losses from Hurricanes Katrina and Rita.
Insurers raised premiums amid fears the 2006 hurricane season would be more active than normal. It has instead proven mild and Berkshire's insurance losses fell 47 percent to $3.2 billion.
"Berkshire is popping on all cylinders," said Steven Check, who oversees $500 million at Check Capital Management Inc. in Costa Mesa, Calif., including $100 million of Berkshire stock. "The storms took a lot of capacity among underwriters. Berkshire was able to push through significant increases in premiums and with few storms, it is profiting tremendously."
Among Berkshire insurance rivals are Allstate (Charts), Markel and Allianz (Charts).
Berkshire Class A (up $894.00 to $105,000.00, Charts) shares closed Friday up $894 at $105,000 on the New York Stock Exchange, and its Class B (up $28.00 to $3,501.00, Charts) shares rose $28 to $3,501. The Class A shares have risen 18 percent this year. The Standard & Poor's 500 index is up 9 percent, and the S&P Insurance Index is up 3 percent.