Berkshire Hathaway Third Quarter Insurance Subscription Gains

Berkshire Hathaway Inc.'s insurers avoided the worst of the damage caused by Hurricane Florence, as companies continued their rebound after a difficult year in 2017.

The company's operating profit doubled last quarter, taking advantage of trends ranging from increased rail traffic on its railways to increased demand for electronic components. The insurance sector was the main driver in the insurance division, where disaster-related costs dropped by almost 90% compared to the catastrophic third quarter of last year.

President Warren Buffett has spent more than 50 years developing his conglomerate in the energy, railways and manufacturing sectors. Insurance has always been at the heart of Buffett's strategy, generating cash that the billionaire can then invest before paying claims. The solution is to avoid the high costs that hinder other activities in the event of a disaster.

"Insurance results have been a radical turnaround in the absence of last year's record losses," said CFRA Research analyst Cathy Seifert in an interview. "Overall, the quarter was very strong. He came in better than I thought. "

Berkshire also benefited from a lower corporate tax rate, with operating income of $ 6.88 billion compared to $ 3.44 billion in the third quarter of 2017. Revenues rose all areas of Berkshire.

A new corporate policy in July gave Buffett more latitude to buy back Berkshire shares. He repurchased $ 928 million during the quarter. That is equivalent to losing one foot, because he still has a pile of money to spend $ 103.6 billion.

Net income more than quadrupled in the quarter, thanks to a new accounting rule that includes fluctuations in the company's equity portfolio. Buffett warned that the moves could be "wild and capricious" and asked investors to instead look at the operating profit.

More highlights

Insurance underwriting generated earnings of $ 1.79 billion in the first nine months of this year, compared to a loss of $ 1.73 billion in the same period of 2017.

Disaster losses dropped to $ 372 million in the third quarter, compared with $ 3 billion in the same period.

Strengthening trucking capacity and economic growth boosted the Berkshire Railroad's earnings, which posted a 34% increase in earnings in the third quarter. The unit announced revenue increases of more than 17% for shipments of industrial and agricultural products.

Profits from Buffett's manufacturing, retail and after-sales operations jumped 24% in the quarter. This year's increase in demand for electronic components fueled the gains of Berkshire's TTI unit.

Copyright 2018 Bloomberg.