UPDATE 2-Berkshire Hathaway net down 8 pct, insurance drags
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NEW YORK, Aug 8 (Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N)(BRKb.N) said on Friday second-quarter profit fell 8 percent, the third straight quarterly decline, hurt by weaker results from insurance underwriting.
"This was a particularly costly quarter for insurers in terms of catastrophe losses," said Chuck Hamilton, senior equity analyst at FTN Midwest Securities Corp in Nashville, who has a "neutral" rating on Berkshire.
Net income for Omaha, Nebraska-based Berkshire fell to $2.88 billion, or $1,859 per Class A share, from $3.12 billion, or $2,018, a year earlier.
Operating profit for the insurance and investment company declined 10 percent to $2.27 billion, or $1,465 per share, from $2.51 billion, or $1,625.
On that basis, analysts on average expected profit of $1,370 per share, according to Reuters Estimates. Revenue rose 10 percent to $30.09 billion.
Insurance underwriting profit fell 43 percent to $360 million. Berkshire boosted insurance premiums following Hurricane Katrina in 2005, but Buffett has said prices and profit margins have since fallen. Insurance typically comprises about half of Berkshire's results.
The period was also the first full quarter to reflect results from Marmon Holdings Inc, a maker of such products as railroad tank cars and pipes. In March, Berkshire paid Chicago's Pritzker family $4.5 billion for a 60 percent stake. Marmon generated a $261 million pre-tax profit in the quarter.
Berkshire also had a $689 million net gain tied to some derivatives contracts, in part because of interest rate changes and as the U.S. dollar rose against the Japanese yen.
"The surprise to us was the contribution of Marmon to results, and better-than-expected results from derivatives positions," Hamilton said.
Berkshire said investment income rose 3 percent in the quarter to $884 million, while profit from non-insurance businesses rose 4 percent to $1.09 billion.
The quarter was the second since Buffett created a bond insurer, Berkshire Hathaway Assurance Corp, to compete with rivals that struggled with guarantees of subprime mortgages. That unit generated about $520 million of business in the year's first half, Berkshire said.
In trading on Friday, Berkshire's Class A shares closed up $275 at $115,750, while its Class B shares fell $6 to $3,848.
INSURANCE WEAKNESS
Pre-tax underwriting gains at auto insurer Geico Corp fell 8 percent to $298 million, as the average premium per policy fell. Gains before taxes fell 56 percent to $102 million at General Re Corp, which rejected some business where it did not believe it was getting paid enough for the underwriting risk. Continued...
