Berkshire Hathaway Insurance Earnings Exceed Expectations in 2d Quarter

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

Berkshire said Friday it earned $3.1 billion (euro2.26 billion), or $2,018 per Class A share during the quarter that ended June 30. That’s up from $2.3 billion (euro1.68 billion), or $1,522 per share, in the same period last year.

Berkshire said its companies and investments generated $27.3 billion (euro19.94 billion) in revenue for the quarter, up from $24.1 billion (euro17.6 billion) a year ago.

Berkshire’s insurance business pulled in nearly $6 billion (euro4.38 billion) in premiums during the quarter, up from $5.8 billion (euro4.24 billion) a year ago.

Companies including Geico and Berkshire Hathaway Reinsurance Group recorded a $632 million (euro461.52 million) underwriting profit during the quarter, up from $371 million (euro270.92 million) in 2006.

Geico also continued to gain new customers and add to its profits. The auto insurer reported a $325 million (euro237.33 million) pretax underwriting profit in the second quarter, up from $288 million (euro210.31 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 2006.

The underwriting profit also includes $356 million (euro259.97 million) from the Reinsurance Group, up from $137 million (euro100.04 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 $245 million (euro178.91 million) in losses from earlier catastrophes, primarily Hurricane Wilma.

And the number of policies in the first six months of 2007 declined about 50 percent compared with the first half of 2006, mostly because of increased competition for catastrophe reinsurance.

Through the first half of the year, Berkshire recorded net income of $5.7 billion (euro4.16 billion), on revenue of $60.3 billion (euro44.03 billion). That’s up from last year, when the company earned $4.7 billion (euro3.43 billion) on revenue of $46.9 billion (euro34.25 billion).

Berkshire said it had nearly $47 billion (euro34.32 billion) cash on hand, up from $46 billion (euro33.59 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 for 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 didn’t close until July 3 just after the quarter ended. The two jewelry makers generate more than $500 million (euro365.12 million) in revenue annually.

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

Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co.

The uptick in the insurance business exceeded some analysts’ expectations, especially after Buffett told shareholders at the annual meeting in May that Berkshire’s companies were cutting back on writing policies.

“I thought he was trying to prepare people that the earnings from insurance are going to be somewhat less,” said Andy Kilpatrick, a stockbroker who has chronicled Buffett’s life in “Of Permanent Value: the Warren Buffett Story.” “But they have come in somewhat more.”

The insurance earnings were helped by a lack of major catastrophes so far this year — a stroke of luck for Berkshire, which continued writing catastrophic-insurance policies after hurricanes Katrina, Rita and Wilma, although it did significantly increase prices.

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