Saturday, 5 November 2011

Berskshire's Q3 income brought down by derivative losses

The holding company managed by billionaire investor Warren Buffet, Berkshire Hathaway Inc. (BRK/A) announced that Q3 profits declined by 24% due to the index derivative bets. Warren Buffet speculated on the long term recovery of the stock market (through several global indexes such as the S&P500 and the FTSE100) by selling puts on the indexes. Needless to say this derivative position is in the red for about $2 billion according to Warren Buffet out of  $4.9 billion position.

Outside of the faulty derivative bets, the Oracle from Omaha lead Berkshire into another green quarter as the net income posted was $2.8 billion, amounting to a $1,380 per share. It is still less than last years $2.99 billion net income with a value of $1,814 per share. A closer description for Bloomberg:

Insurance, which accounted for more than 40 percent of Berkshire’s earnings last year, posted underwriting profit of $1.7 billion pretax, up from $305 million a year earlier. Berkshire Hathaway Reinsurance Group, which specializes in large risks, had a gain of $1.38 billion, compared with a loss of $237 million. The gain at car insurer Geico narrowed to $114 million from $289 million. Gains at General Re fell to $148 million from $201 million.

Burlington Northern Santa Fe, the railroad Buffett bought in a $26.5 billion deal last year, contributed $766 million in net earnings in the third quarter, compared with $706 million a year earlier. Berkshire said it will receive a $750 million distribution from the railroad this month.

 Berkshire's stock A class (BRK/A) declined in value Friday 2.11% to the level of  $115,806. The 1 year return of holding the stock is still bleeding at -7.7%.  

 Source: Reuters

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