Skip to comments.Tornado trauma for Berkshire ( Subhead Buffett: Tough time )
Posted on 11/06/2005 10:47:06 PM PST by sully777
New York, Nov. 5 (Reuters): Warren Buffett-run Berkshire Hathaway Inc on Friday posted a 48 per cent decline in quarterly profit to the lowest level since 2001, hurt by nearly $3 billion of losses from Hurricanes Katrina and Rita.
The company also reduced its stake in foreign currency contracts to $16.5 billion on September 30 from $21.5 billion three months earlier. Buffett has bet against the dollar since 2002 amid concern that high US trade and budget deficits might cause non-US investors to pull money from the country.
Third-quarter net income for Berkshire, whose largest business is insurance, fell to $586 million from $1.14 billion a year earlier.
Excluding investment gains, profit was $106 million, or about $69 per share. Profit was the lowest since Berkshire earned $95 million in the fourth quarter of 2001, in the aftermath of the September 11 attacks.
Because hes in the business of insuring catastrophes, Buffett expects to get tagged now and then by a large event, said Keith Trauner, who helps invest $2.5 billion, including nearly $500 million in Berkshire shares, at Fairholme Capital Management in New Jersey. It sounds like things were pretty good if you take out the insurance loss.
Revenue rose 7 per cent to $20.53 billion. Expenses increased 15 per cent to $19.84 billion, including a 40 per cent jump in insurance losses and related expenses.
Berkshire suffered $2.99 billion losses from tornado Katrina and Rita, which struck the US Gulf Coast in August and September, respectively. This included a $118 million at auto insurer Geico, a $602 million at General Re Corp., and a $2.27 billion within the companys reinsurance group. Berkshire estimated total industry losses from Katrina and Rita at $60 billion to $70 billion.
Net underwriting losses rose more than five-fold to $1.17 billion, while net investment income from insurance rose 24 per cent to $601 million. Insurance-related revenue rose 10 per cent to $6.68 billion.
We expect very significantly higher prices, higher deductibles and tighter terms and conditions as a result of Katrina, Trauner said. For the next one year or two, underwriting results, absent another large catastrophe, should be very, very strong.
Berkshires cash stake fell 4 per cent from the second quarter to $46.03 billion. The company will use some cash for its MidAmerican Energy Holdings Co.s $5.1-billion purchase of the PacifiCorp utility from Scottish Power Plc.
Berkshire also invests in companies such as Procter & Gamble Co. and expects to recognise a $5-billion pre-tax gain from Procters October 1 acquisition of long-time Buffett favourite Gillette Co.
Among Berkshires other holdings are Benjamin Moore, Dairy Queen and Fruit of the Loom, which make paint, ice cream and underwear.
I empathize with Warren Buffett's loss. Truly I do. He is hurting. How can we sit idly by while this man and his giant company gets hammered for betting against Bush and the US currency? There ought to be a guvment subsidy to help him get back on his feet.
FYI for one of your ping-lists: How does one feel about hard times falling upon a man whose only "crime" was investing billions against the US dollar and the reelection of GWB?
In the wake of these losses, I say we raise Buffett's taxes. After all, he keeps insisting that will solve everything.
You know what products I love best from Berkshire Hathaway?
Berkshire Hathaway's Original Apple Pie with a glass of Grandpa Hathaway's Hard Cider which I fetch in my classic 1968 Berkshire Philistine 500 Sedan. All made in the good old US of A!
Warren Buffett and his pals at BH are my idols.
Now excuse me whilst I puke.
Let's see if there are some 'programs' the dems can find to help him out.
boo-hoo. there. done. whiny liberal
Warren Buffett is surely going to heaven rich and famous beyond any posters here.
And in history as a free-enterprise icon. I am extremely happy with my trust in Buffett and my portfolio. Betting against poor performance is always a good bet.
All the rest is sour grapes.
I think the technical term in the currency derivatives business is:
Give me a ping if BRK-A goes below 88000.
I thought from the title that a tornado hit
Reading or Basingstoke.. confusing.
boo-hoo. there. done. whiny liberal