Buffett's Berkshire Says Profit Rises 10 Percent to $4.99 Billion on Insurance Units

Saturday, 01 Mar 2014 08:37 AM


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Warren Buffett’s Berkshire Hathaway Inc. said fourth-quarter profit rose 9.6 percent on gains at insurance units.

Net income climbed to $4.99 billion, or $3,035 a share, from $4.55 billion, or $2,757, a year earlier, Omaha, Nebraska-based Berkshire said in a statement on its website.

Operating earnings were $2,297 per share, beating the $2,204 estimate of three analysts surveyed by Bloomberg.

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For decades, Buffett has used premiums from insurance subsidiaries like Geico to fuel Berkshire’s growth. The funds have allowed the billionaire chairman and chief executive officer to amass the largest equity stakes in companies such as Coca-Cola Co., while also taking over whole businesses. Berkshire now has dozens of operating units spanning the energy, transportation, manufacturing and retail industries.

“All the businesses are doing pretty well,” Cliff Gallant, an analyst at Nomura Holdings Inc., said in a phone interview before the announcement. “They’re all leveraged to a good U.S. economy.”

The insurance and reinsurance industry benefited last year from below-average costs from catastrophes. Carriers shouldered $31 billion in claims from the most expensive disasters worldwide last year, compared with the $56 billion average from 2003 to 2012, according to Munich Re, the world’s largest reinsurer. The fourth quarter of 2012 included claims from Superstorm Sandy, which struck the U.S. East Coast.

Consumer and business spending has helped boost the U.S. economy and is laying the groundwork for further gains this year. Gross domestic product expanded at a 2.4 percent pace in the fourth quarter, Commerce Department figures showed Friday. It was the third straight quarter that growth exceeded 2 percent, the first time that happened since 2010.

Buffett’s company stands to benefit from that trend because many of its subsidiaries count the U.S. as their largest market. Among the more than 80 operating businesses are furniture retailers, a trucking operation and a home builder. Berkshire expanded last year by buying Nevada’s largest energy utility and half of ketchup maker HJ Heinz Co.

The Class A stock has slipped 2.4 percent since Dec. 31, compared with the 0.6 percent gain for the Standard & Poor’s 500 Index. Coke, one of Buffett’s largest stock holdings, has fallen this year as the soft-drink maker faces sluggish growth abroad and concerns about the healthiness of its product.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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