First, the nuts and bolts of tonight's earnings release, then the case of Warren Buffett's disappearing paper portfolio profits.
Warren Buffett's Berkshire Hathaway reported net earnings of $2.88 billion in the second quarter of this year. That's down 7.6 percent from 2007's second quarter.
After taking out realized investment and derivative gains of $610 million, operating earnings came in at $2.27 billion, down 9.6 percent year-over-year.
Much of that decline is due to a reduction in earnings from Berkshire's insurance underwriting businesses. They fell to $360 million from $632 million last year, amid generally poor conditions for the insurance industry as a whole. That is, however, better than the $181 million for insurance underwriting in the first quarter of this year,
Berkshire's operating earnings per share of $1465 is above the recently reduced consensus forecast of $1370 from the handful of analysts who follow the stock.
In the first quarter, Berkshire had an unrealized loss of $1.6 billion on some long-term derivatives contracts that it holds, depressing the quarter's net income. That is, if Berkshire had to sell those contracts right away, they would bring in $1.6 billion less than their purchase price. Buffett, however, makes clear he has no intention of selling them now, and expects a big profit from them years from now.