Berkshire Hathaway Q3 Operating Earnings Fall 19% To $1335/Share


Berkshire Hathaway's third quarter operating earnings fell 19.3 percent to $1,335 a share from $1,655 a share in the same period the year before.

That's below the average forecast of $1429 from the two analysts following the stock, as tracked by Thomson One Analytics.

Operating earnings for Berkshire's insurance-underwriting activities took a big hit, falling to $81 million from $486 million in the year-ago quarter.

Net earnings plunged 77 percent to $1.06 billion ($682 per share) from $4.55 billion ($2942 per share.) A big factor there are investment and derivative losses of $1.01 billion, compared to gains of $1.99 billion in last year's quarter. That year-ago period got a boost from Berkshire's profitable sale of PetroChina stock.

The derivative portion of the gains and losses are on paper only. Buffett has said the derivative contracts held by Berkshire will eventually be profitable, but right now they're losers.

The news release talks about how Berkshire is getting investable income from derivatives that are generating paper losses.

"At the end of the third quarter, we had a liability of $6.72 billion for equity index put option contracts for which we have received cash payments of $4.85 billion. This means our recorded loss to date is $1.87 billion though the first payment that could be triggered would be in 2019, and the average maturity is 13.5 years. In the meantime all of the $4.85 billion can be invested by Berkshire."


Berkshire says its net worth declined slightly to $120.15 billion over the first three quarters of the year. But it adds that net worth fell by roughly $9 billion in October amid all the carnage in the financial markets.

Things had been going better for Berkshire through the end of September. Unrealized "paper" profits racked up by Berkshire's holdings of marketable securities (stocks) totaled $24.3 billion at the end of September, compared to $21.1 billion at the end of the June quarter. That June number represented a decline of about 33 percent from the end of 2007.

Additional information on the company's financials appears in Berkshire's 10-Q filing for the quarter.

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