Berkshire profit falls 37% as insurance segment declines
Berkshire Hathaway said second-quarter profit missed analysts’ estimates because higher claims costs fueled an underwriting loss in the insurance segment.
Net income dropped 37 percent to $4.01 billion, or $2,442 a share, from $6.4 billion, or $3,889, a year earlier, the Omaha, Neb., company said Friday in a statement.
Billionaire Warren Buffett, 84, built Berkshire over the past five decades into a sprawling operation that owns manufacturers, retailers, electric utilities and one of the largest U.S. railroads. While those operating businesses provide a steady stream of earnings, the company’s results can fluctuate widely depending on the performance of investments and insurance underwriting.
The insurance segment posted an underwriting loss of $38 million, compared with a gain of $411 million a year ago. The contribution from the Geico auto insurer plunged to $53 million from $393 million on the increased frequency and cost of claims.
“We are implementing premium rate increases as needed” at Geico, Berkshire said in a regulatory filing. That echoes the approach at Allstate, the largest publicly traded U.S. auto insurer, where CEO Tom Wilson said a stronger economy led to more auto travel, increasing the number of accidents.
The loss at Berkshire Hathaway Reinsurance Group widened to $411 million from $9 million on storm losses in Australia and foreign currency fluctuations.
Fort Worth-based BNSF Railway contributed $963 million to quarterly earnings, compared with $916 million a year ago. Executive Chairman Matt Rose and CEO Carl Ice plan to spend a record $6 billion this year on upgrades to the network after service delays in 2014.
The investments have helped BNSF weather a slowdown in traffic this year better than Union Pacific, its main competitor in the western U.S. Total carloads slipped 0.1 percent at BNSF in the quarter, compared with a 5.8 percent drop at Union Pacific.
Earnings from manufacturing, service and retailing units increased to $1.31 billion in the second quarter from $1.26 billion in the same period in 2014.
Besides BNSF, Berkshire owns Justin Brands, Acme Brick and TTI in Fort Worth.
This story was originally published August 7, 2015 at 5:50 PM with the headline "Berkshire profit falls 37% as insurance segment declines."