By Jonathan Stempel and Luciana Lopez
Nov 1 (Reuters) - Warren Buffett's Berkshire Hathaway Inc posted a 29 percent jump in third-quarter profit as itrecorded big gains on investments made during the financialcrisis, but operating results missed forecasts amid weakness ininsurance operations.
Quarterly results included $1.4 billion of gains frominvestments that Buffett made in October 2008, including inGeneral Electric Co and Goldman Sachs Group Inc warrants, and bonds related to candy maker Mars Inc's purchaseof rival Wrigley.
Such investments helped give Buffett a reputation as alender of last resort.
But investment and derivative gains do not factor intooperating results, and while profit rose at Berkshire's Burlington Northern Santa Fe railroad and MidAmerican energy andutility units, insurance underwriting results deteriorated.
Net income rose to $5.05 billion, or $3,074 per Class Ashare, from $3.92 billion, or $2,373 per share, a year earlier,Berkshire said on Friday.
Operating profit rose just 8 percent to $3.66 billion, or$2,228 per Class A share, from $3.4 billion, or $2,057 pershare. Analysts on average expected $2,402 per share, accordingto Thomson Reuters I/B/E/S.
Michael Yoshikami, president of Destination WealthManagement in Walnut Creek, California, which invests $1.3billion and owns Berkshire stock, said the company can boostinvestment results if bond yields rise once the U.S. FederalReserve pulls back on efforts to prop up the nation's economy.
"The U.S. economy is rather stumbling, and that is positiveactually for their infrastructure investments such asrailroads," he said. "All things considered, we are fairlypleased with the results."
Book value, Buffett's preferred measure of the Omaha,Nebraska-based company's worth, rose 11 percent this year to$126,766 per Class A share as of September 30, 2013.
Net insurance underwriting premiums fell 57 percent to $170million. Results weakened at the Geico auto insurance unit,which paid out a higher percentage of premiums to cover claimsthan a year earlier, and the General Re reinsurance unit, whichhad a $400 million underwriting loss from a European hailstorm.
In addition, Berkshire's main reinsurance business sustaineda $206 million pre-tax underwriting loss, hurt by lower premiumsand currency fluctuations.
Profit rose about 6 percent at Burlington Northern to $989million, as higher shipments of industrial products, consumerproducts and coal offset a drop for agricultural products amidlower grain exports and strong global competition.
Results also improved in businesses such as the Forest Riverrecreational vehicle unit. Revenue from jewelry, homefurnishings and other retail businesses rose 18 percent.
Bill Smead, chief executive of Smead Capital Management inSeattle, which invests 3 percent of its $700 million of assetsin Berkshire, said the 83-year-old Buffett is setting up thecompany to perform over the long haul.
"He's making a big push into almost everything associatedwith the idea that we'll build a lot more homes in the next 10years," Smead said.
Berkshire ended the quarter with $42.08 billion of cash andequivalents, giving Buffett the firepower to make one or morelarge acquisitions, which he calls "elephants."
The second-richest American wants to keep about $20 billionin cash, in part for possible insurance payouts on storms.
Berkshire bought $1.77 billion worth of stock during thequarter but sold $1.48 billion, and was actually a bigger netpurchaser of bonds than stocks.
Buffett has run Berkshire since 1965, favoring businesseswith consistent earnings power. Berkshire now has more than 80businesses, though it remains best known for insurance.
He spent $12.3 billion in June to buy part of ketchup makerH.J. Heinz Co. Berkshire also owns $104.9 billion in equities,including such stocks as Coca-Cola Co, InternationalBusiness Machines Corp and Wells Fargo & Co.
In Friday trading, Berkshire Class A shares closed up$127.70 at $173,122.50, while its Class B shares rose 19 centsto $115.27. Berkshire released results after U.S. marketsclosed. Its B shares fell 0.7 percent to $114.51 after hours.
- Company Earnings
- Warren Buffett
- Berkshire Hathaway Inc