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Buffett's firm says 3Q profit jumps 72 percent

Associated Press Modified: November 2, 2012 at 6:31 pm •  Published: November 2, 2012

OMAHA, Neb. (AP) — Warren Buffett's company said Friday its third-quarter profit soared 72 percent because the value of its investments and derivative contracts improved significantly.

But Buffett has said he believes Berkshire's operating earnings, which exclude the value of its derivatives and investments, are a better measure of the company's performance. Berkshire's operating earnings declined 11 percent in the quarter, weighed by a drop in insurance underwriting profits.

Berkshire Hathaway Inc. reported net income of $3.92 billion, or $1.58 per Class B share. That's up from $2.28 billion, or 92 cents per share, last year.

Its revenue grew to $41.05 billion from last year's $33.74 billion.

The three analysts surveyed by FactSet expected Berkshire to report earnings of $1.38 per Class B share on $39.04 billion revenue.

The biggest difference in the quarter was a major swing in the paper value of Berkshire's derivatives tied to equity markets. Berkshire's investment gains and derivative losses combined to add $521 million to net income this year. In 2011, those things drained $1.53 billion from its third-quarter profit.

Buffett says Berkshire's investment and derivative gains or losses can be misleading because the company rarely sells its investments, and the derivatives don't mature until about eight years from now.

Berkshire executives do not typically comment on quarterly earnings reports, and they did not immediately respond to an interview request late Friday.

Besides the big swing in the paper value of Berkshire's investment and derivatives, several of the Omaha-based company's other subsidiaries performed well.

Berkshire's BNSF Railway contributed $937 million to the company's third-quarter profit as it increased prices about 2 percent and hauled 5 percent more carloads of freight. That's up from $766 million last year as BNSF limited expense growth to less than 3 percent.

Another boost was the addition of specialty chemical maker Lubrizol, which Berkshire acquired last September. That acquisition, combined with a modest improvement in the U.S. housing construction, helped Berkshire's manufacturing, service and retail unit generate $991 million in net income. That's up from $836 million last year.

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