Berkshire Hathaway Insurance, Energy Units Aid Q3 Earnings
Berkshire Hathaway Inc. (BRK.B) reported third-quarter 2014 operating earnings of $1.91 per share, way ahead of the Zacks Consensus Estimate of $1.70. Earnings also compare favorably with $1.49 per share reported in the year-ago quarter.
Earnings growth came primarily from the insurance business which benefited from higher underwriting income on the absence of catastrophic claims and from the energy business, which benefited from last year’s acquisition of NV Energy in Nevada. Other segments at Manufacturing, Service and Retailing and Finance and Financial products also contributed to earnings growth albeit at a lesser degree.
Total revenue came in at $51.2 billion, up 15.2% year over year. The increase was driven by broad-based growth across all the operating segments, with the greatest contributor being insurance.
Total cost and expense of $44.4 billion increased 13.5% year over year.
Segment Results
Insurance Group revenues increased 32.1% year over year to $13.7 billion, primarily led by more than a twofold rise in premium from Berkshire Hathaway Reinsurance Group, followed by higher contributions from Berkshire Hathaway Primary Group, GEICO and General Re. Berkshire Hathaway’s insurance segment has been the biggest generator of float, which has been customarily used by Warren Buffett to make investments.
These investments which come in the form of equity as well as acquisitions have made Berkshire Hathaway a conglomerate of over 80 big and small subsidiaries. Income from the segment before taxes increased 43.6% year over year to $1.9 billion thanks to the absence of any major catastrophe during the quarter.
Railroad, Utilities and Energy operating revenues increased 18.7% year over year to $10.7 billion. Of the total segment revenue, more than half came from Burlington Northern Santa Fe, the railroad company, which was acquired in Feb 2010. Income from the segment before taxes increased 26.3% year over year to $2.7 billion, led by the 79% increase in operating earnings from Berkshire Hathaway Energy Company.
Total revenue at Manufacturing, Service and Retailing, which includes McLane, Iscar and Lubrizol, increased 7.0% year over year to $25.2 billion. Income from the segment before taxes increased 10.2% year over year to $1.8 billion led by higher contribution from manufacturing and other businesses.
Revenues from Berkshire Hathaway's Finance & Financial Products segment which includes Clayton Homes (manufactured housing and finance), CORT Business Services (furniture rental), Marmon (rail car and other transportation equipment manufacturing, repair, and leasing) and XTRA (over-the-road trailer leasing) increased 7.5% year over year to $1.7 billion.
Financial Position
Consolidated shareholders’ equity at Sep 30, 2014 was $237.5 billion, reflecting an increase of 7.0% since Dec 31, 2013. Consolidated cash approximated $62.4 billion at quarter end, up 29.5% since the Dec 31, 2013 level.
Zacks Rank & Other Performances
Berkshire Hathaway Inc. (BRK.B) carries a Zacks Rank # 2 (Buy). Other players like AmTrust Financial Services, Inc. (AFSI), HCI Group, Inc. (HCI) and Arch Capital Group Ltd. (ACGL) reported favorable third-quarter earnings, beating the respective Zacks Consensus Estimate by 75.9%, 10.8% and 9.4%.
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