Warren Buffett’s Berkshire Hathaway Inc. is finding it hard to grind out higher profits this year, in large part because of slumping results at its insurance businesses.
Gains at the conglomerate’s railroad and energy units weren’t enough to overcome an underwriting loss during the second quarter, the company said Friday in a statement. Operating profit slid for the third straight period.
Buffett, 86, is still sitting on a mountain of cash. At the end of the quarter, his company had almost $100 billion. The record balance prompted the billionaire to say earlier this year that he hadn’t put his “foot to the floor” on an acquisition for a long time. It also fueled speculation that he might buy something that’s big even by his standards.
In the meantime, Buffett has been finding other places to invest. Berkshire bought a stake in a real estate investment trust and agreed in June to prop up Home Capital Group Inc., an embattled Canadian mortgage lender.
In early July, the energy arm of his conglomerate announced a $9 billion deal to buy the parent company of the largest electric-transmission operator in Texas, though the agreement is being challenged by Paul Singer’s Elliott Management Corp. Berkshire has also held talks with Sprint Corp. Chairman Masayoshi Son about making an investment, according to a person familiar with the matter.
While those deals could soak up a lot of excess cash at Berkshire, its dozens of businesses continue to generate more. All together, they produced $4.12 billion of operating profit in the second quarter, an 11 percent decline from a year earlier.
The biggest, railroad BNSF, reported profit rose 24 percent to $998 million. The business has benefited from a surge in coal and other freight shipments this year as it continues to take market share from Union Pacific Corp., its main competitor in the western U.S.
The insurance segment — which includes GEICO and two of the world’s largest reinsurers — posted an underwriting loss of $22 million, compared with a gain of $337 million a year earlier. Investment income from the units slipped about 1 percent to $965 million.
Book value, a measure of assets minus liabilities that’s closely tracked by investors, rose 2.7 percent in the quarter to $182,816 per share. The company’s Class A shares have climbed 11 percent this year to $270,000 as of 4 p.m. in New York, matching the gain in the S&P 500 Index. Results were released after the close of trading.