Berkshire Hathaway profits drop 43% in second quarter.
Warren Buffett’s Berkshire Hathaway reported a drop in profits for the second quarter of 2008, with insurance underwriting income dropping 43% to $360m (£190m).
Net earnings across Berkshire Hathaway fell 7.6% in the quarter to $2.88bn. Excluding investment and derivative gains, the company earned $2.27bn, or $1,1465 a share.
Two weeks ago, reinsurer Munich Re warned that its second quarter profits would be sharply down.
In a letter to investors written last year, Buffet predicted the drop in insurance related profits.
After recording a successful year, he wrote: “That party is over. It’s a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008.
“Prices are down, and exposures inexorably rise. Even if the US has its third consecutive catastrophe-light year, industry profit margins will probably shrink by four percentage points or so.
“If the winds roar or the earth trembles, results could be far worse.
“So be prepared for lower insurance earnings during the next few years.”