By Nicole Friedman
Warren Buffett's Berkshire Hathaway Inc. said second-quarter net earnings surged, boosted by insurance underwriting and a change to accounting rules.
Berkshire's earnings are especially volatile due to an accounting rule that went into effect this year requiring companies to include unrealized investment gains or losses in their net income. Berkshire holds large stock investments, and their quarterly changes in value can have a big effect on Berkshire's net income.
Berkshire reported second-quarter net earnings of $12 billion, or $7,301 per Class A share equivalent, from $4.26 billion, or $2,592 a share, in the year-earlier period.
Operating earnings, which exclude some investment results, rose to $6.9 billion from $4.12 billion in the year prior. Mr. Buffett has said operating earnings are more reflective of Berkshire's performance.
The conglomerate runs a large insurance operation in addition to railroad, utilities, industrial manufacturers and retailers. Its holdings include recognizable names such as Dairy Queen, Duracell, Fruit of the Loom, Geico and See's Candies.
Berkshire's insurance business sits at the core of its moneymaking machine. Insurance brings in billions of dollars of "float," upfront premiums customers pay and that Berkshire invests for its own gain.
Berkshire's biggest stock holding is Apple Inc., which this week became the first U.S.-listed company to surpass $1 trillion in stock-market value.
Book value rose to $217,677 a Class A equivalent share as of June 30, a 2.8% increase for the first half of the year. Last year, Berkshire reported a 6.2% increase in book value for the comparable six-month period.
Class A shares closed Friday at $304,671.
The 87-year-old Mr. Buffett, whose shrewd investments have earned him the nickname "the Oracle of Omaha," still has plenty of cash on hand for future acquisitions as a way to drive profit. Berkshire held $111 billion in cash at the end of the second quarter, up from $108.6 billion at the end of the first quarter.
Berkshire changed its buyback policy in July. Previously the company could repurchase shares if the stock price was below 120% of book value. Under the new policy, Berkshire can buy back shares if Mr. Buffett and his business partner Charlie Munger believe that the stock price is below Berkshire's intrinsic value.
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