After the stock market closed on Friday, August 2, Berkshire Hathaway reported its earnings for the second quarter of 2013. The highlights are as follows:
(1) Operating earnings increased by 5% over the past 12 months. Insurance underwriting earnings in the second quarter of 2013 declined by $89 million from the corresponding quarter in 2012, primarily as a result of catastrophic losses of $124 million resulting from floods in Europe. Operating income from Berkshire’s non-insurance businesses increased by 8% as compared to the second quarter of 2012.
(2) Net income increased by 46% over the past 12 months. This comparison, however, includes investment gains and accounting for derivatives which are highly variable in any given quarter or year and are “often meaningless” (Press Release – August 2, 2013).
(3) Book value equaled $122,900 per Class A equivalent share as of June 30, 2013, representing an increase of 14.5% over the past 12 months. Warren Buffett considers book value to be a good, although understated, proxy for intrinsic value. (At Berkshire Hathaway’s Class A closing price of $176,500 on August 2, its shares are trading at 1.4 times its book value as of June 30, 2013, which is below its historic average since 1985 of 1.6. Warren Buffett has announced that he would buy back shares in Berkshire when they are trading at less than 1.2 times book value.)
(4) Berkshire’s balance sheet, as of June 30, 2013, indicated cash and cash equivalents of $35 billion, equity securities equal to $103 billion, and fixed maturity securities valued at $29 billion.
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