Berkshire Profit Declines 24% on Buffett's Derivative Bets

Nov. 5 (Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc. said third-quarter profit fell 24 percent as derivative bets declined in value.

Net income slid to $2.28 billion, or $1,380 a share, from $2.99 billion, or $1,814, a year earlier, the Omaha, Nebraska- based company said yesterday. Operating earnings, which exclude some investment results, were $2,309 a share, beating the $1,796 average estimate of three analysts surveyed by Bloomberg.

Buffett, 81, uses derivatives to speculate on long-term gains in stocks and the creditworthiness of corporate and municipal borrowers. The contracts tied to equity indexes, which aren't scheduled to settle until 2018 or later, produced a loss of $2.09 billion in the period as the Standard & Poor's 500 Index posted its biggest decline since 2008. Liabilities on the equity derivatives rose to $8.85 billion.

"He's been in the negative position for some time now and I'm not worried yet, but it's something to keep an eye on," said Tom Lewandowski, an analyst with Edward Jones & Co., who has a "buy" rating on Berkshire. "Outside of the derivative losses it seems like he had a lot of broad-based growth throughout the businesses."



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