Berkshire Hathaway BRK.A BRK.B reported solid third-quarter results largely in line with our expectations, and we will keep our fair value estimate. Book value per share rose 10% in the quarter after an 11% increase in the second quarter. These very strong annualized increases (40%-plus) are arriving amid light catastrophe losses for the reinsurance operations, as well as improving equity and credit markets and the impact on the value of Berkshire's derivative positions. We had been anticipating somewhat better third-quarter results out of Berkshire's operating subsidiaries amid the developing economic recovery, but we note that revenue growth in these operations did improve a bit on a sequential basis, after discounting for normal seasonal trends, as did the aggregate margin in those operations. Berkshire closed the quarter with nearly $27 billion in cash, and we see its liquidity as more than amply supplementing other features of its robust financial strength. Berkshire's overall operating cash flow has been heading higher in the last couple of years, even as reported earnings and book value remained depressed (at least until the last two quarters). Berkshire has been gaining quality market share and writing expanding premium amid unsettled insurance markets, leading to higher overall cash flow even as the contribution from the operating subsidiaries waned in the recession. During the third quarter, premium volume was flat compared with that of a year ago, but the light catastrophe quarter damped that result a bit. Overall operating cash flow was basically flat or modestly higher from the second quarter, after discounting for normal seasonal trends.
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More Analyst Research
Berkshire Hathaway Inc. Full Analyst Report
Analyst Notes
11-09-09 | 10:59AM Does Berkshire's Stock Split Matter?
11-03-09 | 9:38AM Berkshire Paying Fair Price for BNSF
11-03-09 | 9:07AM Berkshire Hathaway to Acquire BNSF
08-10-09 | 9:45AM Large Book Value Gain in Berkshire's 2Q
More Analyst Research
Berkshire Hathaway Inc. Full Analyst Report
Analyst Notes
11-09-09 | 10:59AM Does Berkshire's Stock Split Matter?
11-03-09 | 9:38AM Berkshire Paying Fair Price for BNSF
11-03-09 | 9:07AM Berkshire Hathaway to Acquire BNSF
08-10-09 | 9:45AM Large Book Value Gain in Berkshire's 2Q
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