Berkshire’s Net Income Falls on Katrina Losses

Berkshire Hathaway Inc., the insurance and investment company run by billionaire Warren E. Buffett, said Friday that losses from Hurricane Katrina triggered its lowest quarterly profit in almost four years.

Third-quarter net income fell 48% to $586 million, or $381 a share, from $1.14 billion, or $739, a year earlier, Omaha-based Berkshire said. Profit excluding changes in the value of investments was about $69 a share, less than the $180 expected by Gary Ransom, an analyst at Fox-Pitt Kelton Inc.

Berkshire owns insurers General Re and Geico and depends on those businesses for more than half of its profit. Results haven’t been worse since the fallout from the Sept. 11 terrorist attacks virtually wiped out profit in the fourth quarter of 2001.

“The storms are certainly in the super-catastrophe area that Buffett himself has been predicting all along,” said Frank Betz, a partner at Carrett Zane Capital Management in Warren, N.J.

Buffett, who has touted the company’s preparation for the “unthinkable” disaster, may benefit in future quarters as Katrina’s unprecedented damage lets insurers raise prices and rebuilding efforts boost demand for the paint, carpet and concrete sold by some of Berkshire’s other businesses, said Keith Trauner, a fund manager at Fairholme Capital Management.

“For the next couple of years, we expect a dramatic increase in reinsurance profits,” Trauner said. Berkshire should also “get a little boost from rebuilding efforts.”

Katrina, which devastated parts of Louisiana and Mississippi in August, was probably the industry’s most expensive U.S. disaster, costing an estimated $40 billion to $60 billion, according to storm modeler Risk Management Solutions Inc. Hurricane Rita, another Gulf Coast storm that struck less than a month later, is projected to cost insurers $4 billion to $7 billion.

Buffett, 75, is the world’s second-richest man, after Microsoft Corp. founder Bill Gates.