Berkshire Says Storms Led to Lowest Profit Since 2001 (Update1) Nov. 5 (Bloomberg) -- Ber... Berkshire Says Storms Led to Low

Nov. 5 (Bloomberg) -- Berkshire Hathaway Inc., the insurance and investment company run by billionaire Warren Buffett, said $3 billion in claims from Hurricanes Katrina and Rita triggered the lowest quarterly profit since 2001.

Berkshire, reliant on insurance units such as General Re and Geico for more than half of annual earnings, said third- quarter net income fell 48 percent to $586 million, or $381 a share. Buffett also reduced his bet against the U.S. dollar, lowering foreign currency investments by 23 percent, the company said in a statement yesterday.

Buffett, 75, hasn't reported lower results since just after the September 11th terrorist attacks. The Omaha, Nebraska-based company may benefit in future quarters as Katrina's unprecedented damage allows insurers to raise their rates, Callahan said.

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

Berkshire's net income fell from $1.14 billion, or $739 a share, in the third quarter of 2004, even as the company reported $480 million in investment gains, including $29 million in pretax gains from the company's foreign currency forward contracts.

Buffett, who's said he expects the U.S. trade deficit to weaken the dollar, reduced the company's contracts by $5 billion to $16.5 billion during the third quarter after $926 million in currency losses earlier this year. The contracts are agreements to purchase a foreign currency in the future at a preset price.

The company, which gained $2.96 billion on the wager between 2002 and 2004, had been losing money as the dollar gained 10 percent against a basket of six major currencies in the first half of the year. In the third quarter, the dollar gained 0.5 percent more against those currencies, prompting some analysts to expect more losses on the bet.

The company increased insurance investment income by 24 percent to $601 million as short-term interest rates in the U.S. rose. The average seven-day yield of taxable money-market funds reached 3.12 percent at the end of September, the highest in four years.

Pretax earnings from building products such as insulation and roofing rose 11 percent to $214 million, boosted by a booming U.S. housing market. Profit at Shaw Industries Inc., a carpet maker, climbed 25 percent to $145 million.

Berkshire reported that General Re received a new subpoena from federal prosecutors in Virginia investigating its role in the collapse of Reciprocal of America, a failed medical malpractice insurer that bought reinsurance from General Re.

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