--Berkshire net income down 9% to $3.11 billion

--Operating profit exceeds analyst estimates

--Operating profit rises in part on insurance underwriting, Burlington, addition of Lubrizol

(Adds details about individual units beginning in the fourth paragraph.)

By Erik Holm

Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) said second-quarter profit fell 9% to $3.11 billion amid declining results in its derivative portfolio and a failure to repeat a big investment gain it chalked up a year ago.

But operating earnings, Buffett's preferred metric for evaluating his company, jumped 38% to $3.72 billion, or $2,252 per Class A share, the company said in a statement Friday. Analysts surveyed by Thomson Reuters had expected operating profit of about $1,777 a share.

Berkshire's insurance operations provided much of the boost in the operating results. The company's insurance operations, which include car insurer Geico Corp., posted an underwriting profit of $619 million, compared to a loss of $7 million in the same period a year earlier.

Much of the gain came in the company's reinsurance group, which had a $172 million gain on a swing in the value of the U.S. dollar in the latest quarter. A year ago, it had a loss of $220 million for the same reason.

At Geico, underwriting profit declined 2.5% to $155 million before taxes. The company warned that new business sales dropped 4.0% in the first six months of the year and reported higher year-to-date costs tied to natural disasters.

Buffett has said he likes the insurance business because he can invest the policyholder premiums until the money is needed to pay claims. Berkshire's insurance units earned $1.07 billion in investment income in the latest period, a 7.3% increase from last year's second quarter.

Buffett, one of the world's richest people, has built Berkshire over four decades into a massive conglomerate with more than 70 distinct units, including noninsurance operations like Dairy Queen, Fruit of the Loom and paint company Benjamin Moore. Berkshire operates power plants and gas pipelines, sells farm supplies and furniture, and manufactures machine parts and mobile homes.

The non-insurance businesses contributed to the improved operating result. Operating profit at those units rose 22% to $2.2 billion, in part because of the $322 million pretax contribution from chemicals maker Lubrizol Corp., which Berkshire acquired in September.

At railroad Burlington Northern Santa Fe, operating profit jumped 16% to $802 million amid higher rail traffic. Berkshire said demand for railcars rose in the industrial products and consumer products but declined for agricultural products.

The derivative book, which includes massive puts whose value rises and falls with major indexes, had a $693 million loss, five time larger than a year earlier. But Mr. Buffett, as always, warned that the figure is "often meaningless," since any losses won't have to be paid for several years, if at all.

A year ago, Berkshire booked $833 million for an investment gain when Goldman Sachs Group Inc. (GS) redeemed Berkshire's crisis-era investment in the investment bank. This time, Berkshire's investment gains were a scant $81 million. Neither the derivative losses nor the investment gains are included in operating income.

Berkshire had $40.7 billion in cash as of June 30, compared with $37.8 billion three months earlier.

Berkshire, which announced an unprecedented share buyback program last September, didn't repurchase any shares during the second quarter. Its shares have risen 12% in the year to date, versus a 10.6% gain in the Standard & Poor's 500-stock index.

Berkshire's Class A closed at $128,479 in regular trading Friday, their highest point since March 2011. The stock's post-2008 high is $131,300, reached in February 2011.

--Serena Ng contributed to this article.

Write to Erik Holm at erik.holm@dowjones.com

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