Warren Buffett has another reason to smile. His company, Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), just posted record earnings in the third quarter, though you wouldn't know it from the company's traditionally nondescript news release.

Berkshire Hathaway reported that its net income grew to $9.4 billion in the third quarter, driven by a massive $5.4 billion gain on its investments, largely related to a gain of $4.4 billion from its holdings of Kraft Heinz.

Operating profit from Berkshire's army of smaller companies fell about 4% to $4.55 billion, down from $4.7 billion a year ago. Net earnings were $5,737 per Class A share and book value grew 3% year over year to $151,083 per Class A share.

Looking under the hood
Berkshire's quarterly results are notoriously volatile, the result of a 12-figure portfolio of publicly traded securities and stakes in insurance companies, which produce volatile earnings by their nature. 

Its insurance companies produced underwriting profit of $414 million, compared to an underwriting loss of $38 million last quarter, and profit of $629 million a year ago.

GEICO built on its dominance in auto insurance. The company reported premium growth of 11.2% from the year ago period, largely from a 6.1% increase in policies. In line with other national car insurers, GEICO reported an increase in claims frequencies and severity, which weighed on underwriting performance this quarter. Though quarterly and annual results can be lumpy, investors should be encouraged to find that America's second-largest car insurer continues to add new policies at a relatively brisk pace.

Its other insurers -- General Re, Berkshire Hathaway Reinsurance, and Berkshire Hathaway Primary -- reported relatively mixed results. The reinsurance businesses posted lower underwriting profits from the year-ago period due to higher losses. The primary insurance business, which is a mix of all things insurance -- specialty, health, commercial auto, just to name a few of its products -- was the only insurance segment to post a year-over-year increase in underwriting profitability.

The insurance companies earned $840 million from investments this quarter, up from $811 million in the same quarter last year. The insurance float grew to $86.2 billion, up from $83 billion during the year-ago period.

Profits by rail
The railroad produced net income of $1.16 billion, an improvement over last year's earnings of $1.04 billion. BNSF reported that lower oil and coal prices have negatively affected its volumes, which grew only 1% year to date, but were offset by lower fuel prices and an increase in agricultural car loads. BNSF fuel costs declined nearly one-half billion dollars compared to the same quarter last year.

While challenged at the top line, operating expenses as a percentage of total revenue fell 5.4 percentage points to 62.9% for the third quarter. In other words, its income growth is primarily an expense story.

Profits in power and other operating companies
Berkshire's utility businesses steamed ahead. The company reported quarterly net earnings of $786 million from energy, up from $697 million in the year ago period. Combined, the railroad, utilities, and energy companies remain attractive places for Berkshire to invest its capital. Its quarterly report outlined $8.3 billion in combined capital expenditures so far in 2015, with $3.3 billion in additional spending slated for the remainder of the year.

An assortment of smaller businesses, from its real estate brokerage to Clayton Homes, made up 43% of Berkshire's operating income. There was a slight year-over-year decline in the other operating companies' profitability, with combined earnings falling to $1.48 billion this quarter from $1.5 billion last year.

Though operating profits fell roughly 4% this quarter from last year, it's notable that the decline was led by its insurance companies, which simply aren't supposed to grow earnings in a perfectly straight line. Excluding insurance, its earnings from operating companies were essentially flat year over year, growing 0.4%. 

While investors would like to see Berkshire's operating income grow quarter after quarter, the size and diversification of its many operating companies puts a limit on the change in its earnings, good or bad. 

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