Berkshire Hathaway, the investment firm run by Warren Buffett, the world’s richest man reported a 77 per cent drop in third-quarter profits, as a $1.01 billion loss on derivatives and other investments combined with sharply reduced results from its operations across the board.

The group announced net earnings of $1.06 billion, it’s fourth straight quarterly decline, down from $4.55 billion the year earlier as so-called operating earnings on its insurance underwriting business plummeted by 83 per cent.

Profits on investments made by Berkshire’s insurance unit fell by 12 per cent to $809 million in the third quarter, while the non-insurance businesses it owns contributed a collective profit of $1.08 billion, 7.8 per cent down.

Berkshire’s operating profit fell 18 per cent to $2.07 billion, or $1,335 per share, from $2.56 billion, or $1,655. It fell short of analysts' average expectation of $1,429 per share. Revenue fell 7 percent to $27.93 billion.

Last month, Mr Buffett threw his weight behind US stocks as the man who has always invested his own money in government bonds revealed that he had recently switched most of his personal account into American shares.

In an editorial published in yesterday's editions of The New York Times, Mr Buffett, the head of the Berkshire Hathaway investment group and the world's richest man, acknowledged that the economic outlook was dire and described the financial world as being in a mess.

The man known as the Sage of Omaha, wrote: "Its problems, moreover, have been leaking into the general economy and the leaks are now turning into a gusher. In the near-term, unemployment will rise, business activity will falter and headlines will continue to be scary."

Mr Buffett's conclusion is to buy shares in US companies. "I have been buying American stocks. This is my personal account I am talking about, in which previously I owned nothing but US government bonds. If prices keep looking attractive, my non-Berkshire net worth will soon be 100 per cent in US equities."

Although most of Mr Buffett's wealth is tied up in Berkshire Hathaway, his personal investments are thought to run into tens, if not hundreds, of millions of dollars.

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