Warren Buffett’s Berkshire Hathaway said on Friday that its third-quarter net earnings sank 77 per cent after it recorded heavy losses on the value of investments and derivatives and suffered a steep drop in insurance underwriting profits.

The Omaha-based company’s net income fell to $1.06bn, or $682 per share of Class A stock, marking the fourth consecutive decline in net quarterly profits for one of the world’s most famous investors.

Mr Buffett, who has shuttled tens of billions of dollars this year into Goldman Sachs, General Electric, confectioner Mars and nuclear power generator Constellation Energy, is also now working as an economic adviser to Barack Obama, the US president-elect.

His insurance company, which has investments in a diverse range of businesses, said its net worth slipped to $120.15bn from $120.73bn over the first nine months of the year. That number dropped $9bn after tax in October, as the value of its equity and debt investments declined.

Berkshire Hathaway recorded $1.01bn in losses on the value of some investments and derivatives for the third quarter, compared with $2.0bn in gains in the third quarter of 2007.

The company, which separates those results from its net earnings, stated that the amount of investment and derivative gains or losses it reported “in any given quarter or year is usually meaningless”.

Most of those losses stemmed from unrealised losses on derivatives contracts. Berkshire had already reported a $1.01bn loss on the value of its two major types of derivative contracts in the first six months of the year, and it more than doubled that loss to $2.06bn by the end of the third quarter.

Insurance underwriting, which in the third quarter of last year accounted for 19 per cent of Berkshire Hathaway’s operating earnings, sank 83 per cent to $81m, accounting for just 4 per cent of that total in the third quarter of this year.

The company took about $1.05bn in losses from recent hurricanes Ike and Gustav, which wreaked havoc on the results of the insurance industry.

Shares of Berkshire Hathaway have slid nearly 20 per cent over the past year, hit by losses in shares of some of the publicly traded blue-chip companies in which Berkshire invests – including Coca-Cola and American Express.

The company’s Class-A shares closed 0.71 per cent higher on Friday at $113,000 per share.