Warren Buffett's Berkshire Hathaway Inc said fourth-quarter profit surged, helped by improved results from derivatives bets tied to global stock markets, though operating profit fell 40 percent as the weakened economy weighed on several businesses.

Net worth per share, which measures asset minus liabilities and is a key metric for Buffett, rose 19.8 percent, rebounding from a 9.6 percent drop the prior year.

While near the 20.3 percent average since Buffett began running Berkshire in 1965, it lagged the 26.5 percent gain including dividends in the Standard & Poor's 500.

Berkshire has about 80 businesses that sell such things as car insurance, carpeting, ice cream, paint and underwear.

Two weeks ago it paid $26.5 billion for Burlington Northern Santa Fe Corp, the nation's second-largest railroad, in Buffett's largest takeover ever. That and a related stock split won Berkshire admission to the S&P 500.

In his annual letter to Berkshire shareholders, Buffett admitted that Berkshire's ability to outperform that benchmark has shrunk dramatically as the company has grown, an unpleasant trend that will continue.

Huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge, he wrote.

NET RISES, OPERATING NET FALLS

Quarterly net income rose to $3.06 billion, or $1,969 per Class A share, from $117 million, or $76. Revenue rose 23 percent to $30.2 billion.

Excluding $1.03 billion of investment and derivative gains, operating profit fell 40 percent to $2.03 billion, or about $1,308 per share, from $3.37 billion, or $2,175.

On that basis, analysts on average expected $1,208 per share, according to Thomson Reuters I/B/E/S. Year-earlier results were hurt by $3.25 billion of losses from investments and derivatives, and helped by a one-time fee related to an aborted takeover of Constellation Energy Group Inc.

For all of 2009, profit rose 61 percent to $8.06 billion, or $5,193 per Class A share, from $4.99 billion, or $3,224. Revenue rose 4 percent to $112.49 billion.

Berkshire said operating results in insurance and utilities, its biggest lines of business, have not been negatively impacted in any significant way by the recession.

In contrast, it said most manufacturing, service and retailing units saw earnings fall from a year earlier, as the recession led to lower sales volume, revenues and profit margins as consumers have significantly curtailed spending, particularly for discretionary items.

For example, the NetJets plane leasing unit had a pretax loss of $180 million in the fourth quarter and $711 million for the year. Its debt had soared to $1.9 billion from $102 million in the 11 years that Berkshire owned it.

I failed you in letting NetJets descend into this condition, Buffett said. Last year, Buffett installed David Sokol, who chairs of Berkshire's MidAmerican Energy unit and is considered a leading candidate to eventually replace Buffett at Berkshire, to repair NetJets' financial condition.

Berkshire's book value rose 20 percent to $131.1 billion at year end from $109.27 billion at the end of 2008.

DERIVATIVES

Quarterly results included $1.05 billion of pretax gains on derivative contracts, mainly tied to the longer-term performance of stock market indexes.

Buffett said Berkshire has changed only a few derivatives positions in the last year, and he still believes they will make money. Berkshire also got billions of dollars of upfront payments from parties on the other side of the contracts, which it can invest as it wishes.

Berkshire ended the year with $30.56 billion of cash, up 20 percent from a year earlier, as Buffett sold some stocks including oil company ConocoPhillips. About $8 billion of the cash, though, was reserved for Burlington Northern.

Last year, Berkshire's Class A and Class B shares rose just 3 percent and 2 percent, respectively. This year, however, they have risen a respective 21 percent and 22 percent, helped by the addition of Berkshire to the S&P 500.

The A shares closed at $119,800 and the Class B shares closed at $80.13 in Friday trading on the New York Stock Exchange.

(Reporting by Jonathan Stempel, editing by Vicki Allen)

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