Latest news with #Berkshire-style
Mint
4 days ago
- Business
- Mint
Replacing Warren Buffett's insurance mastermind is Berkshire's next succession mystery
Now that Warren Buffett has said Greg Abel will succeed him as Berkshire Hathaway's CEO at year-end, Berkshire watchers are turning their attention to a different succession mystery: Who will fill Ajit Jain's shoes? For nearly four decades, Jain has been the brains behind Berkshire's insurance powerhouse. Its profits have helped Buffett expand his conglomerate and seed his stock portfolio. A risk-pricing mastermind, Jain has crafted policies insuring Chicago's tallest building against terrorist attacks, Pepsi against having to award a $1 billion raffle prize, and baseball teams in the event that star players such as Alex Rodriguez got hurt. Along the way, he has made Berkshire billions of dollars. 'Even kryptonite bounces off Ajit," Buffett once wrote. But Berkshire's man of steel (and statutory accounting) is now 73, and last year Jain said he gave Berkshire's board a shortlist of possible successors. Whoever follows Jain will inherit a business in transition. New competitors are moving in. Berkshire's biggest insurance moneymaker in recent years has been auto coverage. Buffett and Jain declined to comment for this article, and Berkshire hasn't disclosed the names on Jain's list. But insurance-industry insiders have some ideas. Joe Brandon, CEO of Alleghany Brandon, 66, is on his second stint at Berkshire after the company's 2022 purchase of Alleghany, a Berkshire-like conglomerate whose business spans insurance, steel fabrication and Squishmallow plush toys. He 'understands both Berkshire and insurance," Buffett said at the time of the purchase. Brandon also spent seven years running General Re, one of Berkshire's major providers of reinsurance, or insurance for insurance companies. He resigned in 2008 after federal prosecutors pressured Buffett to let him go following fraud convictions of four other former Gen Re executives. Brandon was never charged. Todd Combs, CEO of Geico Combs, 54, already has two jobs: heading Geico and helping manage a portion of Berkshire's investment capital. In five years leading the nation's third-largest auto insurer by premiums, Combs has modernized Geico's use of technology and shored up earnings and reserves. Buffett recently called the improvement 'spectacular." Combs also has a record of Berkshire-like returns and Berkshire-style humility. He earned a net cumulative 34% while running a hedge fund from 2005 to 2010, a financial crisis-era period when the S&P 500 produced 1.15%. Still he maintained such a low profile that when he accepted an investment manager job at Berkshire, the media couldn't find a photo of him. Combs's experience insuring more unusual and expensive risks is limited, however, and some analysts believe his money management responsibilities could expand when Buffett retires. Peter Eastwood, CEO of Berkshire Hathaway Specialty Insurance Since Buffett coaxed him away from AIG more than a decade ago, Eastwood, 58, has added a new arm to Berkshire's commercial insurance operations, building property-casualty insurer BHSI from scratch. The company started in 2013, turned a profit within 15 months and has since built up more than $15 billion in reserves, according to a person familiar with the company. Buffett has called Eastwood's hiring 'a home run," and BHSI now has offices across the U.S., Europe, Asia and Australia. Still, it is a smaller proving ground than some of the other companies in Berkshire's insurance empire, such as National Indemnity Company and Gen Re. Kara Raiguel, CEO of General Re Jain once called Raiguel, 52, his 'secret weapon." Practically a Berkshire lifer, she spent more than a decade working closely with him at Berkshire Hathaway's reinsurance division in Stamford, Conn., helping evaluate some of the company's biggest bets. Raiguel took over Gen Re in 2016 and reserves have swelled. Ratings firm A.M. Best said in November Gen Re has taken 'significant" actions toward bringing the prices policyholders pay better into line with the risk the firm takes on. Jain, who works from Berkshire's reinsurance offices in Stamford, hasn't said how long he plans to remain in his role. He grew up in India, earned an engineering degree and then sold early IBM computers before moving to the U.S. to attend Harvard Business School. Jain was still in his 30s, with no experience in the insurance industry, when Buffett hired him in 1986. Within six months, he was running Berkshire's entire reinsurance business. He soon became known in the industry for his warm manner, his close listening ear and his willingness to say no if he can't make money. Jain's meticulously priced deals brought in big lump sums, well beyond what Berkshire was getting from Geico's plain-vanilla auto insurance business. There was enough cash to pay claims and plenty left over for Buffett to deploy. Most hotshot investors have to ask people for money; Berkshire just collects insurance premiums. That is why Buffett once advised shareholders—in the event of a shipwreck where they could rescue only one drowning Berkshire executive—to 'swim to Ajit." Over the past decade, pension funds and other catastrophe bond investors have been displacing traditional property and casualty reinsurance capital, while private-equity firms have pushed into life insurance and annuities. Jain and Berkshire adapted by building out commercial insurers like Eastwood's group and by whipping Geico into shape. The auto insurer's underwriting earnings have outpaced all of Berkshire's other insurance businesses combined for the past two years running. For Jain's successor, the most important quality to replicate may be not his knack for making money but his talent for not losing it, said Christopher Bloomstran, chief investment officer of Semper Augustus Investments Group, a Berkshire investor. No other firm has the same capacity to pay for disaster recovery or bail out an underwater insurer. As long as Berkshire's next insurance chief is also comfortable saying no, the cash pile Jain helped build—arguably his most important contribution to Berkshire—will long outlast him. Jain 'is unique," said Stephen Catlin, executive chairman of the specialty insurer and reinsurer Convex. 'He will be a very hard act to follow." Write to Heather Gillers at
CNBC
05-05-2025
- Business
- CNBC
Bill Ackman sees Berkshire eventually paying dividend, increasing buybacks post-Buffett
Berkshire Hathaway could increase its cash returns to shareholders once Warren Buffett's term as chief executive officer comes to an end, according to Pershing Square CEO Bill Ackman. "I think they're going to start to returning capital," Ackman said Monday on CNBC's " Squawk Box. " The methods for returning capital could include a potential dividend and "being a little bit more aggressive in buying back stock," Ackman said. Under Buffett, Berkshire never paid a dividend and has not repurchased its own stock since the second quarter of 2024. The Berkshire board voted unanimously on Sunday to make Greg Abel the new president and CEO at year-end , following Buffett's recommendation. Abel will take over a company with a market value above $1 trillion and a cash pile of more than $347 billion. Even with that enormous amount of capital, Ackman said he expects Abel and the rest of Berkshire management to be "a little bit more careful" on the first major deals post-Buffett. Ackman is a long-time admirer of Buffett and on Monday called him "one of my most important heroes, certainly in business and I would say in life." The comments came the same day that Pershing Square announced struck a deal to raise its investment in real estate company Howard Hughes , with plans to turn it into a Berkshire-style conglomerate and investment vehicle. The billionaire hedge fund manager said he has confidence in Abel to be a good steward of Berkshire, though the new CEO has big shoes to fill when it comes to picking stocks and companies to buy. "Greg Abel is known to be a superb operator, and a very good allocator of capital certainly in the business that he's managed. I think it's yet to be proven that the current management team has the capability that Buffett has had to buy businesses, and it's more challenging now because of the scale," Ackman said. All that said, however, "I wouldn't bet against Berkshire," Ackman added.
