There was Midas, and then there’s Warren Buffett and now there will be Ajit Jain.
So what is it in Jain that attracted the attention of the legendary investor? The answer is simple: He prevents “foolish losses” through his extraordinary discipline. And that’s the key: Buffett believes insurers produce outstanding long-term results primarily by avoiding dumb decisions, rather than by making brilliant ones.
Ajit Jain (born, 1951 in ) is a businessman who currently heads several businesses for and has been touted as a possible successor to.
Primarily an IITian (from IIT Kharagpur), he showed Buffett-like qualities from the very begining, says Ronojoy Dutta, a friend and former classmate of Jain at IIT who was president of Chicago-based UAL Corp.’s United Airlines from 1999 to 2002.
A simple guy, who needs no limelight and is very self-effacing, justified his worth by investing the cash generated from his insurance business that helped Buffett become second in wealth only to Bill Gates, chairman of Microsoft Corp., the world’s largest software maker. Buffett transformed a failing textile manufacturer into a company with a market value of $140 billion by acquiring businesses he found to be undervalued in industries ranging from insurance and utilities to candy-making and paint.
Buffett’s annual letters to shareholders contain praise for Jain. In his 2005 letter, Buffett called him an “extraordinary manager.” The year before he wrote that “Ajit’s value to Berkshire is enormous.” The year before that he said, “It’s impossible to overstate his value to Berkshire.”
Warren Buffett, world’s greatest living investor has been justly hailed as the Oracle of Omaha. His financial skills catapulted him to the status of the world’s richest man last year, ahead of buddy and bridge partner Bill Gates, and Mexican telecom tycoon Carlos Slim Helu.
Now, Buffett has hinted that his successor may be a person of Indian
origin, Ajit Jain. In his annual letter to shareholders of his holding
company, Berkshire Hathaway, Buffett showered praise on Jain, who
handles the reinsurance division.
Buffett’s admiration of Jain’s underwriting discipline places him on any list of potential successors, says David Winters, who manages $400 million at Wintergreen Advisers LLC in Mountain Lakes, New Jersey.
“He’s been an incredible asset to the Berkshire shareholders over the years,” says Winters, who has held Berkshire stock for his own account for more than a decade. “The guy’s got a very seriously capable insurance brain. So he would certainly be on most people’s lists.”
Ajit Jain raised in India’s coastal state of Orissa, graduated in 1972 from the Indian Institute of Technology Kharagpur IIT. He worked for IBM in India from 1973 to 1976, then moved to the United States, where he earned an MBA from Harvard University in 1978.
He joined McKinsey & Co., but returned to India in the early 1980s. After a month long courtship, he married a woman chosen by his parents. Then he went back to the United States to work for McKinsey.
In 1986 he left McKinsey to work on insurance operations for Buffett and at that time, he said he knew little about the insurance business. But today, Jain, 54, speaks daily to Buffett, 75, Berkshire’s chairman and chief executive officer.
Jain specializes in mega-catastrophe coverage, that is, he takes risks that rivals avoid. For instance, he insured the Sears Tower in Chicago, America’s tallest building, after the September 11, 2001 terrorist attack. He also underwrote the Winter Olympics at Salt Lake City in 2002, when big groups shunned the games as too risky after the attack.
As of July 2006, Jain was overseeing about 30 employees at Berkshire Hathaway Reinsurance Group, located in the First Stamford Place office complex near downtown Stamford, Connecticut. That 30-employee group, according to an article by Bloomberg News reporter Rob Urban, “generated float, the pool of premiums insurers invest before they need to pay out claims, of $16.23 billion as of 2005. That was more than double the $6.69 billion from Berkshire’s 20,417-employee GEICO, the fourth-largest U.S. car insurer, according to Berkshire’s annual report.”
According to a Bloomberg report in 2006, Jain’s focus on generating revenue after joining Berkshire is reflected in an advertisement which he took out in the trade publication Business Insurance which read something like: “We are looking for more-more casualty risks where the premium exceeds $1 million. The Berkshire Hathaway Insurance Group currently has $2 billion in surplus that’s right, $2 billion. And, because we retain the entire risk ourselves, instead of laying it off in the uncertain world of reinsurers, we have the flexibility to respond to your specific needs.”
This was typical of Buffett’s style of building Berkshire by saying: “Send us your deals”, and then just answering the phone.
In the last few years, there has been a lot of speculation about Buffett’s succession. In dealing with it, Jain has shown that apart from his “extraordinary talent and discipline”, he also shares with his boss an extraordinary sense of humour.
As Dutta (Jain’s close friend) says, Jain has an uncanny ability to cut to the core of the matter. People will be throwing extraneous facts in but he has this uncanny ability of saying, `Wait. The real issue is this.’ That’s his greatest strength.”
An ordinary man with an extraordinary mind and wit from IIT Kharagpur made it all big. He proved the world not only his intelligence but the implementation of the same by mastering the select practices in the other area of his keen interest that is finance and insurance.
“Ajit came to Berkshire in 1986. Very quickly, I realised that we had acquired an extraordinary talent. So I did the logical thing: I wrote to his parents in New Delhi and asked if they had another one like him at home. Of course, I knew the answer before writing. There isn’t anyone like Ajit.” Warren Buffett, in his annual letter to Berkshire Hathaway shareholders, in 2009.
In response to a journalist’s question on whether Jain may be the choice for CEO, Buffett said he remains in close touch with him and declined to comment on succession.
”I still do talk to him every day,” Buffett said. “That’s how I get smarter.”
In letters Buffett has written accompanying Berkshire’s reports to shareholders, he has consistently praised Jain:
In 2002: “I have known the details of almost every policy that Ajit has written since he came with us in 1986…. His extraordinary discipline, of course, does not eliminate losses; it does, however, prevent foolish losses. And that’s the key: Just as is the case in investing, insurers produce outstanding long-term results primarily by avoiding dumb decisions, rather than by making brilliant ones.”
In 2003: “It’s impossible to overstate his value to Berkshire.”
In 2004: “Ajit’s value to Berkshire is enormous.”
In 2005: Buffett called him “an extraordinary manager.”
In 2008: “Ajit came to Berkshire in 1986. Very quickly, I realized that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home. Of course, I knew the answer before writing. There isn’t anyone like Ajit.”