Warren Buffett's plans to eventually pass the reins of
Abel will be vice chair of Berkshire's non-insurance business operations, which span dozens of sectors from railroads to chemicals, retail and energy, while Jain will be vice chair of Berkshire's insurance operations, led by GEICO, National Indemnity and its reinsurance business. Both Abel and Jain will also be added to Berkshire's board of directors
Buffett, in a morning interview with CNBC's Becky Quick, was upfront about the moves, characterizing them as part of his succession planning. "It's part of a movement to succession over time and they are the key figures at Berkshire," Buffett said, noting that Berkshire's board was strongly in favor of announcing the move. "This could have happened five years ago," Buffett, 87, said. But he said it did not reflect any immediate plans to step away from Berkshire, or any health issues.
"I feel terrific and I love what I do," Buffett said, "I can't wait to get to the office in the morning." Buffett, in his ninth decade, has continued to pull off masterstrokes, from his infusion into
Shareholders in Berkshire have long speculated on who will eventually replace Buffett when he steps aside. Abel, 55, and Jain, 66, now become increasingly obvious picks. Both have "Berkshire in their blood," Buffett said. However, he noted Berkshire's board has a designated successor were he to step away tomorrow, but that person could change over time.
Abel, a native of Edmonton, Alberta, joined Berkshire Hathaway through its acquisition of MidAmerican Energy in 1999. A trained accountant, Abel was named CEO of Berkshire's energy business, now called Berkshire Hathaway Energy, in 2008. Berkshire Hathaway Energy has grown into one of the conglomerate's fast-growing and most profitable businesses. With $85 billion in assets at year-end 2016, it is one of the largest utilities in the country, with a big footprint in Nevada, Iowa, Utah, Oregon and California. Some 82% of Berkshire Hathaway Energy's PP&E comes from renewable energy, where it is one of the biggest producers of wind and solar energy in the world, in addition to smaller exposure to coal and natural gas.
Jain, by contrast, oversees Berkshire's gigantic insurance outfit, where he's shown deft underwriting skill and the discipline to trim exposures to overly competitive markets like catastrophic insurance and reinsurance when pricing is unfavorable. A native of India, Jain came to the U.S. to get an MBA at Harvard and then cut his teeth at consultancy McKinsey. In 1985, he was hired by Buffett to work in Berkshire's insurance operations. Said Buffett in a 2009 shareholder letter, "I immediately knew we had found a superstar." A decade later, the division was bolstered by Buffett's acquisition of the Geico shares Berkshire didn't already own. From an insurance float of $3.6 billion in 1995, Berkshire's float now stands at about $100 billion annually.
In addition to Abel and Jain, Berkshire's investing business also has two rising figures. Buffett is increasing his allocations of Berkshire funds to lieutenants Todd Combs and Ted Weschler, who each manage over $10 billion, and have led the conglomerate to positions ranging from Apple to Charter Communications.
As succession plans harden, Buffett and Munger will continue in their existing positions. That means they will continue to be overseeing major capital allocation decisions and investment activities, for instance any major deals. In addition to making headlines for Berkshire's succession plans, Buffett also made headlines for his views on the wider investing landscape.
Most notably, Buffett said tax reform will have a big impact on Berkshire's owners, telling CNBC's Quick that shareholders effectively have seen their ownership of the company's profits rise by over 20% as corporate rates have fallen from 35% to 21%.
About crypto-currencies, Buffett said today's euphoria inevitably will lead to heart break. "If I could buy a five year put on any of the crypto-currencies I would do it," Buffett said, admitting he would never short the speculative asset because it's not something he knows well. He dished out the following common sense, "why in the world should I take a short position in something I don't know anything about."
But his views are crystal clear. "I think what's going on definitely will come to a bad ending," Buffett said.
The succession at Berkshire is one of biggest stories in finance, but so far it appears Berkshire investors are at ease with the inevitable change. Berkshire Class A shares closed Tuesday trading at a record high of $308,350, up 1.26%. Shares have gained 27% over the past 12-months, beating the S&P 500.
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