2017: What would happen to Berkshire's insurance operation if Ajit retires?

BECKY QUICK: This question comes from Axel Meyersiek in Germany who writes, “If Ajit Jain were to retire, God forbid, be promoted, what would be the impact on the insurance operations, both with regards to underwriting profit as well as the development of float?”

WARREN BUFFETT: Well, nobody will — could possibly replace Ajit. I mean, it just — you can’t come close.

But we have a terrific operation in insurance. We really do, outside of Ajit, and it’s terrific-squared with Ajit.

There are things only he can do. But there are a lot of things that are institutionalized, a lot of things in our insurance business, where we’ve got extraordinarily able management, too.

So Ajit, for example, bought a company that nobody here has heard of, probably, called Guard Insurance a few years ago, based in worker’s comp, primarily. It’s based in — improbably — in Wilkes-Barre, Pennsylvania.

And it’s expanding like crazy in Wilkes-Barre. And it — it’s been a gem. And Ajit oversees it, but we’ve got a terrific person running it.

And we bought Medical Protective some years ago. Tim Kenesey runs that. Ajit oversees it, but Tim Kenesey can run a terrific insurance company, with or without Ajit. But he’s smart enough to realize that, if you got somebody like Ajit that’s willing to oversee it to a degree, that’s great.

But Tim is a great insurance manager all by himself, and Medical Protective has been a wonderful business for us. Most people don’t know we own it. The company goes back into the 19th century, actually.

We’ve got a lot of good operations. If you look at that section of the annual report called “Other” — insurance company, I mean that is — in aggregate, that is a wonderful insurance company. There’s very few like it. GEICO is a terrific company.

So, Ajit has made more money for Berkshire than I have, probably. But we’ve still got what I would consider the world’s best property-casualty insurance operation, even without him. And with him, you know, it — nobody, I don’t think anybody comes close.

Charlie?

CHARLIE MUNGER: Well, a few years ago, California made a little change in its workmen’s compensation law, and Ajit saw instantly that it would cause the underwriting results to change drastically.

And he went from a tiny percent of the market, (inaudible) 10 percent of the market, which is big, and he just grasped a couple billion dollars, at least, out of the air, like it was snapping his fingers. And when it got tough, he pulled back.

We don’t have a lot of people like Ajit. It’s hard to just snap your fingers and grab a couple billion dollars out of the air. (Laughter)

WARREN BUFFETT: Well, we’ve — actually, the California Workers’ Comp (inaudible), Guard has moved into that. I — we have got a lot of terrific insurance managers. I mean, I don’t know of a better collection any place. And Ajit has found some of those.

I’ve gotten lucky a few times. I mean, Tom Nerney at U.S. Liability, that goes back, what, 15, 16 years. He has a terrific operation. It’s not huge, but it is so well-managed.

And people don’t even know we own these things. But if you look at that last line — and now we’ve added Peter Eastwood with Berkshire Hathaway Specialty. And these are really good businesses, I got to tell you. (Laughs)

When you can produce underwriting prowess, and on top of that just hand more float — we don’t have many businesses like that. Those are great businesses.

We’ve got a hundred — you know, whatever it is — a hundred billion-plus of money that we get to earn on, while at the same time, overall, you know, on balance, we’re likely to make some additional money for holding it.

And if you can get somebody to hand you $104 billion and pay you to hold it while you get to invest and get the proceeds, it’s a good business.

Now, most people don’t do well at it. And, you know, the problem is that what I just described tempts lots of people to get into it.

And recently, people have gotten into it, really, just for the investment management. It’s a way to earn money offshore. And we don’t do that, but it can be done for small companies with investment managers.

So there’s a lot of competition in it. But we have some fundamental advantages, plus we have — in certain areas — plus we have absolutely terrific managers to maximize those advantages. And we’re going to make the most of it.