Wednesday, May 23, 2012

Buffett’s Idiot Challenge Seized




Ajit Jain, who helped build Berkshire Hathaway into a $200 billion firm by underwriting risks that others shunned, is hunting for insurance-premium growth that his boss Warren Buffett says may be a thing of the past, Bloomberg says.

The funds that Berkshire holds before paying out claims may decline after swelling to more than $70 billion last year from $39 million in 1970, Buffett said in a February letter to shareholders. The billionaire has used the premiums, called float, for acquisitions and investments to fuel expansion over the past four decades. According to Buffett, Jain took the letter as a challenge.

Jain wants me to “look like an idiot,” the billionaire said May 5, drawing laughter from an audience of thousands of shareholders at the company’s annual meeting in Omaha, Nebraska.

Berkshire’s increasing float has mirrored its climbing stock price during the past quarter century and been used by investors to value the firm. Buffett’s prediction highlights the dilemma facing Jain as he seeks new long-term liabilities.

Buffett, 81, has praised Jain for his skill in selecting risks at the right prices. The reinsurance chief accumulated $34 billion in float since joining Berkshire in 1985, “a feat that no CEO of any other insurer has come close to matching,” the billionaire wrote in the letter…..


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