The next Warren Buffett: Meet two people who could take over from billionaire investor

EDINBURGH — Sage of Omaha Warren Buffett has given a vote of confidence in two of his lieutenants as possible successors as CEO when he leaves investment holding company Berkshire Hathaway – the company that has dazzled investors over decades. They are people who have had careers within the group: Indian-born Ajit Jain, about whom Buffett has repeatedly sung praises for having the Midas Touch in the insurance sector, and Greg Abel, who has made his mark running non-insurance business for Berkshire Hathaway. Jain is in his late 60s, while Abel is 10 years his junior. The Financial Times reports that Buffett is effectively confirming market speculation that one of these two men will eventually become CEO, while his son Howard Buffett stays on as chairman. The FT cautions that neither Jain nor Abel will have the sway of Buffett in boardrooms. Buffett is influential behind-the-scenes within the US banking sector, for example unofficially playing a role in brokering deals. It will also be hard to replace Warren Buffett from an investor perspective because he has cult-like status. Buffett’s moves are watched closely by investors as he has consistently produced returns above the market averages. There are dozens of books about Warren Buffett’s investment style, which is borrowed from father of security analysis Benjamin Graham. Buffett, 87, remains chairman and CEO of the $500bn company he has run for more than five decades and 94-year-old Charlie Munger remains at his side as deputy CEO for now. Shares ticked up in an apparent sign of approval from shareholders in the annointment of Jain and Abel. – Jackie Cameron

By Noah Buhayar and Katherine Chiglinsky

(Bloomberg) — Warren Buffett finally confirmed what many investors have already guessed about who will succeed him as chief executive officer of Berkshire Hathaway Inc., the sprawling conglomerate he’s built over the past five decades.

In naming two senior executives — Ajit Jain and Greg Abel — to the company’s board and giving them each responsibility for large swaths of Berkshire’s businesses, he positioned one of the two men to probably be his replacement.

“It’s part of the movement toward succession,” Buffett said in an interview Wednesday on CNBC, after the promotions were announced. “They are the two key figures at Berkshire.”

Abel, 55, will be vice chairman of the non-insurance business, while Jain, 66, will be vice chairman of the insurance operations, the company said in a statement early Wednesday. In the interview, Buffett signaled that the executives will be responsible for overseeing subsidiaries in their area, setting compensation for the leaders of those businesses and helping weigh smaller acquisitions.

Abel has run Berkshire Hathaway Energy, the conglomerate’s burgeoning utility unit, and Jain has been in charge of the reinsurance business for the Omaha, Nebraska-based company.

The new arrangement puts into place an organizational structure that is designed to give Abel and Jain more experience with the company’s wide-ranging operations, and free up more of Buffett’s time. For decades, the billionaire has overseen Berkshire with a shoestring staff, even as his company grew to include dozens of subsidiaries like auto insurer Geico, BNSF Railway, Fruit of the Loom, the Buffalo News and Dairy Queen.

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Berkshire’s Class A shares rose 0.9 percent at 11:49 a.m. in New York, giving the company a market value of more than half a trillion dollars.

While the identity of Buffett’s successor has remained a mystery for years, he has said he wants the next leader to be drawn from the company’s ranks, relatively young and unmotivated by ego. Investors had already been homing in on Abel and Jain as the most likely for the role, in part because Munger highlighted their accomplishments in 2015 and said they were in some ways better executives than Buffett.

The promotions announced Wednesday appear more significant for Abel, giving him oversight of a broader range of companies that employ more people. Buffett said on CNBC, however, that there’s no “horse race” to succeed him and that the earnings power of the two executives’ portfolios are roughly equal.

Ajit Jain arrives ahead of the Berkshire Hathaway Inc. annual shareholders meeting in Omaha, Nebraska, on April 30, 2016. Photographer: Daniel Acker/Bloomberg

Abel, who grew up in Canada, has steadily expanded Berkshire’s utility holding company based in Iowa into a colossus in the energy industry. It runs several power companies throughout North America and the U.K., interstate natural gas pipelines, and giant wind and solar farms. It’s a big part of Berkshire that stands to get only bigger, Buffett said in May at the company’s annual shareholder meeting, adding that it’s “hard to imagine a better-run operation.”

Comments like those have caused some investors to bet on Abel as the more likely pick. They often also cite that he’s more than a decade younger than Jain.

A native of India, Jain has run the company’s namesake reinsurance operation, which for decades has provided Berkshire with billions of premium dollars for investments and acquisitions. Buffett has repeatedly said that Jain has probably made more money for shareholders than he has. In 2011 he said the board would make Jain CEO if he wanted the job.

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Buffett, 87, said in the interview that he’s in “remarkably good health” and that the changes don’t imply that he’s less passionate about his company. His title will remain the same, as will that of Vice Chairman Charles Munger, who’s 94. Both will still be responsible for significant capital allocation decisions and investment activities at the conglomerate.

“There’s not a drop of Berkshire blood that’s leaving my body,” Buffett said in the interview. Still, he added that it might be a stretch to think he’ll run the company for another 10 years.

Buffett has previously indicated that his investing and management roles will be divided when he’s no longer running the conglomerate: In the past decade, he hired two former hedge fund managers — Todd Combs and Ted Weschler — to pick stocks for Berkshire. They currently oversee a portion of the company’s investment portfolio and will oversee it when Buffett is gone. Both may also help the next CEO on deals.

Greg Abel speaks with attendees before the start of the Berkshire Hathaway Inc. annual meeting in Omaha on May 6, 2017. Photographer: Daniel Acker/Bloomberg

Buffett has also said that his son Howard, a Berkshire director, could serve as non-executive chairman and help to guard the culture.

Putting Abel and Jain on the board will increase its size to 14 members from 12. The group also includes Microsoft Corp. co-founder Bill Gates and Steve Burke, the CEO of NBCUniversal.

When asked why the promotions were announced now, Buffett demurred, saying it could have made sense five years ago. Still, he said, the board was enthusiastic about the changes.

“The degree to which they jumped at the suggestion was a little alarming,” Buffett joked.

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