Top Berkshire Hathaway Exec Makes Major Stock Decision

Investment legend Warren Buffett, CEO of conglomerate Berkshire Hathaway (BRK.B) praised Ajit Jain, one of the company’s two vice presidents, for years.

Indian-born Jain runs Berkshire’s massive and profitable insurance operations. The company’s insurance proceeds provide much of the ammunition for Buffett’s acquisitions of stocks and entire corporations.

Ajit Jain, Warren Buffett’s right-hand man in insurance at Berkshire Hathaway.

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Jain, who turns 73 on Sept. 15, has played a major role in Berkshire’s success in catastrophe insurance. He started at Berkshire in 1985 and was named vice chairman in 2018. Buffett is chairman.

“Ajit underwrites risks that no one else has the willingness or capital to take,” the Oracle of Omaha wrote in its 2017 letter to shareholders. Buffett lives in Omaha.

“His operation combines capacity, speed, determination and, most importantly, brains in a manner unique to the insurance industry. However, he never exposes Berkshire to risks that are inappropriate relative to our resources.”

Warren Buffett: Jain “handed the keys” as a novice

Although he came to Berkshire as an insurance novice, Jain was “handed the keys to our small and struggling reinsurance business,” Buffett said.

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“Since then, Ajit has created tens of billions in value for Berkshire shareholders. If there is ever another Ajit and you could trade me for him, don’t hesitate. Make the trade!”

Despite his affection for Jain, Buffett named Berkshire’s other vice chairman, Greg Abel, as his successor. It might have something to do with Abel’s age — he’s 62, 10 years younger than Jain, while Buffett is 94.

Jain put his money where his Berkshire office was, buying shares of his own funds to become one of the company’s largest individual shareholders.

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But now he has taken advantage of the stock’s rally to post some serious profits. Berkshire’s shares are up 58% over the past two years, and its market capitalization topped $1 trillion last month.

Jain offloads Berkshire shares

Jain sold 200 Berkshire Class A (BRK.A) shares Sept. 9 at $695,418 apiece, giving it a $139 million kitty, according to a regulatory filing.

The sale represented 55% of his stake: Jain still controls 166 shares. Of this total, he owns 61 directly and 105 through trusts and his non-profit Jain foundation.

You might wonder what kind of signal is being sent about the company that Jain is selling so many shares of. But news of the move did not affect Berkshire’s stock. They fell just 0.5 percent on Sept. 12, the day after the news broke.

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So why exactly did Jain sell Berkshire shares? There could be a number of reasons, including estate planning. The stock filing may not reflect his view of Berkshire at all.

Some experts say it could be a sign that Jain is out the door at Berkshire.

“Those of us who have followed Berkshire Hathaway for a long time suspected there might be a changing of the guard in the insurance operations,” Cathy Seifert, an analyst at CFRA Research, told Reuters.

“My view is that it can go further and I suspect that is behind its share sales.” She has a buy rating on Berkshire’s stock.

The author owns shares of Berkshire Hathaway.

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