28 Feb 2010, 1325 hrs IST,
Download the 2009 Warren Buffett Letter & 2009 Annual Report to Berkshire Hathaway Shareholders
NEW YORK: Describing him as a "superstar", Warren Buffett has reiterated his confidence in India-origin Ajit Jain – long rumoured to be thesuccessor of the legendary
Buffett said that Jain, head of Berkshire's reinsurance operations, is known worldwide as the man to call when something both very large and unusual needs to be insured.
"A hugely important event in Berkshire's history occurred on a Saturday in 1985. Ajit Jain came into our office in Omaha - and I immediately knew we had found a superstar," he wrote in his annual letter to shareholders.
Jain was given charge of then small and struggling reinsurance operations.
"If Charlie (Buffett's partner), I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit (Jain)," the Berkshire Chairman said.
According to Buffett, Jain writes billion-dollar limits - and then keeps every dime of the risk instead of laying it off with other insurers.
Citing an example, Buffett said that three years ago Jain took over huge liabilities from British banking major Lloyds, allowing it to clean up its relationship with 27,972 participants who had written problem-ridden policies.
"The premium for that single contract was $7.1 billion. During 2009, he negotiated a life reinsurance contract that could produce $50 billion of premium for us over the next 50 or so years," Buffett noted.
Berkshire Hathaway is a leading conglomerate and has holdings in firms like Coca-Cola and Swiss Re.
In last year's annual letter too, Buffett had showered praise on Jain while asserting that there is no one like him.
Currently, the reinsurance business is staffed by only 30 people.
Meanwhile, Buffett in his letter, noted the performance advantage of Berkshire has come down due to the conglomerate's growing size. "The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue," he said.
The legendary investor added that Berkshire has many outstanding businesses and a cadre of truly great managers.
"Charlie and I believe these factors will continue to produce better-than-average results over time. But huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge," Buffett said.
Asserting that Berkshire mostly operates as a collection of separately-managed medium sized and large businesses, Buffett noted that he and Charlie would limit themselves to allocating capital, controlling enterprise risk, choosing managers and setting their compensation.
"We will never become dependent on the kindness of strangers... we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity," he pointed out.
Going by the letter, when the financial crisis at its peak, Berkshire pumped in $15.5 billion into the "business world".
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