Buffett’s "insurance guru" Ajit Jain sells up

Warren Buffett tells a funny story about his first encounter with Ajit Jain – the genius Indian “insurance guru” who has proved indispensable in Berkshire Hathaway’s journey to become the first trillion-dollar company outside of big tech . It was 1986 and Buffett was looking to beef up Berkshire’s insurance business. He asked Jain, then a McKinsey consultant, how much experience he had. “None,” he replied. “Nobody’s perfect,” said Buffett, and gave him the job.

Ajit Jain: Berkshire’s brain

Since then, Buffett has had every reason to continue singing Jain’s praises, says the Financial Times . As the Sage knows better than anyone, it is his domain, Berkshire’s insurance operations, that “form the backbone of the company” – providing it with “the financial firepower” to buy companies and invest in stocks . “Ajit has created tens of billions of value for Berkshire shareholders,” he wrote in a 2017 letter to investors. “If there were ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!” His status as a top Buffett lieutenant meant Jain, 73, was long tipped as a contender to succeed as CEO. In the event, Greg Abel was “anointed”. But Jain’s record – and the critical role of the insurance business – mean he is still arguably “the most important person at the company after Buffett”. People watch what he does.

No wonder news of a big stock sale has been exercising Buffettologists. Jain has just sold more than half his Berkshire stake, notes Fortune : 200 Berkshire Class-A shares for roughly $139 million. What motivated the sale is still unclear. Given Berkshire’s booming share price , perhaps Jain was simply “taking profits at an opportune time”. Maybe he wants to further endow a foundation set up to find a cure for dysferlinopathy – a rare muscular dystrophy disorder that his son suffers from. The worst-case scenario for investors is that the brain running Berkshire’s cash machine may be contemplating retirement.

The Jain family, from Odisha in northeastern India, has certainly made its mark on Western finance, says the India Times . Ajit Jain’s cousin, Anshu Jain, is a former co-CEO of Deutsche Bank . Born in 1951, Ajit Jain attended the historic Stewart School in Cuttack (motto: “Fear of the Lord is the Beginning of Wisdom”) before graduating from IIT Kharagpur in 1972 with a degree in mechanical engineering. His first job was working for IBM India as a data-processing salesman, where he was named “Rookie of the Year” for his region. When Big Blue closed its operations in India, Jain moved to the US, earning an MBA at Harvard before joining McKinsey.

What's next for Ajit Jain?

A man of austere tastes – he is a vegetarian teetotaller – Jain brings the same “extraordinary discipline” to work, says Business Standard (India). Like Buffett, he believes that “insurers produce outstanding long-term results primarily by avoiding dumb decisions, rather than by making brilliant ones”. Nonetheless, he is renowned for taking big and sometimes contrarian risks that rivals avoid, specialising in “mega-catastrophe coverage”. Notable deals include insuring the Sears Tower in Chicago, America’s tallest building, after the 9/11 terrorist attacks, and striking a banner $7 billion reinsurance deal with Lloyd’s of London in 2006 over asbestos claims. Indeed, Jain has “taken advantage of Berkshire’s balance sheet” to turn the firm into “the market’s reinsurer of last resort”, says the Financial Times , “taking on risks from other firms at a handsome price”.

Described as “a sweetheart”, but “tough as nails” if you’re negotiating with him, Jain’s extraordinary nous at underwriting “large and fiendishly complicated” deals – while avoiding a “blow-up” – will be hard to replicate. Despite new threats, industry executives say the biggest question facing Berkshire can be boiled down to a simple one: how will it replace him?

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