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No New Succession Clues in Berkshire Board Moves

Greggory Warren, CFA

We were not too surprised to see wide-moat-rated Berkshire Hathaway announce this week that Ajit Jain, who runs the company's reinsurance groups, and Greg Abel, who runs Berkshire Hathaway Energy, have been added to the firm's board of directors, given that both men are integral to the company's operations (and have also been the front-runners to succeed CEO Warren Buffett for some time now). That said, this does not do much to make the succession plan at Berkshire any clearer than it was a week ago, with the moves only adding credence to our long-standing belief that Jain and Abel are the two leading candidates to replace Buffett once he departs the scene.

The moves do, however, more clearly lay out Jain's level of authority, with his new title of vice chairman, insurance operations providing him with oversight of all of Berkshire's insurance operations (including Geico), as well as Abel's, whose new title of Vice Chairman, noninsurance business operations, gives him oversight over the company's remaining segments.

While Jain's experience has primarily been on the underwriting side of the business, his success there has been built on his ability to avoid making "dumb decisions" rather than making "brilliant" ones--attributes that have kept him in good stead with Buffett over the years. The only issue we can think of with Jain is that he has been on the record several times saying that he does not want the top job. At 66 years old, Jain is also older than Abel, 55, which could be an impediment to his getting the top job, especially given Buffett's past comments that the company's next CEO "should be relatively young, so that he or she can have a good, long run in the job." 

This is the main reason why we regard Abel, who brings with him not only the operational experience of running BHE for many years, but also a ton of experience in making acquisitions, as the more likely successor to Buffett in the longer term.