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The change of leadership in Berkshire is one of the most important topics of the financial world
The plan for Warren Buffett to pass the reins of Berkshire Hathaway to his successor moved to a new stage. On Tuesday, Buffett explained why Greg Abel, CEO of Berkshire Hathaway, and Ajit Jane, head of the insurance division, will take a place next to Charlie Manger as vice president of a conglomerate valued at $ 500 billion.
Abel will become vice president of the Berkshire division, which is unrelated to insurance and covers dozens of industries from rail to chemicals, retail and energy, and Jane will become vice president of the Berkshire insurance division, based on Geico, National Indemnity and the reinsurance business. Abel and Jane will join the board of directors of Berkshire.
In an interview with a CNBC reporter, Becky Quick Buffett spoke frankly about the planned changes, describing them as part of his plans to transfer the leadership. "This is part of the strategy for the gradual transfer of leadership, and they are key figures in Berkshire," Buffett said, noting that the Berkshire board of directors expressed strong support for such a reshuffle. "It could have happened five years ago," Buffett, 87, said. But he clarified that this decision should not be taken as an intention to immediately leave Berkshire or evidence of any health problems.
"I feel great, and I like what I do," Buffett said. "In the mornings I'm in a hurry to get into the office." At the eighth, Buffett continues to masterfully do business - from investing in the Bank of America in 2011 to developing cooperation with 3G Capital.
Berkshire shareholders have long speculated about who will eventually replace Buffett when he steps out of business. The 55-year-old and 66-year-old Jane are now becoming the most obvious candidates. Both have Berkshire in their blood, according to Buffett. However, he noted that the successor to his place is known if he resigns tomorrow, but with time his choice may change.
Abel, a native of Edmonton, a city in Alberta, joined Berkshire Hathaway when the company acquired MidAmerican Energy in 1999. Education accountant, in 2008 Abel was elected CEO of the Berkshire energy division, now called Berkshire Hathaway Energy. Berkshire Hathaway Energy has evolved into one of the fastest growing and profitable divisions of the conglomerate. Having at the end of 2016 assets of $ 85 billion, it is now one of the largest utilities in the country. Its activities are concentrated mainly in Nevada, Iowa, Utah, Oregon and California. Approximately 82% of the fixed assets of Berkshire Hathaway Energy are related to renewable energy sources: the company is one of the largest producers of wind and solar energy in the world,
Jane, in turn, runs the giant insurance division of Berkshire, where he demonstrated outstanding underwriting skills and sufficient restraint to limit the company's risks in overcompetitive markets, such as disaster insurance and reinsurance, when prices fall. Hailing from India, Jane came to the US to pursue an MBA from Harvard, and then gained experience in consulting firm McKinsey. In 1985, Buffett took him to work in the insurance business of Berkshire. In a letter to the shareholders of 2009, Buffett writes: "I immediately realized that we had a superstar." Ten years later, the position of the division strengthened when Buffett purchased Geico shares, not yet owned by Berkshire. The profit from the insurance division of Berkshire has grown from $ 3.
In addition to Abel and Jain, there are two rising stars in the investment division of Berkshire. Buffett directs an increasing share of Berkshire funds under the management of managers Todd Combs and Ted Wexler. Both of them manage more than $ 10 billion and provided conglomerate participation in such companies as Apple and Charter Communications.
As plans for the successor acquire greater certainty, Buffett and Manger remain in their previous positions. This means that they will continue to monitor key decisions about the distribution of capital and investment activities, for example, all major transactions. Buffett drew the attention of the press not only because of plans for the successor, but also because of his remarks about the investment climate in general.
In particular, Buffett said that the tax reform would significantly affect the owners of Berkshire and told CNBC journalist that in fact the company's earnings increased by more than 20% when the corporate tax rate was reduced from 35% to 21%.
As for the crypto currency, Buffett said that the current euphoria will inevitably end in big disappointment. "If I could buy a put option for a period of five years for any of the Crypto currency, I would do it," Buffett said, admitting that he would never have made short sales of a speculative asset because he did not know him well enough. He said the following truism: "Why should I take a short position on an asset that I do not know about?"
But his point of view is absolutely clear. "I think that what is happening now will end badly," Buffett said.
The change of leadership in Berkshire is one of the most important topics of the financial world, but so far it seems that Berkshire investors are not worried about the inevitable changes. At the close of trading on Tuesday, Berkshire Class A shares were sold at a record price of $ 308,350, showing an increase of 1.26%. Over the past year, they have grown by 27%, surpassing the company from the S & P 500 index.