As Ajit Jain grew up in Orissa, south of Calcutta, India, he had no idea that he would be helping to insure the type of damage caused by the cyclones that occasionally strike his coastal hometown.
Today, Jain heads part of Berkshire Hathaway Inc.’s reinsurance operation, focusing especially on multimillion-dollar agreements to take over parts of the property risks from other insurance companies. It’s a business that generates hundreds of millions in annual profits.
In addition, since Jain arrived at Berkshire in 1985, his reinsurance operation has built up $37 billion in “float” — money that Berkshire CEO Warren Buffett can invest in other things while the company waits to pay insurance claims.
Jain has generated more profit and more revenue than any other Berkshire employee, Robert Miles writes in “The Warren Buffett CEO.”
All this by a vegetarian and member of an ancient Indian religion called Jainism, who married a woman chosen by his parents and who studied to be an engineer.
In 1999, Buffett wrote:
“In Ajit, we have an underwriter equipped with the intelligence to properly rate most risks; the realism to forget about those he can’t evaluate; the courage to write huge policies when the premium is appropriate; and the discipline to reject even the smallest risk when the premium is inadequate. It is rare to find a person possessing any one of these talents. For one person to have them all is remarkable.”
Many observers have thought Jain would be the likeliest person to succeed Buffett as CEO, although his time may have passed. He’ll turn 64 in July, and Buffett has said he hopes the next CEO would have “a long run.”
It’s a job Jain didn’t seek. He enrolled in the Indian Institute of Technology in Kharagpur in 1972, got a job as an engineer and soon shifted to sales and marketing for IBM’s data processing business in India because salaries were much higher. When IBM pulled out of India after the government required part-Indian ownership of foreign companies, Jain’s job ended.
A supervisor encouraged him to study business in the United States, and he was admitted to Harvard Business School, graduating in 1978. Jain took a job with McKinsey & Co. but returned to India in 1981, married and, at wife Tinku’s behest, returned to the United States and was hired again by McKinsey.
Michael Goldberg, a former McKinsey staffer who was working in Berkshire’s insurance division, offered him a job at Berkshire’s National Indemnity Co.
Jain became head of Berkshire Hathaway Reinsurance Group, including insuring damage from “super-catastrophes” such as hurricanes, floods, earthquakes and, yes, cyclones that can strike Southeast Asia.
For years, Jain has talked almost daily with Buffett about potential deals, usually by phone from Jain’s home in Connecticut.
In 1997, he agreed to cover $1.5 billion in California earthquake losses after the first $5 billion, receiving $590 million in premiums each year for four years. Earthquake damage never reached that threshold.
Jain also engineered a $7.1 billion premium in 2007 to cover losses for British insurance partnership Lloyd’s of London and, last year, an insurance arrangement with a $3 billion premium paid to Berkshire. He is leading an effort by Berkshire to start an insurance business in India.
Jain started a foundation in 2005 to focus on research into muscular dystrophies caused by dysferlin protein deficiency, a condition that afflicts one of his sons.
In the insurance operation, he follows Buffett’s conservative policy of not taking on risks that could seriously damage the company.
“It’s so easy to make dumb mistakes in this business,” Jain told Miles. “Even though you can do a lot of good deals, if you do one lousy deal you give it all back. It’s that one rotten apple, that’s what you guard against.”
Buffett wrote this year that for all of Jain’s past accomplishments, “his mind, moreover, is an idea factory that is always looking for more lines of business he can add to his current assortment.”
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