Billionaire investor Warren Buffett suggests a little-known executive at Geico Corp. might take the helm at his Berkshire Hathaway Inc. holding company if anything happens to him or his longtime partner, Charles Munger, 71.
In his annual letter to shareholders, the 65-year-old Buffett--whose moves and investment strategies are followed by stock market professionals and amateurs alike--points to Louis Simpson, 59, head of investments at Berkshire's Geico insurance subsidiary as the most likely successor to him and Munger.
"His presence on the scene assures us that Berkshire would have an extraordinary professional immediately available to handle its investments if something were to happen to Charlie and me," Buffett wrote. The statement appears to clarify the succession issue at Omaha-based Berkshire.
Buffett also discloses that Berkshire recently bought shares of Walt Disney Co. on the open market, that he and Munger themselves wouldn't buy Berkshire stock at its current price of about $36,750 a share and that he may yet convert Salomon Inc. preferred shares into common stock sometime before 1999. The 18-page letter is contained in the Berkshire annual report being mailed to shareholders this week.
Each year, Buffett's annual letter gives a detailed and public account of the chairman's thinking and hints at what Berkshire might do next. As such, each report is pored over by investors and analysts searching for the latest wisdom from the Oracle of Omaha, as he is sometimes called.
Apart from its main business in auto insurance, Geico also insures special insurance risks, one of them being Mike Tyson. The boxer's technical knockout of Britain's Frank Bruno Saturday night marginally reduced Warren Buffett's exposure: Geico's policy on Tyson insures him for a huge sum at first, with the protection gradually declining to zero, fight-by-fight, in the next several years.
Geico's "rock-bottom operating costs, which virtually no competitor can match," and high profits have improved its position, Buffett wrote. "In business, I look for economic castles protected by unbreachable 'moats.' Geico's moat widened in 1995."
Buffett first bought Geico shares in 1951 after talking for four hours one Saturday with an assistant to the president. The assistant went on to become chief executive officer.
Buffett also cast a vote of confidence in Disney, saying Berkshire has "recently bought Disney stock in the market," adding to the more than 20 million shares it will receive in exchange for its holding in Capital Cities/ABC Inc.
Buffett bought his Cap Cities stock for $345 million in 1986. He would have received $2.5 billion had he elected to be paid in cash as part of Disney's $19 billion buyout of Cap Cities.
Buffett left the door open to one day converting some of Berkshire's $560 million of Salomon Inc. preferred shares to Salomon common stock. Buffett was Salomon's savior in 1991 when he bailed out the investment bank during a scandal tied to its rigging of part of the Treasury bond market.