The guessing game about who will succeed Warren Buffett as CEO of Berkshire Hathaway has largely focused on vice chairmen Greg Abel and Ajit Jain.
But another Berkshire (BRK/B) manager, Todd Combs, is a rising star. That status was evident in the move by Geico, Berkshire’s big auto insurance unit, to name him as CEO as of Jan. 1, 2020. Geico is the No. 2 auto insurance company in the country behind only State Farm, and one of the most valuable and important units within Berkshire, which is the world’s largest conglomerate.
Combs’ coming role at Geico may mean Buffett wants to give him managerial experience that could position him to succeed Buffett, who turned 89 in August. Buffett, who had no immediate comment, hasn’t said anything publicly about his likely successor.
Combs, 48, has been taking on greater responsibility in recent years at Berkshire. His main role has been to run a portion of Berkshire’s equity portfolio in tandem with Ted Weschler. Each runs about $14 billion of the portfolio, which now totals more than $200 billion. Combs was hired in 2010 for that newly created job after running an investment fund, Castle Point Capital, for five years.
Reflecting the multiple roles that top managers have at Berkshire, Combs will continue to manage his chunk of equity portfolio while taking on the job at Geico, which is based in Chevy Chase, Maryland. Combs has been involved in the health-care venture involving Berkshire, Amazon.com (AMZN), and JPMorgan Chase (JPM). And he also played a role in Berkshire’s recent bid for Tech Data (TECD) that eventually was topped by one from Apollo Global Management (APO).
Combs’s rising status was apparent in 2016 when he joined the board of JPMorgan Chase—before Berkshire took a 2% stake now worth $8 billion in the country’s top bank. Combs has gained high marks for his job as a director at the bank.
Barron’s has pegged Abel as Buffett’s likely successor because of the his experience running Berkshire Hathaway Energy, a sprawling group of companies than includes electric utilities and natural-gas pipelines that probably would be worth $50 billion as a stand-alone public company. Abel also is a board member of Kraft Heinz (KHC), the food company in which Berkshire holds a 27% stake.
Abel and longtime Berkshire insurance maven Jain were both elevated to vice chairman in early 2018, giving them what looked like the inside track to succeed Buffett, who has said he wants to see a Berkshire insider follow him as CEO. Abel oversees Berkshire’s huge non-insurance operations and Jain, who had headed a small reinsurance group focused on big-ticket policies including hurricanes and other natural disasters, now runs all of Berkshire’s insurance operations.
Barron’s view has been that Abel, 57, was more likely to succeed Buffett than Jain, who is older at 68. Jain lacks the managerial background that Abel has and is less comfortable in the public eye.
In announcing that Combs will succeed Bill Roberts as Geico CEO, Jain said:
“Todd has a strong career in insurance. He initially worked at Progressive Insurance Company (PGR) before going to graduate school to begin an investing career.” Roberts recently turned 70 and will retire at the end of 2020. He will become Geico vice chairman in January.
Geico’s chairman and guiding force for decades is Tony Nicely, who stepped down as CEO last year after 57 years at the company. Nicely, 76, joined Geico in 1961 at age 18 and became CEO in 1993. He oversaw Geico’s huge and profitable growth during his 25 years at the helm, as the company successfully exploited its status as a low-cost direct seller of auto insurance.
Buffett lauded Nicely in his 2018 annual shareholder letter:
“By my estimate, Tony’s management of Geico has increased Berkshire’s intrinsic value by more than $50 billion. On top of that, he is a model for everything a manager should be, helping his 40,000 associates to identify and polish abilities they didn’t realize they possessed.”
While Geico has grown rapidly and profitably, its margins have been lower than those of Progressive, its biggest rival, and it hasn’t embraced technology as much as Progressive, which is the industry leader in using real-time driving data from customers to price auto insurance policies.
|For more news you can use to help guide your financial life, visit our Insights page.|