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Warren Buffett Names Greg Abel His Successor: Why It ‘Makes Sense’

Yahoo Finance’s Brian Sozzi, Myles Udland and Julie Hyman recap the key takeaways from Berkshire Hathaway’s annual shareholder meeting with UBS Chief Executive Brian Meredith.

Video transcript

MYLES UDLAND: Investors are still reviewing some of what Warren Buffett had to say this weekend at Berkshire Hathaway’s annual meeting of shareholders. Join us now to talk about some of the big takeaways and some news, of course, that just came out this morning. Brian Meredith is an analyst and managing director at UBS covering insurers.

Brian, thanks for jumping on it. Let’s start with this news on Greg Abel. And Charlie kind of let it go at some point in the meeting. Warren Buffett is coming out today. He says if I leave tomorrow, Greg Abel will be the CEO. As you had thought about the roles of Greg and Ajit Jain, co-vice presidents of Berkshire Hathaway, does it make sense to you that Greg, it looks like he will be the sole CEO at some point in the future?

BRIAN MEREDITH: Yeah, I mean, it’s not a huge surprise. I mean, if you look at Berkshire Hathaway today, obviously, from an earnings perspective, it’s much more of a non-insurance kind of business, right? So having a leader, someone who is more involved in these non-insurance activities and understands them better, you know, makes sense. I also think, you know, Ajit Jain, is one of the best insurance executives we’ve ever seen, right? He’s really good at doing business and everything. So I think, you know, it suits Ajit just fine to continue with the insurance stuff, to continue with the insurance stuff, and let Greg kind of be the CEO.

BRIAN SOZZI: And Brian, under Greg Abel, are Geico and those other insurance companies still part of Berkshire Hathaway?

BRIAN MEREDITH: Absoutely. I mean, the insurance business is still at the heart of Berkshire Hathaway, isn’t it? I mean, the floating aspect of the insurance business is kind of the genesis of Berkshire Hathaway, isn’t it? So it’s a central part of the strategy, a critical part of how they view the business and their ability to finance acquisitions and equity purchases.

MYLES UDLAND: You know Brian…

BRIAN MEREDITH: And they are also excellent companies.

MYLES UDLAND: Yeah, and Brian, you know, Warren was asked about this in different ways on Saturday, basically versions of the question, I’m investing in Berkshire, you got all that money. You didn’t spend tens of billions, hundreds of billions of dollars below last year. Like, what does it give? And obviously everyone knows – you know, everyone knows that March 2020 was the bottom. At the time, it was not so obvious. What did you think of these answers? And I guess, what do you think now of the pile of money in Berkshire? Do you expect them to keep buying back more shares if indeed a huge acquisition doesn’t seem imminent?

BRIAN MEREDITH: Yeah, no, remember at the last annual meeting, Buffett made some comments about there being a very short window of time that was really available to get really inexpensive reviews, whether it was a period tough until the Fed comes right? So I clearly don’t think he had a lot of time to really take advantage of the situation that arose in March. So I think that’s number one.

Second, it’s clear there’s a lot of uncertainty about the economy and what’s going on. And number three, I think he did a really good job of bringing to this year’s annual meeting some of the current challenges with acquisitions, didn’t he? And even public stocks, only the valuations being higher. It’s just cheaper for him or more interesting for him to buy his own shares. So absolutely, I think he’s going to continue to be a buyer of their stock. By our calculation, we arrive at an intrinsic value on Berkshire stocks. It’s, let’s call it about 13% below, you know, it was at the close on Friday. So still an attractive use of its capital and that $145 billion in cash.

BRIAN SOZZI: Was there something when you were watching the event and it ended, was there something you wanted more clarity on and wanted more questions about – or something you had more questions?

BRIAN MEREDITH: Look, we always have more questions about Berkshire Hathaway, don’t we? I would have liked to delve a little more into their reinsurance business. Not a lot of growth in the first quarter, a lot of growth last year. Was that indicating something that — you know, his view of the reinsurance pricing environment? I wish I had a little more detail about Geico and what exactly they are doing at Geico to improve their competitiveness against Progressive in terms of pricing, data and analytics. I know he talked about the telematics offer and they are really behind it. But I would have liked to know a little more about that too.

MYLES UDLAND: Yeah, and, you know, Brian, that shareholder proposal on ESG disclosure, and they kind of talked about why they disagreed with that. But certainly for a company with this kind of insurance operation, the questions about the future of what you insure, what it might cost, how you think about those risks, they’ll always be there. As someone covering the insurance industry, where did Berkshire fit into a changing industry? And how far do they go or how far do you think they need to go and really digest what would seem to be, again, a very different future for this company?

BRIAN MEREDITH: Well, you know, the insurance industry is constantly changing, right? And that always changes from the perspective that there’s always new risks emerging, isn’t there, and new things that you have to insure or new things that you have to understand in terms of, you know , which is covered by your contract. And I think Ajit did a good job of explaining that and saying there will always be uncertainties there.

Now the insurance industry, one of the reasons we’re in what we call a tough market right now where you’re getting big price increases in commercial insurance, you know, in the market of reinsurance, one of them is due to the warming, it’s true, and the uncertainty about the scale of major disasters that will continue to progress here in the future, the frequency of those- this. So that’s something that these property and casualty insurance companies — and Berkshire Hathaway is one of the best of them — will take into account in pricing and terms and conditions and where they want — whatever they want to insure.

I mean, it’s not just, you know, weather changes and all that. There are things like cyber risk, right? You know, cyber insurance is seeing a big increase in losses over the last 12 to 18 months. This is something that is currently a very tough market. Prices almost double in many areas there. And companies are being forced to kind of reevaluate how they underwrite cyber risk. So a lot of these things happening.

MYLES UDLAND: Yeah, and I think that was maybe two years ago, maybe three years ago, when Buffett was talking about self-driving cars and how that would impact Geico. And in your opinion, all this is constantly changing. Okay, Brian Meredith, analyst at UBS. Brian, I hope we see you in Omaha next year. Thanks for jumping on it today.

BRIAN MEREDITH: Absoutely. I love. Thank you.