March 11 (Bloomberg) -- John J. Byrne, whose turnaround of auto insurer Geico Corp. led billionaire Warren Buffett to buy the company and call him “the Babe Ruth of insurance,” has died. He was 80.
Byrne died on March 7 at his home in Etna, New Hampshire, according to Robert E. Snyder, a family spokesman. The cause was prostate cancer.
In his letter to Berkshire shareholders reviewing 1980, Buffett credited Byrne’s “managerial brilliance” with resuscitating Geico after his arrival in 1976.
“There aren’t many Jack Byrnes in the managerial world, or Geicos in the business world,” Buffett wrote. “What could be better than buying into a partnership with both of them?”
At the time of the letter, Buffett’s Berkshire Hathaway Inc. owned about one-third of Geico. Buffett bought the remaining two-thirds in 1996 for about $2.3 billion and made it a unit of Berkshire. By then, Byrne had left Geico for White Mountains Insurance Group Ltd.
“Jack’s performance in reviving Geico from near-bankruptcy was truly extraordinary, and his work resulted in enormous gains for Berkshire,” Buffett wrote in his letter summarizing 1985, noting Byrne’s departure. “We owe him a great deal for that.”
Byrne’s tough-love tenure at Geico entered the annals of corporate turnarounds.
He arrived in 1976 as president and chairman of Geico -- an acronym for Government Employees Insurance Co. -- after working as executive vice president at the Travelers Corp. Geico was near bankruptcy, having posted a net loss of $126 million in 1975, according to a 1981 article in Forbes magazine.
Byrne closed about 100 offices, cut the workforce to about 4,000 from 7,000, quit the highly regulated auto-insurance markets of New Jersey and Massachusetts and raised rates by as much as 40 percent, Forbes said. He also reached a reinsurance agreement with competitors, potentially saving the industry, and sold $75 million in preferred stock to restore the company’s capital, Forbes said.
By 1980 the company was back to health, with $44 million in net operating income in the first nine months, Forbes said.
Buffett, who had bought his first Geico shares in 1951 as a business student at Columbia University in New York, was among the buyers of the preferred stock that was part of Byrne’s rescue plan.
Buffett, attracted to Geico’s depressed share price, had arranged to meet Byrne soon after he took over as CEO.
“We talked to maybe 2, 3 a.m.,” Byrne said of the meeting, held at the home of Washington Post publisher Katharine Graham, according to Roger Lowenstein’s “Buffett: The Making of an American Capitalist” (1995). “He wanted to know the things I would do. What did I think of our ability to survive?”
When the business day dawned a few hours later, Buffett called his broker and bought 500,000 shares of Geico at 2 1/8 and left a standing order for shares in the “multimillions,” Lowenstein wrote. At the Washington Post board meeting that drew him to town, Buffett announced, “I’ve just invested in something that might go under. I could lose the entire investment next week.”
Instead, Geico’s share price almost quadrupled within six months, to 8 1/8, and Buffett became the controlling investor over the next few years, Lowenstein wrote. By 1981, Buffett was hailing Byrne as the “Babe Ruth of insurance,” according to Forbes.
Byrne, with advice from Buffett, hired Louis Simpson as Geico’s chief investment officer in 1979. Simpson rose to president and CEO of Geico’s capital operations from 1993 until 2011 and was once identified by Buffett as a candidate to succeed him in an emergency to oversee all of Berkshire’s investments.
John Joseph Byrne was born on July 11, 1932, in Paterson, New Jersey, to John J. Byrne and Winifred Mohr Byrne. As a teenager, he worked at his father’s insurance agency in Wildwood, New Jersey, according to a death notice on the website of Rand-Wilson Funeral Home in Hanover, New Hampshire.
He graduated from Rutgers University in New Jersey in 1954 and earned a graduate degree in mathematics from the University of Michigan. He began his career as an actuary at Lincoln National Life Insurance Co.
After Geico, Byrne led the Fireman’s Fund Insurance Co. until its acquisition in 1991 by Allianz AG Holding of Germany, now Allianz SE. He retained control of the fund’s holding company, which he renamed Fund American Enterprises Inc. Today it is White Mountains Insurance Group.
Byrne served on the Board of Overseers of the Tuck School of Business at Dartmouth College in Hanover, which his three sons -- John, Mark and Patrick -- attended, according to the death notice.
He served on the board of Internet retailer Overstock.com Inc., the company his son Patrick led as CEO. The two clashed at one point over Patrick Byrne’s public campaign against short selling.
Besides his sons, Byrne’s survivors include his wife, Dorothy; seven grandchildren; and his brother, James Byrne, according to the funeral home.
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