• Montross will retire by the end of this year, Gen Re says
  • Unit generates about $6 billion in annual policy sales

Ajit Jain, long considered a top candidate to replace billionaire Warren Buffett as chief executive officer of Berkshire Hathaway Inc., is expanding his oversight of the company’s insurance operations.

Gen Re, one of the major reinsurance businesses at Berkshire, said Tuesday that CEO Tad Montross, 60, will step down by the end of this year. His replacement hasn’t been named, but will report to Jain, said Sabine Denne, a spokeswoman for the reinsurer.

Buffett, 85, has said he considers Jain family. The 64-year-old built a separate underwriting unit, Berkshire Hathaway Reinsurance Group, into one of the company’s largest operations. He has expanded that business, even amid increased industrywide competition, while Gen Re has retrenched in some markets.

“It’s a deepening of his involvement with the insurance vertical,” rather than
a statement about who will succeed Buffett, Tom Russo, who oversees $11 billion at Gardner Russo & Gardner, including Berkshire shares, said of Jain’s new duties. “Tad’s awfully young to be retiring.”

At the end of December, Jain’s reinsurance unit had about $44 billion of float, which includes premium dollars that Buffett can invest before paying claims. That compares with $18.6 billion at Stamford, Connecticut-based Gen Re. Reinsurers assume risks from primary carriers.

Underwriting profit at Montross’s unit declined by half last year to $132 million as competition pushed down rates for property-and-casualty coverage. The unit, which generates about $6 billion in annual policy sales, said last month that it was exiting P&C operations in six locations including Hong Kong and Seattle amid a global reorganization.

Buffett said last year that he expects a slump in reinsurance results in the coming decade as investors enter the market. Given that view, it makes sense to consolidate operations under Jain rather than bring on someone new to report to Buffett, who already oversees dozens of CEOs, said Jeff Matthews, an investor and author of books about Berkshire.

‘In His Sleep’

“Ajit could do that in his sleep,” Matthews said of the expanded role.

Montross, who reports to Buffett, had been discussing his potential retirement for some time with the billionaire and felt like it was a time to move on, according to a person with knowledge of his plans. He’ll work on the transition with Jain and have more time with family, said the person, who asked not to be identified discussing private talks.

Buffett didn’t respond to a message seeking comment. Insurance Insider reported on Montross’s departure plans earlier Tuesday.

Berkshire has grown in recent decades through acquisitions including a railroad, utility operations, retailers and manufacturing businesses. Insurance underwriting and investment income last year contributed less than a quarter of Berkshire’s profit. Still, Buffett says insurance remains a key business as his company diversifies, and has long praised Jain.

‘Like a Brother’

“Ajit has probably made a lot more money for Berkshire Hathaway than I have,” Buffett said at an event in India in 2011 in his response to a question about whether Jain would succeed him. “I really feel about him like I would a brother or a son.”

Other top deputies have also been adding responsibilities, including Greg Abel, who is CEO of the energy operation. The 53-year-old is on the operations-and-strategy board committee at Kraft Heinz Co., the foodmaker that counts Omaha, Nebraska-based Berkshire as its top shareholder.

Berkshire Vice Chairman Charles Munger wrote in a letter last year that Jain and Abel are examples of “world-leading” executives who are in some ways better than Buffett.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE