Warren Buffet’s first flirtation with GEICO took place in 1943 as a fledgling investment consultant. Roger Lowenstein tells an anecdote about this in his book Buffett: The Making of an American Capitalist.
Apparently, Buffett, knowing of the involvement of Graham, his mentor, with GEICO, decided to look it over. He visited the company’s offices only to find them closed. The nightwatchman told him that there was someone still working there, late, and agreed to take Buffett in to meet him. The late worker turned out to be Lorimar Davidson, who was to end up running the company.
Buffett interrogated Davidson for several hours, and each man made a good impression on the other. Because of these discussions, Buffett’s investment partnership took a small holding in GEICO, which it eventually sold down.
By 1974, the company was not travelling well. The government had brought in no-liability insurance in some areas, the company had extended its clientele to higher risk categories, and there had been inadequate provision for future claims.
In 1976, it announced a loss of 126 million dollars and the company’s shares, which had traded as high as $42, were down to just under $5. The 1976 Annual General Meeting was a near riot with angry shareholders challenging management. By then, the shares were down to about $2.
There was then a change in company management with J J Byrnes taking over the key role. Byrnes made drastic changes, cancelling high-risk policies, laying off staff and moving office. Despite these changes, the regulatory authorities were hovering over the company’s near carcass.
Buffett had always kept his eye on the company and took the view that despite its problems, the company’s core business was sound.
The company’s premiums also attracted Buffett. Insurance companies receive premiums against the possibility that they may have to pay out claims in the future. Provided the company follows sound actuarial practices and makes adequate provision for claims, this gives it large amounts of cash to invest in profit making ventures. This is what Buffett calls the ‘float’. He saw this as an opportunity to provide cash resources to buy businesses and invest in shares.
Through Katherine Graham, the proprietor of the Washington Post, Buffett arranged to meet with Byrnes and was apparently impressed enough to buy, via Berkshire Hathaway, 500,000 shares in the company with a standing order to buy more........
As well as being a Friend of Obama, Buffett is a huge pro-abort. I try hard not to do business with him.
He also owns Fruit of the Loom and See's Candies.
All sources I have seen tell me that Warren was born in 1930. This would have been quite an achievement for a thirteen year old.....being an investment consultant.
You neglected to mention that Buffet (advisor to BO) was the white knight for GE last year, buying bonds from them and propping them up when they were on the verge of collapse.
GE, of course, is the owner of NBC/CNBC/MSNBC, and employs a swath of media personalities to demonize the right and glorify the left.
GE is also the largest wind turbine generator producer in the country, AND expects to profit from “cap and trade” as one of, and possibly the only, secondary market trader of C&T credits. (see http://thecommonconservative.com/?p=446)
One big, happy family.