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At its April 1976 annual general meeting hundreds of irate GEICO shareholders made their displeasure felt. They really didn’t want the current executive directors to carry on.
Piling on the pressure, insurance commissioners from many states came knocking, wanting to know if GEICO was sufficiently strong to avoid bankruptcy and thus meet obligations to policyholders.
The regulators saw that the company desperately needed both reinsurance to lay off some of its exposure and an injection of large amounts of long-term share capital. Despite the company’s protestations the Washington DC Insurance Superintendant was not convinced that it could survive and was minded to declare it insolvent very soon.
If the company was to make it through it would need a very strong-minded CEO with a plan, and a rugged determination to see the plan through to the end. Someone who had the strength to battle against the odds.
But within days of the AGM the CEO was sacked, so leadership was even more degraded. Sam Butler, the lead director, took over as temporary chief with a brief to find someone capable of rescuing the firm. Time was very tight.
Jack Byrne: The company saviour
Jack Byrne was to become Buffett’s key man at GEICO. I think it is fair to say that without Byrne Buffett would not have invested. Warren needed to ensure that (a) he had someone in place who could see the real strategic strengths of the company; those strengths the previous CEO had lost sight of in the era of enthusiasm for growth, and (b) had the shear guts and drive to pull the company from the edge of a crumbling cliff. Buffett later called Jack “the Babe Ruth of insurance”.
Byrne was a no-nonsense New Jersey man with insurance in his blood, growing up with his father talking insurance at the dinner table, the family insurance agency being where the teenage Jack cut his business teeth. A trained actuary, as a young man in his twenties Byrne gained reinsurance salesman and managerial experience working for a couple of companies.
But the place where he really flourished was Travelers Insurance Company. Joining it in 1966 aged 34, he rose rapidly through the ranks becoming an Executive Vice President. He gained a reputation as a tough-love kind of manager – you wouldn’t want to be on the wrong side of him, but if you performed well you were well rewarded. In 1975, after he was passed over for President, he decided it was time to move on.
Butler called him shortly after GEICO’s explosive AGM and persuaded him that saving the firm was important not just for shareholders but for the insurance sector and for wider American society.
Byrne worked out a plan of action to get GEICO out of its mess, which he presented to the formal appointment committee. They were impressed and he started as CEO in May 1976.
On the to-do list
There was no time to lose. The first task was to persuade the insurance commissioners not to close the business down. He visited the District of Colu…………
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