NU Online News Service, Feb. 24., 12:00 p.m.EST

Read what Warren Buffett, chief executive officer of BerkshireHathaway, has to say about his successor, his company's insuranceoperations, the economy, and a newspaper-throwing challenge.

A 20-page annual letter to shareholders from the “Oracle ofOmaha” did not disappoint those who look forward to reading.

(Photos of Buffett and Berkshire executives by the AssociatedPress)

BUFFETT ON HIS SUCCESSOR:

“Do not, however, infer from this discussion that Charlieand I are going anywhere; we continue to be in excellent health,and we love what we do.”

“Charlie” refers to Charlie Munger, Berkshire's vicechairman.

Buffett says the Berkshire board has chosen his successor asCEO, as well as two back-up candidates, but does notname them in the shareholder letter. The primary choice is “anindividual to whom they [the board] has had a great deal ofexposure and whose managerial and human qualities they admire.”

BUFFETT ON INSURANCE:

“There are a lot of ways to lose money in insurance, and theindustry is resourceful in creating new ones.”

Buffett calls “float” the money his comany receives in premiumsto pay claims that happen later. Berkshire invests this float. Whenthe company turns an underwriting profit, it adds to the investmentincome. This basically results in Berkshire geting “paid” forholding the float.

The intense compeition among insurers in their pursuit of thisresult typically causes the P&C industry as a whole to operateat an underwriting loss, he says.

BUFFETT ON AJIT JAIN:

“Charlie would gladly trade me for a second Ajit. Alas,there is none.”

Ajit Jain, head of Berkshire Hathaway Reinsurance Group, iscredited by Buffett with creating an insurance business with afloat of $34 billion and significant underwriting profits to add a“great many billions of dollars” to Berkshire's value.

(At left, Ajit Jain)

BUFFETT ON GENERAL RE:

“Many insurers pass the first three tests but flunk thefourth.”

The last of four disciplines a successful insurer must adhere tois walking away from underpriced business, says Buffett. The firstthree pillars of sound insurance operations are evaluating allexposures; conservatively evaluating the likelihood of loss and itscost; and setting a profitable premium.

General Re, headed by Tad Montross, has observed eachdiscipline, leading Buffett to call the unit “a treasure” ratherthan the “major headache” he says the insurer was when he firstacquired it.

BUFFETT ON GEICO:

“Our lizard has another endearing quality (other thanguiding consumers to the GEICO's website for a quote): Unlike humanspokesmen or spokeswomen who expensively represent other insurancecompanies, our little fellow has no agent.”

GEICO's premium volume has grown to $15.4 billion from $3.3billion under the direction of 18-year CEO Tony Nicely, who justcompleted 50 years of service at Berkshire.

The auto insurer's market share is now 9.3 percent as itsanimated gecko leads consumers to get an insurance quote.

(At left, Tony Nicely)

BUFFETT ON THE HOUSING RECOVERY:

“Last year I told you that 'a housing recovery will probablybegin within a year or so.' I was dead wrong.”

Instead, the number of housing starts is less than the number ofnew households being formed. Buffett says buyers and renters aretaking what had been on oversupply before the housing bubbleburst.

The sector of the economy “remains in a depression of its own,”says Buffett, but he predicts housing will come back.

“Wise monetary and fiscal policies play an important role intempering recessions, but these tools don't create households noreliminate excess housing units. Fortunately, demographics and ourmarket system will restore the needed balance—probably before toolong.”

BUFFETT ON NEWSPAPER-THROWING:

“Any challenger whose paper lands closer to the doorstepthan mine will receive a dilly bar. Take your best shot. Make myday.”

Buffett purchased the Omaha World-Herald newspaper andhas been bragging about the newspaper-throwing skills he honed as ateenage paperboy. To spice up Berkshire's annual meeting in May,Buffett laid down a bet—with the reward of ice cream—to anyone whocan better his toss.

(In photo, Buffett hands out Dairy Queen dilly barslast September to University of Nebraska Medical Center studentsand guests following the dedication ceremony of a student plazabearing the name of Bill Scott, former vice president of BerkshireHathaway.)