By Jonathan Stempel<\/p>\n
Download the 2009 Warren Buffett Letter & 2009 Annual Report to Berkshire Hathaway Shareholders<\/span><\/a> NEW YORK, Feb 27 (Reuters) – Warren Buffett is considered expert in many things in the financial world.<\/p>\n <\/span><\/p>\n Credit cards apparently are not among them.<\/p>\n <\/span><\/p>\n The world’s second-richest person often admits when he gets things wrong. He did so on Saturday in his annual letter to shareholders of his Omaha, Nebraska-based insurance and investment company, Berkshire Hathaway Inc (BRKa.N<\/a><\/span>) (BRKb.N<\/a><\/span>).<\/p>\n <\/span><\/p>\n Buffett had a brainstorm: create a credit card for customers of Geico Corp, the third-largest U.S. car insurer, which Berkshire has owned since 1996.<\/p>\n <\/span><\/p>\n Though Geico underwriting profit fell 29 percent last year as loss claims increased, premiums earned grew 9 percent as it won new business in part through $800 million of advertising, many featuring a talking gecko.<\/p>\n <\/span><\/p>\n Thanks to Geico chief Tony Nicely’s leadership, Buffett said he is “more excited” about Geico now than he was when he first visited the company in 1951, as a 20-year-old student.<\/p>\n <\/span><\/p>\n He’s probably referring to the car insurance.<\/p>\n <\/span><\/p>\n “For many years,” Buffett wrote, “I had struggled to think of side products that we could offer our millions of loyal Geico customers. Unfortunately, I finally succeeded, coming up with a brilliant insight that we should market our own credit card. I reasoned that Geico policyholders were likely to be good credit risks and, assuming we offered an attractive card, would likely favor us with their business.”<\/p>\n <\/span><\/p>\n And they did — but as at many traditional credit card lenders, it was the wrong type of business.<\/p>\n <\/span><\/p>\n Buffett said Geico lost $6.3 million pretax on cards before he “finally woke up.” It lost $44 million more when it sold a $98 million portfolio of card receivables, at 55 cents on the dollar.<\/p>\n <\/span><\/p>\n “Your chairman closed the book on a very expensive business fiasco entirely of his own making,” Buffett wrote.<\/p>\n <\/span><\/p>\n “Geico’s managers, it should be emphasized, were never enthusiastic about my idea,” he went on. “They warned me that instead of getting the cream of Geico’s customers we would get the — well, let’s call it the non-cream. I subtly indicated that I was older and wiser.”<\/p>\n <\/span><\/p>\n Buffett said he was half-right. “I was just older.”<\/p>\n <\/span><\/p>\n Buffett is 79. (Reporting by Jonathan Stempel)<\/p>\n <\/span><\/p>\n Share Investor Links<\/span><\/a><\/a><\/p>\n Share Investor Blog<\/a> – Stockmarket & Business commentary
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