Jack Ringwalt
Founder of National Indemnity
Founder of National Indemnity Company, one of Berkshire's earliest and most important insurance acquisitions.
Biography
Jack Ringwalt was an Omaha insurance man through and through — a graduate of Omaha's Central High School, class of 1923, the same school that later educated Charlie Munger, Buffett's father, and most of the Buffett family. In 1940, with $125,000 in capital, he started a property/casualty insurance company and, as Buffett later noted, somewhat pompously christened it National Indemnity.
The dream was preposterous on paper. Ringwalt's pipsqueak operation competed against giant insurers with abundant capital and nationwide networks of well-funded, long-established agents. National Indemnity had no cost advantage in acquiring business and had to use whatever agencies deigned to accept it. To survive, Ringwalt focused on "odd-ball" risks that the big companies deemed unimportant — and, improbably, the strategy succeeded. Over the following decades he built National Indemnity and its sister company, National Fire & Marine, into disciplined underwriters that earned underwriting profits in years when the industry lost money.
On March 9, 1967, Ringwalt sold both companies to Warren Buffett's Berkshire Hathaway for $8.6 million. He stayed on and ran them for six more years, retiring as President of National Indemnity in 1973. He was succeeded by Phil Liesche, who shared his underwriting and managerial philosophy and carried it forward for decades afterward.
Key Stories
$125,000 Against the Giants (1940) — Ringwalt launched National Indemnity in 1940 with $125,000 in capital, in an industry where the entrenched competitors had everything he lacked: capital, brand, and agent networks. His answer was to go where the giants would not — specialty and "odd-ball" risks that were beneath the notice of the big boys. The 2020 letter records that the strategy succeeded, and that today National Indemnity is the only company in the world prepared to insure certain giant risks. It remains based in Omaha, a few miles from Berkshire's home office.
Ten Minutes a Year — Ringwalt was an excellent but somewhat eccentric businessman. For about ten minutes every year, Buffett wrote in 2006, he would get the urge to sell his company — moods perhaps brought on by a tiff with regulators or an unfavorable jury verdict — and those moods quickly vanished. In the mid-1960s Buffett asked investment banker Charlie Heider, a mutual friend, to alert him the next time Jack was "in heat." When Charlie's call came, Buffett sped to meet Jack.
The Fifteen-Minute Handshake (March 9, 1967) — The deal was made in minutes, with Buffett waiving an audit, due diligence, or anything else that would give Ringwalt an opportunity to reconsider. They just shook hands. Neither of Jack's companies had ever been audited by a public accounting firm, and Buffett didn't ask for one — his reasoning being that Jack was honest, and also a bit quirky and likely to walk away if the deal became at all complicated. The purchase agreement ran a page and a half, homemade, with no lawyer on either side. At the closing in Charlie Heider's office, Ringwalt arrived late: he had been driving around looking for a parking meter with some unexpired time. Buffett called it a magic moment — he knew then that Jack was going to be his kind of manager.
Outshining the Fortune 500 (1967) — The first year under Berkshire ownership vindicated the price. The 1967 partnership letter reported that National Indemnity, run by Ringwalt, earned about 20% on capital employed — a figure only 37 companies among Fortune's 500 achieved that year. Buffett delighted in noting that his boys outshone such mildly better-known companies as IBM, General Electric, General Motors, Procter & Gamble, DuPont, and Hewlett-Packard.
The Discipline of Walking Away (1967–1973) — Ringwalt's founding principle was underwriting for a profit, never volume for its own sake. When competition made rates inadequate, National Indemnity simply let its premium volume shrink — as it did in the early 1970s, exactly as forecast — rather than write business at a loss. It is a policy frequently talked about within the industry, Buffett observed, and much less frequently achieved. In 1973 Ringwalt retired as President, closing an absolutely brilliant record that stretched back to the founding in 1940.
A Philosophy Etched on the Company (1978 and After) — Ringwalt's influence did not retire with him. The 1978 letter, reporting one of National Indemnity's best years under Phil Liesche, credited the success equally to Ringwalt's business talents, saying his operating philosophy remains etched upon the company. The 1979 letter made the same point about underwriting discipline: Ringwalt instilled it at the inception of the company, and Liesche never wavered in maintaining it.
Impact on Berkshire
Ringwalt's sale of National Indemnity was the single most consequential transaction in Berkshire's history. The 1982 letter states it plainly: National Indemnity has been the most important operation in Berkshire's growth. The 2014 letter calls insurance the engine that has propelled Berkshire's expansion since 1967. When Berkshire bought Jack's two insurers, they carried $17 million of float; by the end of 2006 Berkshire's float had grown to $50.9 billion, and by 2014 National Indemnity's GAAP net worth of $111 billion exceeded that of any other insurer in the world. Per page of that homemade purchase agreement, Buffett wrote, this has to be Berkshire's best deal.
Ringwalt was also the prototype of the Berkshire acquisition pattern: buy an excellent business from its founder, pay cash, and leave the founder alone to run it. The 1971 letter grouped him with Gene Abegg of Illinois National Bank and Vic Raab of Home & Automobile as men cut from the same cloth — founders who sold their ownership positions for cash and then retained every bit of the proprietary interest and pride they had always had. The 1972 letter confirmed the formula: all three acquisitions had worked out exceptionally well, from both the financial and human standpoints. Twenty years later, in 1992, Buffett consciously replayed the Ringwalt deal when he bought Central States Indemnity from Bill Kizer — another Omaha insurer, another long-time friend, built from scratch.
Finally, Ringwalt taught Buffett something permanent about what to look for in a manager: honesty first, plus a personality strong enough to shrink volume when prices are wrong. The man who hunted for unexpired parking meters while closing a sale of his life's work embodied the owner-mindset Buffett spent the next six decades trying to recruit.
Key Passages from Buffett's Letters
Both of these companies earned about 20% on capital employed in their businesses.
Since establishment of the business in 1941, Mr. Ringwalt has held to the principle of underwriting for a profit — a policy which is frequently talked about within the industry but much less frequently achieved.
During 1973, Jack Ringwalt retired as President of National Indemnity Company after an absolutely brilliant record since founding the business in 1940.
Present successes reflect credit not only upon present managers, but equally upon the business talents of Jack Ringwalt, founder of National Indemnity, whose operating philosophy remains etched upon the company.
Jack Ringwalt, the founder of National Indemnity Company, instilled this underwriting discipline at the inception of the company, and Phil Liesche never has wavered in maintaining it.
Phil and Jack Ringwalt, his predecessor, were the two prime movers in National Indemnity's success.
If I don't sell the company, my executor will, and I'd rather pick the home for it.
Finally arriving, he explained that he had been driving around looking for a parking meter with some unexpired time. That was a magic moment for me. I knew then that Jack was going to be my kind of manager.
It was our lucky day when, in March 1967, Jack Ringwalt sold us his two property-casualty insurers for $8.6 million.
Jack Ringwalt, a friend of mine who was the controlling shareholder of the two companies, came to my office saying he would like to sell. Fifteen minutes later, we had a deal.
Jack was honest, shrewd, likeable and a bit quirky. In particular, he disliked regulators. When he periodically became annoyed with their supervision, he would feel an urge to sell his company.