Chapter 5

Ian Cumming and Joseph S. Steinberg

Don’t overpay, no matter what the madding crowd is up to.1

—Ian M. Cumming and Joseph S. Steinberg

Ian Cumming and Joseph Steinberg run Leucadia National Corporation, a holding company with many subsidiaries, and large investments in other companies. Subsidiaries include Hard Rock Hotel and Casino in Biloxi, Mississippi, Idaho Timber, Conwed Plastics, and Crimson Wine Group. The large investments are in Jefferies Group, Inc., and Mueller Industries, Inc.

Cumming and Steinberg, classmates at Harvard Business School Class of 1970, formed Leucadia in 1980 with the takeover of Talcott National. Diversification attempts in the 1960s had left Talcott, a factoring business founded in 1854, in financial difficulties. Leucadia sold the factoring business and acquired American Investment Company, a small loan and life insurance business soon after. The insurance operations were expanded organically and via acquisitions throughout the 1980s. The pattern continued in 1991 with the acquisition of Colonial Penn for $150 million. The insurance operations of Leucadia’s businesses are often compared to Warren Buffett’s Berkshire Hathaway, as both companies engage in using the float in the insurance businesses to invest in a diversified range of businesses in other sectors.

The book value of Leucadia National grew at a compounded annual growth rate (CAGR) of 18.5 percent from 1979 to 2011, compared to the 8 percent growth of S&P 500 Index, including ...

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