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Stocks B / Berkshire Hathaway


Subject:  Re: Questions About BRK Date:  10/7/2012  6:45 PM
Author:  DrtThrwingMonkey Number:  194720 of 218984


Your post makes me think of an alternative way of valuing Berkshire that has not been discussed here, as far as I can recall. Clearly, float is valuable, and profitable underwriting is also valuable, so excluding underwriting profit, and conservatively ignoring the value of float, is going to significantly undervalue a company which is still primarily an insurance company.

But say that we divided Berkshire differently, not into op companies and investments, but rather, op companies, insurance companies and remaining investments. In other words, we find comparable insurance companies, like Progressive as a comparable for GEICO, or Munich Re as a comparable for GenRe and Berkshire Re; that already takes care of most of the insurance company value. Then we need some way of assessing how much of Berkshire's investments are needed for those insurance companies. So if, for instance, Progressive is worth $13 billion (a little over 2x book), with its $15.5 bn in revenue, then at first blush, GEICO, with its $15.4 bn in revenue, is also worth about $13 billion. We might adjust GEICO down a bit, since Progressive's profits seem to be a bit higher ($1 billion a year), as opposed to GEI