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Fairfax's intrinsic value


bluedevil
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Would this be a fair way to think about Fairfax's current intrinsic value?

 

I assume that Fairfax will maintain current float and will do so without cost; Fairfax has roughly $1100 of equity and float per share; I assume Fairfax will generate through its investments over time a return of 7% on that $1100 (vs. 9% long-term average), which equates to annual unlevered, normalized earnings per share of roughly $77 per share.  Value that "earning power" at 10x for an IV estimate of $770 per share.

 

 

 

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This is what Bruce Berkowitz said when he valued Markel in 2000 in an interview with businessweek.

 

“Look, the key concept for insurance companies is to take a look at the investments per share. And you can find companies where the investments per share are significantly higher than the stock price. Markel has roughly $400 per share of investments. If they can break even on their underwriting and only make a 5% after-tax investment return, that’s $20 per share. Not bad for a company at $140 per share. So the trick is to have that investment leverage and at the same time break even or make an underwriting profit.”

 

Any underwriting profit that Markel makes is a bonus.

 

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