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"On Insurance Investing, Part 1 - Shrinking the Share Count"

Guest hellsten

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Guest hellsten

Aleph blog on share buybacks in the insurance industry:



Now, buying back stock is not a panacea.  It is only good when the shares are trading below or not much above fair market value.  What’s fair market value, you ask?  Well, that’s not an easy question to answer in most places, but in insurance, it means around 1.3x book value, adjusting for intangibles that have no economic significance.


Now if a company has some proprietary products, technologies or methods that give it a sustainable competitive advantage, that multiple can rise — AFLAC might be an example of that.  But sustainable competitive advantages in a mature and competitive industry like insurance are rare.  Above the 1.3x book value hurdle, it would be better to do special dividends.


WLP has bought back 48% of shares since 2005. WTM 40%...

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