Hagerty probably worth $700 million in equity method investments. And maybe back out deferred taxes. Gayner obviously wants to defer taxes indefinitely which has led to some high multiples in the portfolio.
One of the brilliant parts of the portfolio is that when they buy Ventures companies they can take debt against it and treat that debt as high quality capital in the insurance operation.
Overall I do not have a ton of bones to pick with their valuation. Gayner basically wants to count $1 of float as $1 of value which Buffett has outlined many times. Although my understand what Buffet means is that it is because the float was achieved with an underwriting gain and he can invest it anywhere (hence I do not think you should also capitalize underwriting earnings). Anyways, I love this stock. They are going to buy back $2 billion this year. The insurance business should improve. And I think it gets stronger as the markets get weaker because they have a long pipeline of Ventures investments.
I also think Ventures would go off at greater than 10x EBITDA in public markets given my assessment of quality of some of the businesses and the lack of leverage.
Good summary! Your comment on "double counting" the float + capitalizing underwriting earnings is my primary beef with the approach, but it still probably gets in the ballpark.
I agree the insurance earnings are a huge potential source of growth from here. Big reason I find it interesting.
Did management say the $2bn authorization was going to be deployed this year? That'd be a big step change from current run-rate.
Hagerty probably worth $700 million in equity method investments. And maybe back out deferred taxes. Gayner obviously wants to defer taxes indefinitely which has led to some high multiples in the portfolio.
One of the brilliant parts of the portfolio is that when they buy Ventures companies they can take debt against it and treat that debt as high quality capital in the insurance operation.
Overall I do not have a ton of bones to pick with their valuation. Gayner basically wants to count $1 of float as $1 of value which Buffett has outlined many times. Although my understand what Buffet means is that it is because the float was achieved with an underwriting gain and he can invest it anywhere (hence I do not think you should also capitalize underwriting earnings). Anyways, I love this stock. They are going to buy back $2 billion this year. The insurance business should improve. And I think it gets stronger as the markets get weaker because they have a long pipeline of Ventures investments.
I also think Ventures would go off at greater than 10x EBITDA in public markets given my assessment of quality of some of the businesses and the lack of leverage.
Im going off memory but believe as part of resolution with Jana they said they would focus cap allocation on the 2 billion in buybacks.
Good summary! Your comment on "double counting" the float + capitalizing underwriting earnings is my primary beef with the approach, but it still probably gets in the ballpark.
I agree the insurance earnings are a huge potential source of growth from here. Big reason I find it interesting.
Did management say the $2bn authorization was going to be deployed this year? That'd be a big step change from current run-rate.
Excellent analysis.
Thank you!