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Strategies & Market Trends : Value Investing
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To: Graham Osborn who wrote (55396)6/2/2015 5:57:22 PM
From: E_K_S  Read Replies (1) of 78702
 
Re: Graham Valuation and the Graham No.

This has been my one best valuation metrics in the last two years. I was surprised to see the undervalued Graham valuations for some of the reinsurers I follow specifically Baldwin & Lyons Inc. (NASDAQ: BWINB) and Maiden Holdings, Ltd. (NASDAQ: MHLD).

I do not have a lot of experience evaluating these reinsurers and do not know if the Graham No. valuation has a hidden flaw when using the mathematical valuation calculation. I have linked the two name to the Google Graham No. valuation spreadsheet I use and you can see they both show that they are selling below 40% of their Graham No. fair value.

Have you looked at the sector in general and specifically BWINB and/or MHLD?

Neither of the companies have 10 years of positive EPS so one could exclude them from the GN calculation based on that criteria but BWINB did have 8 positive EPS years. The two that were negative were due to one time insurance claims paid that impacted the current years reserves. Maybe if one smooths out the EPS and increase in BV/Assets over 10 years, it better accounts for the insurance premiums collected vs paid out.

After my review of these companies and the sector in general, it's pretty easy to evaluate assets and cash flows from the insurance premiums but more difficult to quantify the risk level of the company's future insurance liability for customer policies written.

Since W. Buffet did so well with Geico, I wanted to give it another look before I excluded this sector from my candidate buy list.

EKS
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