What's Geico Really Worth to Berkshire Hathaway?
Warren Buffett often refers to Berkshire Hathaway's (NYSE: BRK-A)(NYSE: BRK-B) book value as a measuring stick for its success or failure, but even he admits it has its flaws.
One of the biggest is that Berkshire's losing acquisitions have to be marked down, but winners can't be marked up. Therefore, Berkshire's book value captures many of its failures, but none of its biggest acquisition successes.
Few success stories are as important as Geico, which has grown by leaps and bounds since Berkshire acquired it 1996. But as Buffett wrote in his 2010 letter to shareholders, Geico has never been written up to reflect its success and is carried at a mere $1.4 billion premium to its book value.
Source: Fool.com
