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An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money.. Buffett also touches on what makes valuing an insurance company difficult.nsurance Valuation Insight. A couple of key metrics can be used to value insurance companies, and these metrics happen to be common to financial firms in general. These are price to book (P/B) and return on equity (ROE).
A number of valuation metrics are more specific to the insurance industry. The Combined Ratio measures incurred losses and expenses as a percentage of earned premiums. A ratio above 100% means the insurance firm is losing money on its insurance operations.Below 100% suggests an operating profit.nsurance Valuation Insight. A couple of key metrics can be used to value insurance companies, and these metrics happen to be common to financial firms in general. These are price to book (P/B) and return on equity (ROE).