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gaf63

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    FFH - Net Premiums Written to Statutory Surplus

    in Fairfax Financial

    Posted

                          NPW          SS      NPW/SS

     

    Northbridge      928.7    1,411.3  0.7

    Crum & Forster 716.4    1,628.2  0.4

    OdysseyRe      1,893.8  3,512.8  0.5

    Fairfax Asia      127.9      327.8      0.4

     

    Their NPW to capital is also < .5

     

    I am interested in knowing how much insurance FFH  can write to their SS according to the regulations,

    and also if any one has an opinion or knowledge of  what level would they be comfortable in writing.

     

    Am interested in how much they can increase their business once the opportunity arises.

     

    Thanks, gaf

    FFH relative valuation to MKL

    in Fairfax Financial

    Posted

    In comparing FFH to WRB  and MKL,  WRB  does discount their reserves and by a little over 10% over the past yrs.  If this discount is  added back to the LAE , their combined ratio would be 104, 103, 98, 98, 99 over last 5 yrs.  (If the discount is not added back at 100% could someone explain what the ratio is?)

    If this is the case their UW  is ok , but not great.  So why the premium in P/BV?

     

    MKL states that they do not discount their reserves

     

     

    FFH Valuation

    in Fairfax Financial

    Posted

    FFH has an excess of regulatory capital, from pg. 163 of the 09 AR,

     

    At December 31, 2009, the

    U.S. insurance, reinsurance and runoff subsidiaries had capital and surplus in excess of the regulatory minimum

    requirement of two times the authorized control level – each subsidiary had capital and surplus in excess of 5.3 times

    the authorized control level, except for TIG (2.4 times).

    In Canada, property and casualty companies are regulated by the Office of the Superintendent of Financial

    Institutions on the basis of a minimum supervisory target of 150% of a minimum capital test (MCT) formula. At

    December 31, 2009, Northbridge’s subsidiaries had a weighted average MCT ratio of 240% of the minimum statutory

    capital required, compared to 224% at December 31, 2008, well in excess of the 150% minimum supervisory target.

     

    By another measure , premiums written to equity they are also in good shape(pg. 163 AR09)

     

    A common measure of capital adequacy in the property and casualty industry is the ratio of premiums to surplus (or

    total shareholders’ equity). These ratios are shown for the insurance and reinsurance operating companies of Fairfax

    for the most recent five years in the following table:

    2009 2008 2007 2006 2005

    Net premiums written to surplus

    (total shareholders’ equity)

                                 2009 2008 2007 2006 2005

     

    Northbridge (Canada) 0.7   1.0   0.7   1.0   1.1

    Crum & Forster (U.S.) 0.5   0.8   0.8   1.0   .09

    Fairmont (U.S.)(1)                                    0.9

    Fairfax Asia               0.4    0.3   0.4   0.5

    Reinsurance

    OdysseyRe                0.5    0.7   0.8   1.1   1.5

    Other(2)                   1.1   0.6    0.6   1.2   1.1

    Canadian                  1.0   1.0    1.0   1.0   1.1

    insurance industry

    U.S. insurance           0.8   1.0    0.9   0.9   1.0

     

    Also a look at the loss/LAE triangles shows LAE shows more than adequate reserves to cumilative losses,

    and finally , Prem Watsa has stated many times that FFH  is conservatively reserved, and I trust the man!

     

    So, dont believe under reserving to be a problem

     

    The Year of the Roth

    in General Discussion

    Posted

    For me the ability to take withdrawals when I want from a Roth and not on a schedule starting at age 70.5 as in reg. IRA is an important consideration. I dont want to be invested in equities  and have to sell at inopportune times to meet the ira schedule.  Also odds of taxes going up are pretty good, and if one has other income with the proceeds of the IRA added , the tax levels will be  higher than you suggest(Im in Calif).  So I'll pay for the privilege in taxes which I may or may not recover, but I'll be able to withdraw  in 10 or 15 yrs at my discretion.  So at my age I am debating whether the tax cost is worth the above benefit.  Money would be invested in FFH which if it compounds at 15% ,  .......  big if , Gaf

    zenith

    in Fairfax Financial

    Posted

    Paul Rivett comments on the Zenith purchase:

     

    The Canadian insurance conglomerate intends to sell workers compensation policies from Woodland Hills, Calif.-based Zenith across its U.S. distribution network, as well as cross-sell general liability insurance to Zenith policyholders, who are primarily in California and Florida. Ê  The insurer gathered a 8.4% stake in Zenith last year. The deal values Zenith at $1.44 billion. Ê  In Toronto, Fairfax stock is up C$3.30 to $371.00 in light trading. Ê  "It's a great marriage for us," says Peter Rivett, Fairfax's chief legal officer. Ê  Unlike many of its peers, Fairfax, run by Prem Watsa, often called Canada's Warren Buffett, is flush with cash. Even with this transaction, the company still has another $1 billion in cash and marketable securities in its coffers, and expects to garner $500 million to $1 billion a year in dividends after privatizing its subsidiaries, says Rivett. Ê  "We now have tremendous internal dividend capacity to support acquistions like this," he says. Ê  This acquisition is atypical for Watsa, who tends to buy insurers that need to be overhauled. That's not the case at Zenith. Fairfax said it is retaining the management team, and the company will continue to operate from its California headquarters. "It's the best insurance company that we've bought," Rivett says. Ê  Watsa has eyed Zenith for awhile. In 1998, Fairfax agreed to buy a 38.4% stake for $28 a share. By 2006, it had divested that stake. But, in the interim, Rivett said Fairfax gained valuable insight into Zenith's business and managerial style. In January, Fairfax disclosed its 8.4% stake. Zenith insiders own about 3.4% of the stock. Ê  Fairfax intends to cross-sell products to policyholders using the distribution platform from its Morristown, New Jersey-based Crum & Forster. Roughly 60% of Zenith's business is in California and 35% is in Florida, with the remainder scattered throughout the U.S., Rivett said. Ê  Fairfax is using a combination of holding company cash and subsidiary dividends to finance the deal. It will also raise $200 million through an equity issue prior to the closing. The transaction is expected to close in the second quarter. Ê  In the past year, Fairfax rebuilt its insurance empire, bringing back into the fold several subsidiaries, including Toronto-based Northbridge Financial Corp., British insurer Advent Capital (Holdings) Plc, and Connecticut-based Odyssey Re Holdings Corp. Ê  The window for acquisitions may be closing, Rivett said. Ê  "We're not seeing the type of investment opportunities that we saw in the first quarter of 2009," he said. "The world is back from the brink and things seem to be functioning again." Ê  -By Caroline Van Hasselt, Dow Jones Newswires;

    New OTC stock vs FFH.TO

    in Fairfax Financial

    Posted

    At Scottrade , one of the consiquences of FFH being transfered to the pink sheets is that the value of FRFHF shares are not allowable for margin

    purchases.  Do other brokers follow same rules? Has been this way since the switch but finally inquired today.  I Use margin so I can purchase shares before money is in account, which is not often.  So am mainly curious.

    Thanks , GAF

    Fairfax Announces Preferred Share Issue

    in Fairfax Financial

    Posted

    Couple of possibilities:  pay off the ORH pfds. ( A at 8%),  injection of capital into  ICICI Lombard to bring % owned to 48%, 49%(if the Indian govt. ever moves on allowing higher foreign ownership), more investment opportunities with a much higher return than 4.75%, and the disastrous quake in Haiti could have caused major losses( altho would think that they ample reserves for such an occurance.

     

    Gaf

     

     

     

     

    Should be getting a presser some time soon - Annual Dividend

    in Fairfax Financial

    Posted

    Ericopoly,

    the holding period is 60 days on either side of the ex-div date

     

    "Dividends are taxed either as ordinary income or as qualified dividends. In order to be taxed as a qualified dividend, the investor "must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date," as the IRS explains in Publication 550."

     

    As to the foreign tax credit for US residents, I received 58% of the Canadian tax withheld as a  tax credit.  The % will change depending on total AGI and deductions( 2 pg. IRS form)

     

     

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