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Posts posted by Tommm50
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The reserve triangles show current reserves for each calendar year are less than the original reserves put up that year except 2018. JFan may be referring to the penultimate (I don't often get to use that word) line which shows negative development for several years. This is the current calendar year's change for those prior year's reserves. These years are relatively young and I kinda expect younger years to show increased reserves as they mature. To me the more important comparisons are the what are current reserves for that year vs the initial reserves. By this metric only 2018 shows a modest deterioration.
If several years start to show current reserves are more than the initial reserves then that bears watching. Loss reserving has always been the Achilles Heel of P&C insurance companies. You've got to estimate your products cost when you won't know the actual cost for 5 or more years down the road. If you find out you're wrong at the end of that time you not only lose money for that year but possibly for all the intervening years you've made the same mistake.
An average insurance company may get some years right and some years wrong but as long as it averages out they continue merrily on their way as they also collect investment income on those reserves. A company that is conservative in their reserving will get all or almost all years where their initial reserves are more than their ultimate payouts. Like Fairfax.
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Looks to me like they"re flat or down each year. They have favorable development every year but one, by $200k.
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I wonder if they're back at it. A week straight of declines on no news...
That's pretty unusual. If so, it seems like they could pick a much easier target, or maybe sheer vindictiveness over Fairfax shining a light on the nest of vipers back in the day?
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To me "no moat" basically means nothing special, it can be easily replicated. How would Brett suppose to replicate the global reach, the market position in emerging economies, the diversity of industries, the expertise in bond investing, and longevity and loyalty of staff enjoyed by Fairfax?
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53 minutes ago, StubbleJumper said:
Looking at company-wide core underwriting CRs, the lack of cats in 2023 appears to be a good thing, otherwise the consolidated CR in 2023 would have been higher than 2022.
Note the premium reductions at Brit relate to trimming their gross and net property cat exposure. I believe this has also happened in other segments. I don't think Fairfax will be hit as hard in the future with Property Cat losses.
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I notice a significant difference in the percentage change in the stock price on the OTC U.S. stock and Fairfax on the Canadian exchange. I'd guess it's the forex rate difference between U.S. and Canadian dollars but the seems like a lot. Any comments?
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Yeah, I'm hugely over-weighted in Fairfax. I've owned it for over twenty years. It's finally moving as I knew it eventually would. I was waiting for it to crack $1,000 U.S. to pull some of the investment into treasuries. Today it did. My plan is to wait for the year end results and start to siphon money out. Having said that I will keep a large position because I think the market is just starting to catch on and it has a long way to run yet.
I believe Buffett once said "If you want to make a fortune, concentrate. If you want to keep a fortune, diversify."
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Simply looking to pick up the dividend?
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Large volume on FRFHF the last few days, pattern seems to be price rises in the morning session and sells off as the day goes on. Very large volume on FFH.CA today with no movement in price. Any insights into the activity? Related to building a position prior to year end results announcement?
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5 hours ago, petec said:
All three are largely driven by rates: bond earnings obviously are, and I suspect premium growth and lower CRs are too since rates drive tourist capital in and out of the industry.
I don't believe lower CR's are driven by higher interest rates, if fact, the opposite. If an insurance company is not making income on the investment side it is forced to try to make it on the underwriting side i.e. lower CR's. I'm not sure the relationship to growth but growth is not as important as profit.
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36 minutes ago, Viking said:
I think there are a few factors to consider including Fairfax being a more complex business vs. some peers in terms of where they write business, international (not U.S. or Bermuda based), larger non-insurance exposures that can have volatility, larger equity exposures,
That's kinda odd, those attributes are a plus for Berkshire....
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I've owned this stock for over 20 years, this may be the largest single day increase in it's history.
And it's just getting started...
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Impressive volume today for Fairfax on both the OTC and Toronto Exchange. Maybe they've been reading Vikings posts...
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16 hours ago, Parsad said:
Prem and Patrick Byrne never complained about short-selling.
They only complained about naked short-selling and coordinated attacks through certain analysts, media and hedge funds, who specifically created downward spiral attacks because they artificially increased the number of shares available as the DTC wasn't properly enforcing fail to delivers.
I don't think any critic ever had an issue with short-selling itself...which is part of creating an efficient market. Cheers!
Exactly.
I fear they're still doing it. It seems just before every positive quarter announcement the share price edges down so the bump on the news becomes incremental vs eye catching. I promise to stop now.
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13 hours ago, marcowelby said:
For those who remember the Fairfax Bear short attack in the beginnings of the 2000's
https://oilprice.com/Energy/Energy-General/Is-This-The-End-Of-Naked-Short-Selling.html
https://www.wbny.com/Warshaw-Burstein-Prevails-Against-Major-Banks-and-Brokerage-Houses-Opposition
Finally, some justice after all those years I suppose.
I would like to take the opportunity to thanks the members of this group who kept the conversation rolling on the subject at the time and help me believe that not only I should not sell any of my Fairfax shares and convince me to buy more at bargain price ... an obvious wise decision in retrospect but not so evident at the time.
Marc
It would be great if it's enacted. I can't help but believe the massive fleets of HF lawyers will endlessly appeal an obviously correct ruling.
It's kinda depressing to note the Candian Stock Exchange is a hotbed of naked shorting. As Sanjeev can tell you, I've long felt that Fairfax's low multiple vs peers had more to do with short manipulation than "Mr. Market's" opinion. Long term holders recall Fairfax had the temerity to sue the hedge funds for manipulating their stock on the NYSE. Although it was 15 years ago it's hard to get off their black list once your on it.
Enough of my conspiracy theory...
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4 hours ago, sleepydragon said:
reading Fairfax's annual letters last night. I am new to this stock.. but they are writing insurance everywhere in the world -- like Indonesia etc.. Do they really know what risks they are taking on? It makes me a bit hard to sleep at night.
I agree with StubbleJumper. Having written business internationally myself I can say writing liability business (largely what Fairfax does) outside the U.S. is way more consistently profitable than in the U.S.. Americans are one of the most litiguous
populations on the planet.
Also, U.S. is a mature market with fierce competition and modest incremental growth. The economies of other countries around the world have an ability to grow at a much faster pace (although obviously smaller scale). India is the poster child. The opportunity to grow profitably in emerging markets is much more attractive as instead of achieving growth by taking an account from another insurer you have more insureds that are just starting and need insurance.
This means Fairfax's geographic spread and presence in significant emerging markets is one of its greatest strengths and a huge strategic advantage. You should sleep well mon ami.
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2 hours ago, StubbleJumper said:
That leads me to yet another interesting observation about FFH shareholders. Allied, Odyssey and Northbridge all have plenty of capital to enable an underwriting expansion. It's fascinating to me that shareholders have not been haranguing Prem during the conference calls to grow those books more aggressively.
I hope our shareholders understand It's not that simple.
I've been managing underwriting operations for over 30 years and you are a;ways walking on a razor's edge trying to balance growth and profitability. It's been said on this board that Fairfax is in a commodity business but that is not exactly true. Where that concept is most true is in U.S. personal lines and small commercial business, less so in reinsurance and specialty casualty business. Fairfax's portfolio is more tuned to the latter, as well as global and emerging markets. Crum & Forster went from a "main street" insurer (read commodity insurer) when Fairfax bought them to much more of a specialty casualty insurer now. Their results reflect this.
In every case in the U.S. market even the largest insurer has a very small market share, you have very little leverage in obtaining your price and terms. You have better conditions in lines of coverage that fewer insurers write. Even here your opportunities are contingent on market conditions. In a hard market you have a better shot at getting your terms but if you are not very disciplined on managing your growth you'll find in a few years your combined ratios will climb as you wrote "middlin' opportunites" rather than the best opportunities. Your combined ratios will revert to 100 or worse.
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14 hours ago, Parsad said:
It's because of guys like this that make the markets so efficient! Cheers!
Parsad, you know I have deep suspicions surrounding the hedge funds market manipulations. They have before and likely now have analysts in their pockets. This analysis of Fairfax is so far off it simply seems to be there to justify a short campaign.
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I check the FRFHF stock price on the WSJ website. They also list the stock movement of 6 competitors (including Chubb and Berkley). All those competitors are negative today, from half a percent to almost two percent. Fairfax is up over four percent. Nice to see.
I'm guessing it's the much greater impact for other insurers of "mark to market" losses on their bond portfolios.
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19 hours ago, Thrifty3000 said:
But, back in 2015 FFH had reserved $896 million for asbestos. In my mind that suggests FFH expected to eventually pay $896 million. However, since 2015 they’ve actually paid something like $1.2 BILLION and they are still showing reserves of over $800 million.
This is an issue all major insurers who were doing business in the 60's and 70's are dealing with, these old "legacy issues". Asbestos is a great example. We are decades removed from when the insurance industry was blindsided by a tsunami of claims from the plaintiffs bar using the infamous "triple trigger" strategy.
It's very hard to estimate how much is left of this to go. If FFH reserved it at $896M in 2015 and, as you say, paid out $1.2B over the last eight years you can clearly say they under-reserved it 2015. If their 2022 reserve is still over $800M you could argue they are currently over-reserved. It would be instructive to see what the annual payouts were. Were they annually declining, increasing, or relatively constant. In any event my guess is it's a trivial number in the grand scheme of things.
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20 hours ago, Thrifty3000 said:
Great news.My understanding is if a reinsurer fails to pay claims then the primary insurer is still on the hook for the liabilities. (That’s why insurers disclose gross premiums and net premiums.)
Therefore the reinsured premiums involve a certain amount of credit/counterparty risk (which should correlate with the reinsurer’s credit ratings). That’s why higher credit ratings are an important competitive advantage for reinsurers. I’m sure the A+ rating increase will drive additional pricing power.That's correct. The back end purchase of reinsurance does not alter the insurance company's obligation to the policy holder.
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19 minutes ago, jbwent63 said:
If wildfires are started by arsonists, does that give the insurers an "out" to avoid claims? Subrogation would be difficult (assuming the firebug isn't a billionaire).
Nope, as long as the homeowner didn't start it.
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I think we should send Brett Horn Viking's various posts. Maybe he would learn something...
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I rate them a solid eight. I've been following them for 20 years and I worked for Fairfax back then. When they finally had to shut down TIG Specialty Prem made sure all stakeholders got out safe, including employees and especially reinsurers. That was extremely rare. I have absolutely no doubt of his integrity. They made a killing on the MBS debacle, they got killed on the huge deflation bet. I think they had the economics right, they badly underestimated what governments would do to prop up their economies. They have a lot of scars but they've learned and all their moves are finally paying off.
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