Tommm50

Sad to say, the feeling in the business is there is so much excess capacity right now even a major hurricane won't move the market to better pricing.

This must be a misprint. I realize pink sheets are volatile but FRFHF.PK is down over 10 points (over 2.5%) at the open on a trade of 7 (count 'em) shares? Is there some technical reason?

Any speculation as to the knock on effect to Fairfax's suit against the hedge funds? What was seen by the market (especially the Wall Street Journal) as a wild and unlikely allegation when the suit was filed years ago is suddenly extremely credible and riding the tide of the 47 criminal charges lodged against hedge funds (so far) for insider trading. And the feds are sniffing around SAC and Stephen Cohen.

Well the big lawsuit was for $6b. However, at this point, that's just a gleam in Prem's eye. First FFH has to win. Then they have to defend the thousand appeals that the hedgies will try to launch, and then FFH has to actually collect from the deadbeats. If they actually win and defend all the appeals, maybe, maybe, maybe they'll receive a cheque in 2020 or so.....assuming that these guys still have any visible assets in 2020 (as opposed to offshore money). And, whatever they collect will be discounted by time value of money (ie, what's the value of a billion that you won't receive until 2020?). So IMO, you're left with: $6b X probability of winning the case X probability of winning the appeals X % of award that is collectible / (1 + r)**10 Personally, I attach a value of zero to the lawsuit when I try to value FFH. SJ I wouldn't disagree about not waiting by the mailbox for a check but didn't the lawsuit include RICO allegations which if upheld would treble the damages to $18 billion? Just to add to your equation.

It depends on the type of Business Interruption coverage they bought. Some would, some wouldn't. It used to be business interruption coverage only kicked in if your business was interrupted by direct physical damage to your property caused by a covered peril. Nowadays there are much broader coverages out there. I'd guess in this soft market the broader coverage has become more common but I have no idea how prevalent it is.

I've taken everything else out of the market. I think FFH is not only a good investment in it's own right but a hedge against sudden market shock.

KF is right, the $9 billion is the estimated value of the entire fleet. Their risk is basically an individual plane crash. You can bet they buy reinsurance behind it because even an individual plane is worth a great deal more than the annual premium. The frequency of air crashes is low, hence the small premium relative to the value of a plane. It's analogous to buying fire insurance on your home. It may be worth $500,000 but you're paying $1,500 in premium.

The rough translation of the phrase is "Think Better"

As focus is turning to the annual meeting there's one topic I'd love to see discussed either at the meeting or at the post meeting festivities. That is: "What's up with A.M. Best and Fairfax?". As I'm sure most of you are aware A.M. Best is an extremely influential rating agency for insurance companies. When Fairfax announced their preferred share offering a few weeks ago A.M. Best gave the offering an ICR rating of bb+. That's a below investment grade rating. This is the web address of A.M. Best's description of their rating methodology. (http://www.ambest.com/ratings/methodology/bcrm.pdf) There are a number of considerations but given Fairfax's operating earnings record, their excellent liquidity, and their diversified insurance and reinsurance operations I'd really be interested in learning what conversations Fairfax is having with A.M. Best and has Best told them what exactly they need to do to be considered an investment grade?

I know this is obvious to most but for some reason I can't quite connect the dots. I'm a U.S. citizen holding a sizable number of FFH shares (since 2003). Since the delisting on the NY Exchange of course they are on the pink sheets. I hold them in an IRA account with E*Trade and they won't allow me to hold the shares on the Toronto Exchange. I therefore have shares of a Canadian company in U.S. dollars. My question is: If the U.S. dollar devalues won't the US dollar value of the FFH shares actually increase or do I have this backwards?

I may be the only one who finds this mystifying but in contrast, today, 15,000 shares trade with NO ???change in the stock price. Then, at the close a 100 share trade drops the stock price $1,50. ???

I've been looking for the thread to start for 2nd Qtr results and it just did with a vengeance. What I found amazing however was today's movement on the pink sheets. I understand it's very lightly traded but for a company of this market cap and shares outstanding to move 1.5% on 753 shares is very hard to believe.

Man, I look at that SFK thread and wonder if it deserves it's own mailbox. It's certainly dominating this board. On another topic. There seems a lot (relatively) of trading activity today on Fairfax on both the pink sheets and the Toronto Exchange. Happily it's upward. Any insight as to why? Tom

Up the Republic! (cry of defiance against the devious hordes of the hedges)

There are a number of tests regulators use nowadays using risk adjusted capital calculations. The old rule of thumb used to be you could write premiums 2 to 3 times your policy holders surplus. 2 to 1 was considered conservative.

Yes. I have used Etrade to buy FRFHF in odd lots. You can actually trade on the TSX with Etrade, but you can't buy FFH in odd lots (based on when I last tried). Txlaw, I have an Etrade accounts but my FFH stock is in an IRA account and they tell me I can't buy stocks on the Toronto exchange in that account. That doesn't make sense to me. The IRS does not place such a restriction on IRA investments. Any insight other than Etrade not giving me the straight scoop?

Wow. Strong letter to follow. Think all the massive hijacking of the financial markets and theft on an epic scale will finally come to light? Wouldn't it be nice if the FBI got in the game on the right side this time. I would guess the "Guru" mentioned would be JC.

Fitch's comments are absolutely absurd. What's their agenda? They have to stand on a latter, get on tip toes, twist around 240 degrees and squint through a straw to find this as a reason for potential downgrade? More volatility in investments? Isn't that dwarfed in importance by the much larger size of the acquiring company's portfolio, exemplary investing track record, and $1 Billion in cash?

It seems people are quibbling over the $200 million in possible equity dilution. What about a 35% increase in book value year on year? What about steady uw results? What about the over $700 million in investment and interest income and they haven't gotten their hands on Zenith's portfolio? This reads to me like a spectacular year, am I alone in this?

Did I miss an announcement? Don't they normally report year end results in the next week?

Thanks for the information.

I'll ... try.

I note that the new OTC stock FRFHF.PK is down 2% today while FFH.TO is down 0.25%. This appears to be more than simply the currency conversion. Are the two stocks actually trading differently? If so, I'm thinking I need to switch to FFH.TO. ??

I spoke to my broker this morning and he said I could request an exchange (different CUSIP number) from the OTC traded stock to the Toronto traded stock.

Regarding the insurance cycle I agree with Cardboard, anticipation of a hard market as an investing strategy in insurance companys is buitling your portfolie on quicksand. To understand the insurance cycle (lunatic as it is) it's helpful to put it in historical context. Back in the 60's and 70's (and decades before) the insurance cycle was regular as the seasons, three years hard, three years soft. Beginning in the 70's that began to change. The mid 70's brought the medical malpractice insurance crisis. Insurance companies stopped writing it altogether. It forced doctor groups and hospital groups to form their own insurance companies or alternate funding mechanisms. The next real hard market in the mid 80's did the same for U.S. Excess Casualty business. The Fortune 1000 were unable to purchase adequate Product Liability, Auto Liability, Workers Compensation, or General Liability coverage. They were forced to create their own insurance companies (that's how ACE and XL came to be) or find alternative funding mechanisms (a lot of legislation was passed to allow Purchasing Groups, Risk Retention Groups, Captives, Self Insurance Retentionss, etc.). The end result was that by the end of the 80's half the U.S. Casualty Insurance business was removed from the "standard" insurance company market, never to return. The myopic strategies of the insurance companies forced their customers to, in effect, write their own insurance. This means that the insurance premium pie is half what is was (at least for Casualty). The supply and demand cycle of the old markets is forever changed to have relatively less demand vs the same supply. The other big influence on the insurance cycle is the evolution of tremendous flows of capital the financial markets now provide. A graphic demonstration was 9/11. Almost overnight $12 billion or so in capital arose in Bermuda to take advantage of the "opportunity" provided by the hard market. This had the effect of dramatically shortening a real hard market because you can only get better prices and terms if there is no other alternative. If you have extensive inflows of new capital that hard market is extinguished rapidly. That's a long winded way of saying the old fashioned "hard market" environment is history. I don't agree with Cardboard about Fairfax's UW results. The huge reserve hole TIG and C&F created is now behind us but has left it's mark on Fairfax management. I think Fairfax will keep their U.S. uw combined ratio around 100 going forward (letting their top line decline in the U.S.) allowing the investment returns and growing foreign insurance operations to generate the "lumpy" 20% average annual growth Prem espoused. My two cents anyway