Tommm50

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

All Y'all, In looking at the tax forms I see no restriction to owning foreign stocks in an IRA. See http://www.ira.com/faq/faq-14.htm Where do you get the notion it's a problem? Tommm

Absolutely correct, although I mangled the second line it's "into your heart it will creep".

Am I alone in wondering what the heck is going on with the trading of this stock? It has made billions in the face of an epic financial disaster over the last two years, has grown book value at an eye popping clip, just announced a quarter that beat analysts estimates by over $20 dollars a share! Results, it gets zero mention in the trade press for the spectacular performance and the stock actually goes down on higher than average volume. We've all noted the power of the hedge funds and their influence with the trade press, particularly the Wall St. Journal. The market maker on this stock has done weird things in my opinion. Is it possible the hedge funds being sued by Fairfax are wielding their influence behind the scenes? Paranoia strikes deep...into your soul it will creep... (name that tune).

Any thoughts as to the strange behavior of the stock price this week? It's down over 20 points over a couple of days on above average volume. I'd thought it might be speculation the Odyssey transaction would not complete but it has and the stock is down again today. All signs point to a sterling quarter about to be announced next week so I'm stumped. Any insights?

It seems three of the four purchases are trivial and the fourth not substantial either. It's hard to draw any conclusions from this.

The link works just fine, thanks.

I quite agree Card. I can't help but wonder what's going on behind the curtain of the stock trading. Paranoids and conspiracy theorists (I'm trying hard not to be one) can't help but note Fairfax has engaged in a lawsuit against some of the biggest players in the rigged game Wall St has become since Long Term Capital (aka Cassandra) sounded a warning no one listened to. These guys move trillions of dollars without much in controls. It looks very unlikely, whatever the merits of the suit, there will be anything more than lip service to regulating these modern day robber barons. If I had that much money and someone was suing me and threatening everything I have (plus jail time) I might work to hold the stock down (and let Fairfax know it to an unprovable degree) as a bargaining chip to get Prem to call off (or settle for pennies) the lawsuit. There, I've said it, now I feel better.

I must be incredibly naive but isn't the function of the market maker on the NYSE to provide an orderly market in the stock? How do less than 18,000 shares move a stock with millions of shares outstanding by over 4%?? Particularly on a day when AM Best affirms Fairfax's ratings, cites all the improvements (cash, commuted reinsurance treaties, cleanup of C&F's property cat exposure, etc.) and declares the outlook stable. This happens all the time with Fairfax stock.

Stubble Jumper is correct, the property values insured are typically replacement cost, not market value. The replacement cost is usually inching up year on year although the down economy may help a bit on this score. In the face of a major cat replacement costs can spike due to scarcity of raw materials and labor as so many properties need to be reconstructed at once.

Looks like a fresh round of FFH bashers on the Yahoo board. Isn't this traditionally a leading indicator the stock will rise (it's a paradox, but the posters are so inept)?

I wouldn't put too much stock in that kind of statement from an individual reinsurer. Hannover is a "broker market" reinsurer rather than a "direct reinsurer". A direct deals directly with the insurance company a broker market reinsurer goes through an intermediary like Guy Carpenter, Aon Re, or Willis Re. Carpenter is reporting (and their perspective includes all the broker market reinsurers on the placements) January 1 renewals were a mixed bag. Some improvement on Property Cat placements, less on Property Per Risk, and none to speak of on Casualty placements. It's too early to see any significant improvement for reinsurers and certainly not yet for insurers.

Even a neophyte like me can navigate it. Thanks Sanj.