Hoodlum

Hellenic bank received a ratings upgrade on Friday. The update also provided some comments surrounding their decision and the impact from the Eurobank acquisition. https://www.financialmirror.com/2024/12/15/hellenic-bank-upgraded-on-strong-capitalisation-eurobank-synergies/ the acquisition by Eurobank is seen as strategically positive for HB given the expected synergies, particularly between the two Cyprus-based banks. Eurobank Cyprus’ corporate banking operations are complimentary to HB’s predominately retail banking franchise. “We therefore anticipate the planned merger to produce a more diversified balance sheet and earnings profile, and help address strategic challenges previously faced on a standalone basis,” CI Ratings said. “We expect overall asset quality to remain stable post-merger given Eurobank Cyprus’ sound risk profile,” the rating agency added. Capitalisation metrics are strong, as improved profitability and low dividend payouts have meant strong internal capital generation. Meanwhile, higher capitalisation in combination with the decline in the volume of NPLs has improved the bank’s extended NPL coverage; this offsets the modest LLR coverage ratio. Capitalisation is anticipated to remain strong after the planned merger in view of Eurobank Cyprus good capital ratios. “Looking ahead, we anticipate the quality of the funding base of the combined entity to remain good, despite Eurobank Cyprus having a much smaller proportion of retail deposits.”

i suspect that the extra $8m was to cover the dividend for most of Q4.

I also wonder if this had to be completed before the transition of KI Insurance transition out of Brit on Jan 1.

Swiss Re today as well is targeting a P&C CR of below 85 for 2025. They also committed to at least a 14% ROE over the next few years

The first sub buyback with more to come in 2025. It is interesting that Fairfax paid only $8M more than what they sold this for in 2021. So it looks like OMERS only benefited from the Brit dividends over that time. I believe we have now shifted away from share buybacks, focusing instead on buying back sub minority ownerships. Odyssey Re will likely be next with the exit of non-profitable contacts completing in Q4.

Moody’s is estimating a 6% increase in US Commercial line premiums in 2025 https://www.insurancebusinessmag.com/us/news/property/moodys-stable-2025-outlook-for-us-pandc-insurance-517796.aspx According to Moody's, analysts predict a slight slowdown in premium growth for 2025. They estimate a 6% increase in direct premiums written for US commercial lines in 2024, reaching approximately $511 billion, up from $481 billion in 2023. However, they anticipate this growth to moderate in 2025 due to slower inflation and real GDP growth.

I thought of that as well. They better do it soon as this inflated market cannot last much longer.

Brit Announced that Ki will operate as a standalone Insurance company within Fairfax, effective Jan 1 2025. We may start hearing more about Ki from Fairfax in the quarterly releases and conference calls. https://www.britinsurance.com/news/ki-to-become-standalone-business-within-the-fairfax-group Ki was incubated and launched by Brit in 2020 and began writing business on 1 January 2021 with its own syndicate, 1618. Ki was one of the largest start-up syndicates in the history of Lloyd’s and the first digital follow syndicate. Over the last 4 years, Ki has grown significantly and evolved to become a digital follow platform offering capacity from multiple syndicates with over $1 billion of GWP written through the platform in 2024. Ki has now reached scale and developed its operations to enable it to operate as a separate company within Fairfax. It will continue to maintain a close partnership with Brit as a nominated lead across all classes. These changes to corporate structure and operations do not impact how brokers trade with Ki or Ki’s appetite in any class of business. For those not familiar with how Ki operates, here are some details on how their business is using AI for underwriting. https://ki-insurance.com/news/future-of-ai-in-underwriting

A well run insurance business with 2023 CR of 84. And it looks like the existing management team will have an equity stake. This definitely looks like a quality acquisition. I suspect FIBLAC is involved to inject additional capital for significant growth. This is behind a paywall but it looks like Fairfax will own less than 50% of Albingia. https://www.argusdelassurance.com/les-assureurs/albingia.233779

I agree. The continued growth of their global insurance business will open up new opportunities.

This purchase seems to be a bit different than previous insurance acquisitions ,as some of those involved are looking at this purely as an investment and don't come with an insurance background. It will be interesting to see how this one is structured. I presume Fairfax was included for their success from both the insurance and investing side of the business. This may involve an equity stake, performance fee or some combination of that , with the plan to expand the business quicky with the funds that Krefeld Invest ($171B family business) is able to provide. We have seen how well the Fairfax subs have performed over the past few year, but there have been a couple of tailwinds from the past year that are clearing up now. - For the past year Odyssey Re has not been renewing their Quota Share Contract and this has significantly impacted premium growth, by 11.9%! in Q3 alone. This is expected to be completed in Q4. Odyssey’s gross premiums written were down 4.7% due to the previously disclosed non-renewal of a large quota share in the fourth quarter of 2023. Excluding the quota share contract, Odyssey’s business was up 7.2% in the third quarter, driven by its reinsurance operations. - Brit has also been shedding unprofitable business and we should see this turn around in Q4. Brit then were down 4% in the third quarter, and I think you’ll see that turn around as well as they’ve been--you know, they’ve been really focusing on the margins in their business and cutting back and reallocating capital to more profitable lines, so I would expect that you’ll see Brit on the positive side of premium growth going forward. - In additional during 2025 we will have a full year of comparison for GIG. I believe Fairfax will provide guidance in their 2024 Shareholders letter where they will increase their very conservation sustaining operating income from $4B to ~4.5B ($125 --> $140/share) for the next 4 years. This would certainly be well in line with the ~15% ROE.

It looks like Fairfax is part of group in the process of finalizing acquisition of French insurer Algingia. https://www.bnnbloomberg.ca/business/company-news/2024/12/11/hermes-family-in-talks-to-invest-in-french-insurer-albingia/ Krefeld Invest, the family office of heirs to the luxury goods fortune, is part of an investor group that’s in exclusive talks to buy the insurer from asset manager Eurazeo, according to a statement on Wednesday. The consortium is being led by existing shareholder the Chamoin family and also includes Canadian insurer Fairfax Financial Holdings. Eurazeo SE said it expects to sell its entire 70% financial stake in Albingia, bringing around €289 million ($303 million) of sale revenue to its balance sheet. Albingia is an independent player in the French commercial insurance lines market, which collected about €334 million in insurance premiums last year. Eurazeo bought a stake in the business six years ago, based on an enterprise value of around €508 million. The deal is subject to approval of various relevant authorities and is set to close in spring 2025.

It looks like the global bond market has recognized the stability at Eurobank. https://www.naftemporiki.gr/english/1848770/eurobank-strong-interest-in-600-million-euro-senior-preferred-notes/ The transaction received tremendous level of interest from the onset which resulted in a final demand of 3.4 billion euros, i.e. an oversubscription close to 6 times, thus enabling Eurobank to raise 600 million euro at a reduced credit spread of 125bps compared to the initial 155bps indication level. Upon new issue allocation, foreign investors’ participation accounted for approximately 93% of the subscribed amount of the book, with key participation from the United Kingdom and Ireland (40%), France (14%), Germany (13%) and Italy (9%). In terms of investor type, 68% were Fund Managers, 19% were Banks and Private Banks, 6% were Hedge Funds and 5% were Insurance and Pension Funds.

@kodiak like got 7th ranking from the following link. But I have seen others sites that had Fairfax with the 11th largest earnings. I see similar difference when comparing market cap size in Canada, with Fairfax ranging between 21-25 position. https://www.tradingview.com/markets/stocks-canada/market-movers-highest-net-income/

I wonder if Siemens believes it could be a long while before there is an IPO. This transaction with Siemens doesn't close until July 2026.