Hoodlum

Fairfax didn’t provide any guidance on the claims for Hurricane Milton, but BRK did mention they expect $1.3-1.5B in claims. Based on past hurricane claims that would translate to about $500M for Fairfax (1/3). This was about what I was expecting based on Fairfax’s 1% share of the initial ~$50B reinsurance loss estimate. Most of this would be offset from the $366M gain on the sale of Stelco.

RBC raised their target to US$1500 US with an upside of US$1650. I think we will see analyst start to chase the stock price over the next year in order to keep ahead of it. Even National Bank raised their target twice this week. On Wed they went from $2100 to $2200, then on Friday raised it to $2400.

Does he still have his " CAD 1,180 fair value estimate" from May? LOL

It is the gift the keeps on giving. The stock market response on the day of the conference call was very refreshing, along with the 2x avg volume.

National Post increased target to $2400 cdn. https://www.theglobeandmail.com/investing/markets/inside-the-market/article-fridays-analyst-upgrades-and-downgrades-for-november-1/ “We believe the combination of 1) solid underwriting results with a combined ratio of 94 per cent vs. the street 98 per cent; 2) consolidated interest and dividend income that remains at a run rate of $2.4 billion; 3) outperformance from associates and consolidated investments; and 4) solid net investment performance supports our view Fairfax will deliver consistent profitability (ROE in the mid to high teens) over the next several years,” said Mr. Gloyn. “Moreover, FFH continues to hold $2 billion in cash at the holdco and $2.3-billion in excess capital at its insurance subsidiaries to deploy in ROE accretive transactions (e.g., buybacks or repurchase of minority interests in those insurance subsidiaries). We firmly believe FFH merits a higher valuation than the current trading multiple.”

I wonder when they purchased the $1.3B in 30yr treasuries.

On the other side of the world, Typhoon Kong has hit Taiwan landing with the equivalent Category 3 winds. I am not sure what if any impact this would have to reinsurance.

Berkley is suggesting at best flat pricing for renewals. It sounds like Hurricane Milton losses will come under what was initially thought, which will be good for Q4 earning but not so good for 2025 pricing and future earning. https://in.investing.com/news/stock-market-news/earnings-call-w-r-berkley-reports-robust-q3-results-amid-market-shifts-93CH-4481988

https://dbrs.morningstar.com/research/441166 Key highlights include the following: -- We expect insured losses to be in the upper half of our initial estimated range of $30 billion to $60 billion. -- Citizens Property Insurance Corporation, Florida's public insurer of last resort and the largest residential property insurer, will maintain its financial strength, while some smaller and mid-size local insurers may face significant earnings pressure. -- Considering the significant hurricane-related losses, reinsurance prices are likely to increase, reversing the signs of price stabilization observed during the 2024 mid-year renewal season.

This hurricane took only 18 hours to go from category 1 to 5, the 2nd fastest development ever. It is becoming more difficult to predict how these hurricanes develop. The last update is that Hurricane Milton is strengthening again and is just 2 kmh short of becoming a category 5 hurricane again.

I saw some video of the Tampa Bay area and was surprised by the huge amount of junk in front of houses. That is going to get thrown around if not picked up in the next 24 hours. Hurricane Milton has now jumped to category 5 level. That was fast!

Hurricane Milton is now Category 3 and expected to be a Category 4 hurricane later today and continue at that level for a couple days, until reaching the Florida coast as a Category 3 Hurricane. This is also expected to be a very large/wide hurricane. I don't think I have seen a Hurricane come at Florida from this direction previously, although I am sure this is not the first time. I suspect modeling will be challenging based on historical records. Current path of hurricane center is Sarasota (just south of Tampa Bay), but that can change. Central Florida has been receiving heavy rain the past couple days so the ground has not had a chance to soak up the water ahead of this Hurricane.

While still early, tropical storm Milton has now formed. They are currently projecting this to reach Category 3 and while this will be further south, the final path could still change.

I periodically look at the daily Atlantic Sea temperature to look for any trends. I noticed today that the data hasn't been updated since last week and then noticed the following tidbit on that site. I guess they never had any disaster recovery plan. I don't think we will see data being updated for a while as Ashville was heavily impacted. https://climatereanalyzer.org/clim/sst_daily/?dm_id=world2

While not impacting reinsurance directly, the scale of the water damage was massive. https://www.artemis.bm/news/hurricane-helene-floods-over-100k-buildings-at-least-10k-to-over-5-feet-iceye/

So it looks like they could not find a buyer at the price they wanted. We will find out in Feb what this acquisition was valued at.

They are now suggesting it will reach Cat 4 level. Still on path to lesser populated shores. Tallahassee will be hit the hardest as it will be near the center. It would seem to have a very wide path so damage could be extensive.

This hurricane season seems to be more difficult to predict path and intensity growth. Many storms have either petered out or have changed direction unexpectedly. But just like Hurricane John that recently landed on the Pacific, things can change quickly now.

This is where increasing Cash/short term securities from the current $2.5B to $3.5B would help. With the current $2.5B and the above scenarios, Fairfax would need to pull additional dividends from their subs to cover these adverse events.

It is interesting that BRK is back to Thurs closing level, while Fairfax is still down 5% from then. Not sure why the gap is increasing.

I believe they are limited to buying 25% of daily volume but hope they are maxing that out.

I believe Markel provided Fairfax with a lifeline of convertible debt during the early 2000s, during the short squeeze. This is likely how they owned Fairfax stock for a short period. I am going strictly by memory on this so I may be mistaken.

Thanks

I looked at the MD&A to see how much this had increased, but could not find it. Does anyone else see it.

We will need to wait until Tues for FFH action, as Monday is a holiday in Canada. Market volatility should settle by then and Fairfax will be buying back shares on Tuesday.