Mikenhe

breath Cardboard, breath. Part of the reason that I sold out my ORH shares was because I'm happen for FFH to maximise the value in their books. I think FFH has got a long way to go and the better shape it gets into now then the bigger it will grow. Let the sub's kick in the cash and if FFH can;t find good use for it then I'm sure they can always buy shares back from the unhappy investors..

I totally understand what you are saying and agree with it. However the conversation has to go beyond just being a ORH shareholder. With FFH being the buyer and only having to buy 27% then I’m taking a different outlook. I can’t believe that this buyout has gone ahead without FFH getting the undertaking of a few of the large players left in the game. If they bid gets accepted at 60 then its pretty much game over – if they up the bid to 65 then those that are holding get more – fair play. I can’t see it going much beyond that price. If the bid doesn’t go through then I think the share price may drop and present an opportunity to get back into ORH. If FFH complete the take over then all the future development will go to FFH and their shareholders – and I’m ok with that because I’m one of them too. I suspect that a lot of people selling ORH are also FFH shareholders and will benefit through that investment.

I’ve now sold my ORH shares. The upside (holding for somewhere between 2 to 7 dollars per share more) was overshadowed for me by the downside of the bid being rejected and the shares dropping into the 50’s or maybe below. Plus lessons learned from trying to squeeze and extra dollar or 2 out of the share price (Lehman brothers) and not just taking a good profit were applied here. I’m still long FFH (and would have been longer ORH had this buyout not occurred ) so I now hope the takeover can be completed swiftly and the benefits to FFH be realized. FFH have sold shares to make this happen which I’m not too keen on but as they were buying back for less previously at least they have made good use of the profit.. plus the buyback of ORH shares had reduced the amount that need to raise. If FFH cannot find anything more suitable to invest in then I’m comfortable with them buying ORH.. and if that doesn’t come off them I’m happy to buy back into ORH at $50… ;D

I have shares in ORH and FFH and am very comfortable with holding both at the moment. I can see a time in the future that I would sell ORH – however FFH I fully intend to keep. I don’t have much to put into stock but I do believe that the FFH shares will form the cornerstone of my (early?) retirement. After everything I have read about FFH and first, second and third hand communication with FFH I cannot see any reason to sell those shares that I have and in fact – even at this price I am looking to purchase more. Just wish I had more time and liquidity to research and utilize options - that would have been a nice addition to my portfolio over the last year! I also have the mental stumbling block of not being able to pull the trigger on selling shares.. I’m good at buying them but I get attached to them.. Need to work harder on that but my venture into other financial shares (Lehmans) has helped me along the path of selling at the right time (I failed to take profit in my shares in Lehman and paid the price there… To conclude – no its not the right time to sell FFH.

For the first quarter they mentioned gains in April as it offset some of the declines in the first quarter. The second quarter saw gains – I’m assuming July did too - so as it didn’t offset anything from the 2nd quarter maybe they are just keeping their powder dry for the 3rd quarter. If FFH pick up some hurricane losses in excess of expectation then the gains will hopefully offset them – or limited hurricane losses will see just further increases in the equity position and hopefully more equity per share. Good move not to call anything. Shame no analysts asked about the lawsuit against the shorts. I doubt if anything would have been revealed but it would have been nice to remind people that its still ongoing with potentially a positive financial outcome..

Good point about the replacement costs – although I think it would be cheaper – if only due to cheaper labor!! How about the number of foreclosed properties in a hurricane area.. if they are not insured anymore – or a houseowner or bank who does not insure the property. If cost of the amount of insured property has decreased by 20% and the reinsurance market has decreased by 10% then the true capacity has increased? Additionally if this is true and rates have stayed the same then the reinsurance market is getting less risk for the same amount of premium.. Maybe I should keep my thinking out loud off the internet :d

Capacity may have fallen but how does the fall in property prices in the Southeast affect the potential results? Surely the amount being insured and reinsured has also fallen – IE a hurricane that does the same damage this year as one two years ago will cost less as the replacement cost for property would be lower. So the same reinsurance price for covering less costs is a good thing – isn’t it? I’m not sure how that impacts forecasts for reinsurance results – I would have thought it would be an improvement in results as the potential payouts could be smaller = or it would take a more damaging event to trigger reinsurance payouts.

This is an exercise in getting inside the mind of someone who is selling Fairfax and why they would do so. 1) In a supposed hardening market they still can’t produce a decent loss ratio on their underwriting. 2) The best year they had is gone. If they can’t produce an underwriting profit then where will the profit come from. 3) There are few chances left for them to make money from the cds portfolio. They have bought into the market and taken the hedges on equities off. Since then the market has gone down therefore they must lose money. They can’t make money off bonds and other investments therefore why bet on the jockey. 4) They have a lawsuit out there against short traders yet its going nowhere. Does that mean that the shorts really did have a case? 5) I see some great companies for sale and Fairfax has still made money for me over a 3 year span.. maybe now this the tie to sell FFH and invest elsewhere. 6) I just need the cash. Ok then – so what else is there to make anyone think that it should be sold. I’m struggling with the fact that anyone who looked deep enough to cover the above points wouldn’t also see the positives. What am I missing? I’m frustrated because the value of my portfolio is now heading south after getting through all the calamity in the market up to now. However it does mean that I can buy more at a good price.. I just don’t have as many bullets as I’d like. Discloser: I’m long FFH and ORH and intend to be for a while.

There’s a couple of factors at work here that need to be considered. First it how long the tail is on this business. If Fairfax have a longer tail on their business then they have access to the premium for investment purpose for a longer period of time. And I can’t think of anyone I’d want investing the premium ahead of those guys. Secondly - how accurate is the loss reserving and how is it reported? If you reserve on a discounted basis then your ratios look better but you have to “stepladder” those reserves up toward the final payment on the claim. If you reserve undiscounted then your ratio looks worse (especially if you commute like the C&F deal) but you know what your future payouts are now. Maybe the cost of doing business the Fairfax way looks worse.. but it’s the bottom line results that really matter and that’s always post investment income. Id’ rather have 100%+ of ratio and a big book of invested funds out there than be able to report 95% and have funds that have returns in the negatives…

maybe just some damage and a need for some other experts in the field to buy them out?? In a fair and friendly manner? I think whats also very omportant is the ratings of some competitors on the way down as FFH and its subs go up... There are some very big companys out there who aren't going to be renewing with insurers that have poor ratings and will be looking elsewhere...

Its not just the CR – its what these guys do with the money that’s coming in that as , if not more, important. Last few years track record isn’t looking too bad.. but we can’t use that to predict the future… can we??? 8)

looking good - thanks!! ;D