Packer16 Posted May 6, 2014 Share Posted May 6, 2014 I was thinking about FFH and the bind they have gotten into with the hedges and if there may not be a better structure where the hedges would not have to be used. One idea is to IPO the insurance companies, sell say 30 to 40% and use the proceeds to allow Fairfax at the holdco level invest the proceeds in there normal distressed/value investments. The insurance companies would use HW as there asset manager and use a more traditional mix of bonds at the insurance company level and dividend up excess capital to HW for investment. This would allow HW to pursue its value/distressed investing which it is good at independent of the constraints of the hedges. I think one of the issues with FFH is I am not sure investing insurance float in a distressed/value approach is appropriate. The two other invest the float companies (MKL and BRK) invest in high quality companies and stay away from distress. Packer Link to comment Share on other sites More sharing options...
ERICOPOLY Posted May 6, 2014 Share Posted May 6, 2014 They've been going the other direction -- first buying up the rest of NB and ORH, and then buying up more and more whole insurance companies with their cash. Including taking on debt to do so. Link to comment Share on other sites More sharing options...
shalab Posted May 6, 2014 Share Posted May 6, 2014 This is one way to do it. The other would be to issue stock in canadian dollars ( or u.s dollars ) to retire debt to bring the leverage down. Improves book value/share gains. They are getting a tail wind from the interest rate changes and if the unemployment keeps going down in the U.S., the low interest rates won't last forever. However, I don't think Prem will do the above as he said in the conf call, he( and his family) is the controlling shareholder. I was thinking about FFH and the bind they have gotten into with the hedges and if there may not be a better structure where the hedges would not have to be used. One idea is to IPO the insurance companies, sell say 30 to 40% and use the proceeds to allow Fairfax at the holdco level invest the proceeds in there normal distressed/value investments. The insurance companies would use HW as there asset manager and use a more traditional mix of bonds at the insurance company level and dividend up excess capital to HW for investment. This would allow HW to pursue its value/distressed investing which it is good at independent of the constraints of the hedges. I think one of the issues with FFH is I am not sure investing insurance float in a distressed/value approach is appropriate. The two other invest the float companies (MKL and BRK) invest in high quality companies and stay away from distress. Packer Link to comment Share on other sites More sharing options...
Zorrofan Posted June 4, 2014 Share Posted June 4, 2014 I was thinking about FFH and the bind they have gotten into with the hedges and if there may not be a better structure where the hedges would not have to be used. One idea is to IPO the insurance companies, sell say 30 to 40% and use the proceeds to allow Fairfax at the holdco level invest the proceeds in there normal distressed/value investments. The insurance companies would use HW as there asset manager and use a more traditional mix of bonds at the insurance company level and dividend up excess capital to HW for investment. This would allow HW to pursue its value/distressed investing which it is good at independent of the constraints of the hedges. I think one of the issues with FFH is I am not sure investing insurance float in a distressed/value approach is appropriate. The two other invest the float companies (MKL and BRK) invest in high quality companies and stay away from distress. Packer Packer - how about a small modification. First, IMHO, without a doubt FFH should be buying quality companies for the 100% owned business portion (i.e. MRK and BRK). However take $2 billion, about 10% of the investment portfolio, and create a BAM-type investment fund (similar to what they just proposed for India). Get pension funds to kick in another $8 billion and you have a $10 billion distressed asset investment fund. Charge 2% plus a performance fee. FFH makes about $160 million, or 8% guaranteed, in management fees plus performance fees if the fund does well. And on top of the management and performance fees FFH has a 20% stake in the fund. It works for BAM why not FFH?? Thoughts?? cheers Zorro Link to comment Share on other sites More sharing options...
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