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Fairfax to sell 25% of ICICI Lombard for a billion and start a new insurer


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Fairfax may redeploy some of the proceeds to fund its $4.9 billion takeover of Swiss insurer Allied World <AWH.N>, a source said.




Raising more capital for a deal they shouldn't have needed to raise capital for, that they already are raising capital for by paying at least partially in equity and selling minority interests in the acquisition.


I find Fairfax's capital allocation continuing down a path that leads me to raise an eyebrow...


Understand of course the above is rumor only (and of course we don't know the magnitude of what part of the Lombard sale goes toward AWH...) but still...


I like Fairfax, but with the complexity of their business and the recent actions, trading at ~1.5x TBV, I think they are inviting negative press.

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They added to ICICI Lombard at a value of $2.5B 15 months ago. They are cashing out between $3.2-$4 Billion 15 months later and buying an insurer that they will control in Europe and potentially starting another insurer in India focusing in an area they already operate in - Thomas Cook.  I understand P&C isn't as good a business in India. They may have realized this and decided to specialize in India.


Is that bad capital allocation?

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found the answer

fairfax bought 35% stake in ICici Lombard over years for 347 million. now they are selling 25% of the stake for 1 billion$

not bad




They have been harshly criticized for their investments in equities recently: well, it seems that at least some of them are turning out to be quite profitable!






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