Fairfax 2024

[Parsad]

2 hours ago, steph said:

I used to agree with this, but much less nowadays.  Reason being that with BRK you also pay 1,4 times the value of Apple and other huge listed portfolio + huge cash pile.  You don’t pay the real value of the unlisted companies, but you pay a big premium on cash and listed portfolio that has become a very big part of BRK. 

 

Yes, you are partially correct.  Huge investments like AAPL do have the opposite effect.  

 

That being said, a significant amount of BRK's value will never be valued correctly, thus BRK will almost always be valued significantly higher than book value.

 

That may continue to change under Abel, Todd and Ted if they invest more in public securities long-term.

 

Cheers!

[Parsad]

1 hour ago, Hamburg Investor said:

Isn‘t that thinking about price to book ratios a bit „static“? In the end it‘s all about roe and not equity alone. And I see FFH better positioned fir a high roe:

 

- BRK is more like a conglomerate with an additional insurance arm. I haven‘t the exact numbers, but BRK has around 35 per cent leverage on equity through float; while FFH has around 130 per cent (and MKL is somewhere in between).

- Assuming both FFH and BRK get 4% on float and both get 10% on equity, than BRKs return on equity would be 11.5% and FFHs would be 15.2%. If it’s 6%, than BRKs roe is 12.0%, FFHs 17.8%. Even if BRKs „real“ equity would be bigger, it‘s returns on that equity will be lower for sure, so FFH will grow stronger

- BRK is 25 times bigger than FFH. It‘s pretty hard getting high roes for BRK over the next 1 or 2 decades on its equity; not so for MKL/FFH. 
- Just look at 2023 and the next 4 years: It‘s hard to argue for an roe way under 20%. That‘s a double on equity every 3.6 years (with 18% it’s every 4 years). I don‘t know anybody seeing BRK doubling every 3.6 or 4.0 years; that could happen to FFH though (I am not predicting that, but there is a chance).

- And today it’s way more normal times than it‘s been with such low interest the years before (if interest is zero, than it‘s way easier for BRK to not loose against MKL and FFH, as float doesn‘t give any returns, but FFH is levered most.

- MKL and FFH both grew stronger than BRK since 1986; I don’t see any reason, why that should change ultimately.

- Munger once said something like (from memory): In the end kver very long timeframes your CAGR return will

be relatively close to roe; regardless if you pay a high or low price. 
- That’s why I think, I‘d happily pay way higher pb ratios for FFH than for BRK. Let‘s assume an roe of 15% (Prems minimum goal…). What do I like to pay for that? Maybe a pe ratio of 15 to 25, let’s say 20. 15% roe on equity gives earnings of 0.15 at a pe ratio of 20 gives a pb ratio of around 3 to us. And BRK? Let’s say roe of 12% is doable. Than a lower pe ratio seems reasonable - say 15. Than you get a pb ratio of 1.8. 

 

Float cuts both ways.  Catastrophe losses will be magnified within FFH simply because of the asset to equity leverage.  So good times...tons of income.  Bad times...significant losses.  There is no net tangible value of float other than it is a more useful version of debt.  Leverage is leverage.  In an outlier event, BRK will be the last to fall!  Cheers!

[glider3834]

Looking at income from associates & non-insurance subs, its worth thinking about Grivalia Hospitality & BIAL which are significant investments. IMHO we haven't seen their normalised earnings/cash generation power reflected in Fairfax's results yet, because both have just completed major capex investment projects in 2023 & as they ramp up they are still operating below capacity in terms of passenger traffic (BIAL) and in terms of occupancy (Grivalia). Grivalia only opened the doors on its biggest resort this November https://www.linkedin.com/pulse/what-does-prem-watsa-gain-from-greek-tourism-thetotalbusiness

 

Also Fairfax has increased its ownership share in both businesses over the last 12 mths -so I am hoping in AR to see some clues as to how these might contribute to results in the coming year/s.

[gfp]

18 minutes ago, Parsad said:

Float is just a more useful version of debt.  There is no net tangible increase or decrease in value from float. 

 

I'll agree to disagree on that one! 

[dartmonkey]

Float cuts both ways.  Catastrophe losses will be magnified within FFH simply because of the asset to equity leverage.  So good times...tons of income.  Bad times...significant losses.  There is no net tangible value of float other than it is a more useful version of debt.  Leverage is leverage. 

 

I would say the leverage is investment leverage, not insurance leverage. 

 

Any pure insurer is at risk of having claims exceed premiums. But if you take Fairfax with its $30b of float , more than its market cap, and you compare it with Berkshire whose float is less than a quarter of its market cap, the leverage risk is on the investment side - at Fairfax, a negative return will be hugely negative because of the leverage, and a good return will be greatly amplified. 

 

But I don’t see a downside of this, if it’s mostly invested in treasuries, as it is at Fairfax. You can be pretty sure you’re not going to lose a lot of money on treasuries. I’d say that Fairfax might be safer with a lot more leverage on a bond portfolio than Berkshire with 20% of its assets in Apple. 

[Viking]

It can be useful to look into the past. 13 short months ago i put together my estimate for 2022YE. It was dominated by investment losses (bonds and equities). Thank god for the pet insurance sale.

 

The more interesting forecast on the chart below is the estimate for 2023. At the time it looked crazy high. And of course, it has now been proven to have been crazy low. 

 

What are some of the lessons looking back on the 2023 forecast? 
1.) Valuing a turnaround is tough. 

2.) It is important to keep an open mind - when the facts change… update the model.

3.) Don’t get trapped by dogma (things that ‘have to happen’).
 

[Haryana]

5 hours ago, glider3834 said:

I assumed no reinvestment of divs (eg assume you pop dividend money in a no interest account each year and leave it there and add it to your share gains over period) - which appears thats how Fairfax got their CAGR calc of 11.7% for 2017-2022 but feel free to double check.

 

You do see total return measures that include reinvested divs, so I think assuming no reinvestment like Fairfax do is more conservative.

 

You are right; that is the point, they are being conservative in that reporting and the actual rate of return is higher.

 

[Haryana]

2 hours ago, dartmonkey said:

Float cuts both ways.  Catastrophe losses will be magnified within FFH simply because of the asset to equity leverage.  So good times...tons of income.  Bad times...significant losses.  There is no net tangible value of float other than it is a more useful version of debt.  Leverage is leverage. 

 

I would say the leverage is investment leverage, not insurance leverage. 

 

Any pure insurer is at risk of having claims exceed premiums. But if you take Fairfax with its $30b of float , more than its market cap, and you compare it with Berkshire whose float is less than a quarter of its market cap, the leverage risk is on the investment side - at Fairfax, a negative return will be hugely negative because of the leverage, and a good return will be greatly amplified. 

 

But I don’t see a downside of this, if it’s mostly invested in treasuries, as it is at Fairfax. You can be pretty sure you’re not going to lose a lot of money on treasuries. I’d say that Fairfax might be safer with a lot more leverage on a bond portfolio than Berkshire with 20% of its assets in Apple. 

 

I see it as a simple thesis that Fairfax is better than cash because that cash is in Treasuries with better than free leverage.

 

[UK]

10 hours ago, Viking said:

2.) What is the size of IFRS 17 impact?

 

TBD - but not a concern

 

"In the fourth quarter of ’23, the net earnings of $1.3 billion included pre-tax net expense of $781 million, and the net earnings in the full year of 2023 of $4.4 billion included a pre-tax net benefit of $210 million related to IFRS-17. The pre-tax amounts are reported within two financial statement lines in the consolidated statement of earnings."

 

It seems that this item has reversed back quite a bit in q4?

[nwoodman]

Discussion on BNN regarding results and the CC. I'm not sure who the grey-haired gentleman is and he is a bit waffly for my money.  However, the upshot is a message of

 

1. They've been here before and survived. 

2. Stellar results.  

 

https://www.bnnbloomberg.ca/video/fairfax-operating-income-jumps~2868708

 

and another one

 

 

I think this coverage has been gold.

Edited February 17 by nwoodman

[UK]

9 hours ago, nwoodman said:

1. Forward Guidance

Prem Watsa

“Now as I’ve said for the last number of quarters, the most important point I can make for you is to repeat what I’ve said in the past - for the second time in our 38-year history, I can say to you, we expect - there is of course no guarantees - sustainable operating income of $4 billion, operating income consisting of $2 billion-plus from interest and dividend income, $1.2 billion from underwriting profit with normalized catastrophe losses, and $750 million from associates and non-insurance companies. This works out to over $125 per share after interest expenses, overhead and taxes. Of course, fluctuations in stock and bond prices will be on top of that, and these fluctuations only really matter over the long term.’

 

Plus: "When you put all of that together, we look at that operating income of $4 billion as a pretty conservative number."

[Hamburg Investor]

8 hours ago, Parsad said:

 

Float cuts both ways.  Catastrophe losses will be magnified within FFH simply because of the asset to equity leverage.  So good times...tons of income.  Bad times...significant losses.  There is no net tangible value of float other than it is a more useful version of debt.  Leverage is leverage.  In an outlier event, BRK will be the last to fall!  Cheers!

I'd say "a more riskless version of debt". And leverage and leverage can be very different in terms of risk.

Berkshire Hathaway was also heavily float hedged for a long time. I sometimes get the impression that many people forget that. You have to make a decision: Either Warren actually took on too much risk for a long time and got pretty lucky. Or Warren's way of using float was good in terms of risk adjusted returns. You can't say both. As investors, we need to understand how to minimize risk. I think float is a key technology to achieve high risk-adjusted returns. Of course, you can't go too far with float. I've heard a lot of value investors say that a big mistake was not buying Berkshire Hathaway in the 1970s or 1980s because the price was too high for them.

Risk is higher with more float, as it is with every "more" of any leverage. We don't disagree on that one. We don't disagree on BRK being a fantastic company and being the last to fall (that's why it's my second biggest holding with 14%). Where we disagree: I think 130% of float like at FFH is ok and the chances are higher than the risks (so higher price is ok); and you say the opposite - the float risk is so high, that even higher "normal" (so the roes in the times where the business is not wiped out nearly totally) returns on equity do not justify a higher price, but the other way around. This is not black or white and everybody has to define his risk tolerance. That's fine. I don't think there are a lot of ways for getting high roes with less risk than by using (not too much) float. There's no free lunch. Without taking risk, no return. Risk comes from not knowing what you're doing. Don't loose money. Don't forget that rule. Of course. Simple rules, but still not easy to do.

There are a lot of other risks to consider when comparing Berkshire versus Fairfax. The country risk. I would consider this to be greater at Berkshire than at FFH with its rapidly growing international insurance business and its large positions in India and Greece. The management risk. I would also rate this higher at Berkshire in the long term, as management at Berkshire is likely to change much sooner than at Fairfax; and Prem has a longer track record in his position than Warren's successor (who has experience, but as CEO of Berkshire he starts with a track record of 0 years).

 

BTW: I have a small portion in Protector Forsikring, a Scandinavian investment company that is growing very fast and of course it does so with a high float compared to the assets, the management is great. Sometimes I wonder if I shouldn't have more than just 1.5% in Protector; but I don't as their track record is not long enough for me (20 years. Writing it that way, it does seem quite long now).

[MMM20]

13 hours ago, Parsad said:

 

The leverage of float is already accounted for in the portfolio income.  I don't give it any additional weight than that, since float cuts both ways. 

 

If you are valuing FFH on earnings, then float is accounted in the income/loss statement.  If you are valuing FFH on book value, float is also accounted for since it will have both a positive and negative effect on book value depending on catastrophe losses. 

 

Float is just a more useful version of debt.  There is no net tangible increase or decrease in value from float. 

 

Cheers!

I just have a hard time understanding the view that this should trade anywhere close to book value when the $30B+ of float does not show up as an asset on the balance sheet. Adding this structural ability to borrow tens of billions of dollars at 0 or better into to our estimate of intrinsic value, I can’t see how one can credibly argue that the output is anything less than 1.5x book and probably much higher. Buffett taught us this decades ago so I’m not onto something clever. What is the counter argument? That leverage - even of the highest possible quality and at their scale a nearly irreplicable (smart folks have certainly tried) economic asset not liability - introduces so much volatility that it flips to fragility and therefore merits a much lower valuation? Lower than anything else out there?

 

Edited February 17 by MMM20

[MMM20]

13 hours ago, dartmonkey said:

Float cuts both ways.  Catastrophe losses will be magnified within FFH simply because of the asset to equity leverage.  So good times...tons of income.  Bad times...significant losses.  There is no net tangible value of float other than it is a more useful version of debt.  Leverage is leverage. 

As long as you realize Mr. Buffett disagrees with you - he has written about it extensively for decades and it explains nearly all of Berkshire’s excess returns in the middle decades if you really dig into it. He has even said that he wouldn’t trade $1 of float for $1 of equity. What does that mean for intrinsic value? This is the key question for FFH investors nowadays IMHO. 
 

Edited February 17 by MMM20

[ValueMaven]

I feel like I was very lucky.  I've owned FFH in the past - but largely missed this recent runup.  I was able to add aggressively the day of, and the day after the MW short thesis, and was able to get FRFHF around $910 per share (below BV).  Honestly, this quarter was awesome, particuarly around the interest and dividend income and improved underwriting!  Look at FFH's valuation difference compared to even Arch!!  Please consider me a long-term shareholder - and this board has been very helpful in keeping even a casual observer updated.  

 

Blocks question was so weak ... damn

[ValueMaven]

dumb question - whats the difference between FFH.TO vs. FRFHF - which is OTC.  Honestly, I dont even really know how OTC works.  

[gfp]

9 minutes ago, ValueMaven said:

dumb question - whats the difference between FFH.TO vs. FRFHF - which is OTC.  Honestly, I dont even really know how OTC works.  

 

There is not a ton of difference really.  FFH.TO trades in Canadian dollars and is marginable.  FRFHF trades in US dollars and is usually not marginable.

 

Sometimes in a US-domiciled IRA it is easier to buy FRFHF since you can't borrow Canadian dollars and it adds an extra step to first purchase the exact amount of Canadian currency you need to make the trade and then buy the FFH.TO.  In taxable accounts I just buy the Toronto listed shares.

[Spooky]

37 minutes ago, MMM20 said:

As long as you realize Mr. Buffett disagrees with you - he has written about it extensively for decades and it explains nearly all of Berkshire’s excess returns in the middle decades if you really dig into it

 

This is essentially correct - there is a good paper out there called Buffett's alpha from 2013, I've pasted the abstract below:

 

Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.

 

[StubbleJumper]

1 hour ago, MMM20 said:

I just have a hard time understanding the view that this should trade anywhere close to book value when the $30B+ of float does not show up as an asset on the balance sheet. Adding this structural ability to borrow tens of billions of dollars at 0 or better into to our estimate of intrinsic value, I can’t see how one can credibly argue that the output is anything less than 1.5x book and probably much higher. Buffett taught us this decades ago so I’m not onto something clever. What is the counter argument? That leverage - even of the highest possible quality and at their scale a nearly irreplicable (smart folks have certainly tried) economic asset not liability - introduces so much volatility that it flips to fragility and therefore merits a much lower valuation? Lower than anything else out there?

 

 

 

First off, float is definitely valuable, there's no question about that.  That's what tends to attract value investors to the insurance industry. To correct a couple of points in your post, float does show up on the balance sheet as investments (ie, we take policy holders' premiums and invest them and that's where the float goes) and as policy liabilities.  What is more, float is not always at zero-cost or better, as there have been many years when the CR exceeded 100.  But life is definitely grand when that zero-cost or better situation prevails!

 

How much "credit" we should give to it in a company's market valuation is yet another question.  Buffett proposed that float is effectively money that you borrow from somebody else, but as long as your insurance company is a going-concern and never shrinks its book, you never need to repay that money that you borrowed.  He then went one step further and stated that if you borrow money, never need to pay it back, and can do whatever you want with it, then that's akin to equity.  Personally, I have always had a quibble with this because a regulated insurance company can't just do whatever it wants with float.  There's a reason why FFH's portfolio allocation has traditionally been two-thirds to three-quarters fixed income and that's because you always need to be able to pay indemnities.  The downside of that is that we know that long-term returns on fixed income have traditionally lagged equity returns by a considerable margin.  To me, I don't buy Buffett's argument that we ought to value a dollar of float at the same value as a dollar of unrestricted equity because I'm effectively forced to put 66 cents or 75 cents of that dollar of float into an inferior investment vehicle.

 

Over the past 3 or 4 years, underwriting conditions for FFH have been fabulous.  The cost of float has been negative (ie, CR<100) and, more recently, sovereign debt rates have soared, resulting in a financing differential that has been out of this world.  This makes float look like an astoundingly good deal!  But, it hasn't always been the case.  Every year in his annual letter, Prem publishes an excerpt of a table that depicts FFH's cost of float, prevailing government bond rates, and the resulting financing differential.  The average financing differential over most lengthy time periods has been about 4.5%.  That's good, but nothing even close to what we've seen during 2023, which by my eye-ball estimate was a whopping 10.3%!  I believe that was FFH's most favourable financing differential since 1991.

 

If you want to value FFH, think about the company's long-term return on equity, the ability to reinvest at that long-term ROE, and select a P/BV that is appropriate.  If you assess the long-term ROE high enough and you believe that FFH can reasonably reinvest at that ROE, you can easily make the argument that the company is worth 1.5x BV.  But, when doing that exercise, it is important to remain mindful of the financing differential table and the growth in BV table that Prem publishes every year in his annual letter.

 

 

SJ

[Ghost]

21 hours ago, SharperDingaan said:

 

Keep in mind that no buying doesn't mean no money waiting on the side-lines to come in. If MW round 2 doesn't happen soon it's not going to, so give them some time  ; it's a small community, and the laughter is echoing. Their last success was a long time ago, and if this is the best that they can do now ...... well, the walls are closing. 

 

Somebody lend them a few shares, to buy back cheaper!

 

SD!

 

 

 

 

This situation that FFH is currently in (attack by short sellers) reminds me of the Gamestop saga, except of course FFH today is actually undervalued. 

 

As much as I love this board, perhaps we should all start posting on Reddit to help our friends at FFH and really stick it to MW.

 

 

[Hektor]

I guess Berkshire mostly writes short tail insurance, while Fairfax tends to write more long tail insurance. Is this assumption true? If true, how, if at all, does this impact the quality of the float at either companies?

[gfp]

1 hour ago, Hektor said:

I guess Berkshire mostly writes short tail insurance, while Fairfax tends to write more long tail insurance. Is this assumption true? If true, how, if at all, does this impact the quality of the float at either companies?

 

Berkshire writes some very large, very long tail policies.  They are a specialist in messy long tail stuff like the Lloyd's deal and the more recent AIG deal.  They also write some shorter stuff like 1 season Cat and a lot of what GEICO writes - but I wouldn't say that Berkshire's business is shorter duration than Fairfax's on average.

 

An example:

https://www.reuters.com/article/idUSKBN1541TN/

 

$10 Billion premium paid to Berkshire up front (float).  First claims payments by Berkshire didn't start to go out for many years later.

 

A description from the WSJ at the time:

"The agreement with Berkshire’s National Indemnity Co. requires AIG to pay the first $25 billion of claims as they come due. It is expected to be at least several years before Berkshire would begin tapping the roughly $10 billion for its portion of responsibility. The Berkshire unit will pay 80% of net losses and related loss-adjustment expenses if more than the $25 billion is needed for policyholders. Berkshire’s exposure is capped at $20 billion."

Edited February 17 by gfp

[Matthew Lembo]

1 hour ago, StubbleJumper said:

 

 

First off, float is definitely valuable, there's no question about that.  That's what tends to attract value investors to the insurance industry. To correct a couple of points in your post, float does show up on the balance sheet as investments (ie, we take policy holders' premiums and invest them and that's where the float goes) and as policy liabilities.  What is more, float is not always at zero-cost or better, as there have been many years when the CR exceeded 100.  But life is definitely grand when that zero-cost or better situation prevails!

 

How much "credit" we should give to it in a company's market valuation is yet another question.  Buffett proposed that float is effectively money that you borrow from somebody else, but as long as your insurance company is a going-concern and never shrinks its book, you never need to repay that money that you borrowed.  He then went one step further and stated that if you borrow money, never need to pay it back, and can do whatever you want with it, then that's akin to equity.  Personally, I have always had a quibble with this because a regulated insurance company can't just do whatever it wants with float.  There's a reason why FFH's portfolio allocation has traditionally been two-thirds to three-quarters fixed income and that's because you always need to be able to pay indemnities.  The downside of that is that we know that long-term returns on fixed income have traditionally lagged equity returns by a considerable margin.  To me, I don't buy Buffett's argument that we ought to value a dollar of float at the same value as a dollar of unrestricted equity because I'm effectively forced to put 66 cents or 75 cents of that dollar of float into an inferior investment vehicle.

 

Over the past 3 or 4 years, underwriting conditions for FFH have been fabulous.  The cost of float has been negative (ie, CR<100) and, more recently, sovereign debt rates have soared, resulting in a financing differential that has been out of this world.  This makes float look like an astoundingly good deal!  But, it hasn't always been the case.  Every year in his annual letter, Prem publishes an excerpt of a table that depicts FFH's cost of float, prevailing government bond rates, and the resulting financing differential.  The average financing differential over most lengthy time periods has been about 4.5%.  That's good, but nothing even close to what we've seen during 2023, which by my eye-ball estimate was a whopping 10.3%!  I believe that was FFH's most favourable financing differential since 1991.

 

If you want to value FFH, think about the company's long-term return on equity, the ability to reinvest at that long-term ROE, and select a P/BV that is appropriate.  If you assess the long-term ROE high enough and you believe that FFH can reasonably reinvest at that ROE, you can easily make the argument that the company is worth 1.5x BV.  But, when doing that exercise, it is important to remain mindful of the financing differential table and the growth in BV table that Prem publishes every year in his annual letter.

 

 

SJ

I think argument that Buffett is making is that if one were to borrow money (float) with a zero cost or negative cost with an infinite or very long term ie 50-75 years than the npv of that liability today is can get pretty close to zero, depending on discount rate used.. Yes we are restricted in how we can invest that liability but that liability should not be valued at par.
 

Agree tho that it all comes down to expected Roe of the business over time irrespective of the inputs to get there. 

[Viking]

On the valuation front, i continue to think that Fairfax today is still crazy cheap. 1.08 x BV and a ‘normalized’ trailing PE of around 6.4

 

Over the past 3 years what was the big miss from investors? Investors grossly underestimated the rapidly improving earnings power of the company. 
 

What is the big miss from investors today? It looks to me like investors are now grossly underestimating the power of compounding over time.
 

Compounding is probably the most important concept in investing. The fact it is getting zero attention when people discuss Fairfax tells me volumes about investors mindsets. You also see it in analysts forward estimates (pretty much all have earnings falling at Fairfax in the coming years). 
 

And i love it.

—————

Most investors missed investing in Berkshire Hathaway 30 or 40 years ago. They knew what Berkshire Hathaway was earning. And they knew Warren Buffett was an above average capital allocator. 
 

What was probably the biggest single reason they didn’t invest (or sold their shares too soon)? They didn’t understand the power of compounding. 

Edited February 17 by Viking

[Cigarbutt]

30 minutes ago, gfp said:

... but I wouldn't say that Berkshire's business is shorter duration than Fairfax's on average.

An example...

On November 1st of 2023, there was a discussion in these pages (FFH Q3 results) with some others and 'we' (in a collegial way?) had defined the Spekulatius quick measure (SQM) of reserve duration for insurers (basically using 'insurance contract liabilities' net of reinsurance divided by net premiums earned) and it looks like this basic measure (ratio of 2.1 for FFH) needed to be multiplied by 1.8 to arrive at 3.8 years (let's call this the adjusted Spek's measure (aSQM)) if i listened well during the last call ("due to the reserves have a longer duration of 3.8 years compared to Fairfax’s very short duration on the fixed income portfolio of 1.6 years", courtesy of J. Allen).

For BRK, using similar numbers (careful IFRS vs US GAAP), the SQM comes to 2.2, suggesting an overall reserve duration of 3.9-4.0 years. In the case of BRK, they have some kind of bimodal distribution of both very short and very very long tails.

At any rate, concerning the quality of float, longer tail lines are both a blessing and a curse as the time value of money can magnify both the favorable and unfavorable reserve development.

For FFH, if the past is indicative of the future: