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Fairfax Acquires FMR!


Parsad
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Fairfax is acquiring FMR for $16.50 a share.  Ericd was on to something here a month ago, but you guys stopped him!  ;D  Hopefully he didn't listen to anyone and bought...would have been a nice 50% gain in a month.  Cheers!

 

http://cornerofberkshireandfairfax.ca/forum/index.php?topic=3049.0

 

http://finance.yahoo.com/news/Fairfax-Financial-to-Acquire-prnews-1520281664.html?x=0&.v=1

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Does it strike anyone as strange that:

 

Prem  and Fairfax have bought 4 or 5 insurance companies in the last few years

The Buffet wannabe Biglair is trying to buy an insurance company

 

Meanwhile the man who started the trend of buying insurance companies so that you could invest the float hasn't bought an insurance company in years and is instead buying railroads and financial stock.

 

just strikes me as a little strange that if there are such bargains out there in the insurance field and companies that are ripe for taking over that buffet has been a none player in the field.

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ValueBuff - I agree 100% with you.  Prem is buying insurance companies to increase float and because they are cheap b/c of low interest rates / soft market dynamics.

 

Buffett has 50 - 60b in float with 10B+ of FCF to deal with. 

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Guest longinvestor

ValueBuff - I agree 100% with you.  Prem is buying insurance companies to increase float and because they are cheap b/c of low interest rates / soft market dynamics.

 

Buffett has 50 - 60b in float with 10B+ of FCF to deal with. 

 

What is the current float at FFH?

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Guest petey2720

Regarding ACGL (discussed as part of original thread), please note that the Chairman is a former Berkshire employee:

 

Constantine Iordanou has been president and chief executive officer of ACGL since August 2003 and a director since January 1, 2002. On November 6, 2009, he became chairman of the board of ACGL. From January 2002 to July 2003, Mr. Iordanou was chief executive officer of Arch Capital Group (U.S.) Inc. From March 1992 through December 2001, Mr. Iordanou served in various capacities for Zurich Financial Services and its affiliates, including as senior executive vice president of group operations and business development of Zurich Financial Services, president of Zurich American Specialties Division, chief operating officer and chief executive officer of Zurich American and chief executive officer of Zurich North America. Prior to joining Zurich, he served as president of the commercial casualty division of the Berkshire Hathaway Group and served as senior vice president with the American Home Insurance Company, a member of the American International Group. He holds an aerospace engineering degree from New York University.

 

My first post here by the way.  Longtime lurker.

 

 

 

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Smallcap,  What I see is quite different and BRK has been buying insurance recently.  Didn't he just invest 1.3 billion in Swiss Re?  I think Brk also faces two other issues that prevent Buffett from doing anything:

1) move the needle issues - a small deal like FMR is not going to add much to BRK

2) competition concerns of two types - buying externally will put them into competition with themselves, and anti-comp legislation likely prohibits Buffett from alot of purchases in insurance these days.

 

I dont have any comment about SNS aside from Bigliari has no experience in the business and I do think that is critical in insurance unlike simpler businesses. 

 

FFH has vast experience in insurance and buying bad insurers so they certainly know how to do it now, as does Buffett. 

 

FFH has somewhere around 7 B in float, maybe more now.  It is published in the AR.  There is at least 20 B in investable capital.

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Uccmal,

 

Your points are very well made, I hadn't considered the competition issues but it makes a lot of sense.

On Swiss Re, there is a lot of difference between buying shares in an insurance company and buying the entire company for a man like WEB.

 

Myth, I had completely forgotten the CNA run off.

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Smallcap,  What I see is quite different and BRK has been buying insurance recently.  Didn't he just invest 1.3 billion in Swiss Re?  I think Brk also faces two other issues that prevent Buffett from doing anything:

1) move the needle issues - a small deal like FMR is not going to add much to BRK

2) competition concerns of two types - buying externally will put them into competition with themselves, and anti-comp legislation likely prohibits Buffett from alot of purchases in insurance these days.

 

I dont have any comment about SNS aside from Bigliari has no experience in the business and I do think that is critical in insurance unlike simpler businesses. 

 

FFH has vast experience in insurance and buying bad insurers so they certainly know how to do it now, as does Buffett. 

 

FFH has somewhere around 7 B in float, maybe more now.  It is published in the AR.  There is at least 20 B in investable capital.

 

 

Good points about the constraints against BRK's gobbling up insurance companies.  Interestingly, in BRK's last Chairman's letter, WEB talks about buying BNF and how good their prospects are and then about some of BRK's other equities.  Then he touches on their insurance businesses and says in passing that they are better businesses than others.  :)

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Does it strike anyone as strange that:

 

Prem  and Fairfax have bought 4 or 5 insurance companies in the last few years

The Buffet wannabe Biglair is trying to buy an insurance company

 

Meanwhile the man who started the trend of buying insurance companies so that you could invest the float hasn't bought an insurance company in years and is instead buying railroads and financial stock.

 

just strikes me as a little strange that if there are such bargains out there in the insurance field and companies that are ripe for taking over that buffet has been a none player in the field.

 

How about Munich Re in addition to Swiss Re in addition to Sunlife….

 

http://dealbook.blogs.nytimes.com/2010/10/19/buffett-increasing-stake-in-munich-re/

 

http://www.prnewswire.com/news-releases/sun-life-sells-reinsurance-business-to-berkshire-hathaway-105874988.html

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Long Term FFH shareholders who'da thunk that FFH could raise another companies credit rating:

 

A.M. Best Places Ratings of First Mercury Financial Corporation and Its Subsidiaries under Review with Positive Implications

4:12PM ET on Friday Oct 29, 2010 by Business Wire

A.M. Best Co. has placed under review with positive implications the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of "a-" of First Mercury Group (First Mercury) (Chicago, IL) and its members. Concurrently, A.M. Best has placed under review with positive implications the ICR of "bbb-" of First Mercury's parent holding company, First Mercury Financial Corporation (FMFC) (headquartered in Southfield, MI) (NYSE: FMR). (See below for a detailed listing of the companies.)

 

The rating actions follow the announcement that FMFC and Fairfax Financial Holdings Ltd. (Fairfax) (Toronto, Canada) [TSX: FFH and FFH.U] have entered into a merger agreement whereby Fairfax will acquire all of the outstanding shares of FMFC's common stock. The under review status with positive implications reflects the perceived benefit to First Mercury of being ultimately owned by Fairfax, which offers the group greater financial flexibility and resources.

 

A.M. Best plans to resolve the under review status upon the completion of the transaction, which is expected in the first quarter of 2011, subject to shareholder and regulatory approval.

 

The FSR of A- (Excellent) and ICRs of "a-" have been placed under review with positive implications for First Mercury Group and its following members:

 

First Mercury Insurance Company First Mercury Casualty Company American Underwriters Insurance Company

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