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Fairfax 4th Q Results


Parsad
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Not very good due to mark to market losses on the hedges and catastrophe losses.  A breakeven year.  Hedges still in place as Prem thinks things will be bad in the next few years.  Nice to see Northbridge coming back to form, and Asia is still a rock-star!  Cheers!

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I guess I've managed to forget the last 6 months, but what catastrophes were driving the 4th qtr combined ratios?  Reinsurance was brutal.

 

Edit--

 

Thai flooding for one.  Ironic that it slipped my mind since Western Digital (WDC) is one of my holdings.

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And you won't be too happy to see these numbers:

 

 

 

Combined ratios of the insurance and

reinsurance operations in the

fourth quarters and years ended

December 31, 2011 and 2010 were:

                                                            Year ended

                                                            Fourth quarter      December 31,

                                                            ------------------- -------------------

                                                            2011      2010      2011      2010

                                                              --------- --------- --------- ---------

Insurance  - Canada (Northbridge)    101.9%    111.2%    102.8%    106.9%

                    - U.S. (Crum & Forster

                      and Zenith National)      124.2%    130.1%    114.3%    116.5%

                          - Asia (Fairfax Asia)      89.2%    90.8%    83.2%    89.3%

Reinsurance  - OdysseyRe                    122.7%    85.8%    116.7%    95.0%

Reinsurance and Insurance - Other      155.1%    90.1%    140.9%    107.2%

                                    --------- --------- --------- ---------

Insurance and reinsurance operations  121.0%    102.9%    114.2%    103.5%

 

 

 

 

 

 

 

 

 

 

Definitely not good

 

Net investment gains of $691.2 million (net investment losses of $914.9 million in the fourth quarter)

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Cant say I expected alot.  Guess we know why the dividend wasn't increased, eh?

 

Alot of cash sitting in the subs.  Explains their ability to buy more companies.  Well see what Prem or Andy say about the Insurance outlook tomorrow. 

 

Perhaps a buying opportunity?

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Nice bond gains and the losses could have been worse for a year with so many loss events. It could have been much worse. Now only one year to go to solar maximum so I am expecting one more bad year. I am glad to see the subs have built up so much cash. I hope they increase their rates.

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As a result of the rise in catastrophes, insurance premiums are also rising, and so now is actually a good time to be writing such business, Mr. Watsa added.

 

The big advantage is that when this happens, pricing goes through the roof. The pricing in Japan has gone up very significantly, and pricing in Thailand is going up. When I say ‘significantly,’ I’m talking 50 to 100 per cent, big price increases.

 

http://www.theglobeandmail.com/globe-investor/watsa-sticks-to-his-guns-as-pessimism-proves-costly/article2341221/

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I guess I've managed to forget the last 6 months, but what catastrophes were driving the 4th qtr combined ratios?  Reinsurance was brutal.

 

Edit--

 

Thai flooding for one.  Ironic that it slipped my mind since Western Digital (WDC) is one of my holdings.

 

Im kicking myself. I was early on WDC in late 2010 and managed to make no money on it. Almost bout huge at $26 due to flooding using leaps......

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Guest misterstockwell

When they say there was a mismatch in equity investment gains and hedge losses in Q4, they weren't kidding! Yikes. Whatever they do, I beg that they don't use the "excluding catastrophe losses" line tomorrow on the call. You can't exclude that one. That's a whopper. That's bad underwriting.

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Im kicking myself. I was early on WDC in late 2010 and managed to make no money on it. Almost bout huge at $26 due to flooding using leaps......

 

That's too bad. I remember you were one of the most vocal supporters of WDC back when I first gave it a look. Ultimately it wasn't a company for me, but I kind of expected you to be rolling in cash by now.

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It will work out. I have learned quite a bit over the last year, but made little cash. With ATSG, Petrobank / Petrobakken, FTP, and WDC - I should have been buying hand over fist during those collapses. Going to restructure my portfolio to feature 25% cash, because these deals seem to come along a few times a year. If you know the company / management it should have been easy to step up and buy. I did buy a boat load of SD, so hopefully things play out.

 

 

Liberty based on what you hold I would think you were doing quite well also.

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I guess I've managed to forget the last 6 months, but what catastrophes were driving the 4th qtr combined ratios?  Reinsurance was brutal.

 

Edit--

 

Thai flooding for one.  Ironic that it slipped my mind since Western Digital (WDC) is one of my holdings.

 

Im kicking myself. I was early on WDC in late 2010 and managed to make no money on it. Almost bout huge at $26 due to flooding using leaps......

 

I recall we had a brief exchange about WDC about a year ago (when I first bought).  We had the same perspective on it, so I naturally thought you were pretty sharp. :) 

 

The Thai floods did worry me a bit, but also gave an opportunity to buy really low (~$25), which I did a little of.  After FFH gets hammered in the morning, WDC probably be my third largest holding. 

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Congrats Zarley let me know what you buy next.  :)

 

Real time buy and sell calls cost extra. ;D  Although, I'm still slightly underwater on L . . . watching that paint dry.

 

LOL. I love Loews, just wise the Tisches were hungrier. How could you not have found value from 2008 - 2012... At least buy back a boat load of stocks in the subs. They just keep missing the board, should have bought more DO during DWH. I will own Loews one of these days but prefer cash these days. The value is there though.

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fairfax's significant $12 billion bond holdings, of which 75% has a maturity > 5 years, seems to go totally against buffett's recent warning to stay away from bonds  ("Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.")

 

what would be the implications for fairfax if buffett is right, i.e. how much wiggle room do they have to "adjust" their bond positions if things slowly develop in line with the buffett scenario?

 

regards

rijk

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