Author Topic: Fairfax 2018  (Read 30124 times)

Dazel

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Re: Fairfax 2018
« Reply #200 on: February 16, 2018, 06:20:17 AM »


Because it is a hell of lot easier to be negative...join the club!

If the crowd was not negative than the price would be much much higher and we would not even be having any conversation.


StubbleJumper

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Re: Fairfax 2018
« Reply #201 on: February 16, 2018, 06:45:51 AM »


Because it is a hell of lot easier to be negative...join the club!

If the crowd was not negative than the price would be much much higher and we would not even be having any conversation.



I'm not sure that it's a simple question of being negative.  The adverse development is definitely a concern.  Does it end in Q4 or do we see more in the future?  Was it caused by bad luck, or is it a symptom of bad underwriting (under pricing and poor adjustment practices)?  Is it something that fixes itself, or can FFH find somebody to go in and fix it?

Those are legitimate questions.  Allied might be a decent deal, but the first few quarters are harkening back to the massive reserve adjustments of TIG and C&F.  But, this time FFH doesn't have the SwissRe cover, right?  The good news is that TIG and C&F were long-tail which is where the worst adverse development tends to appear.  But, I'd say the jury is still out (this is true of all acquisitions -- it takes a bit of time to determine whether you bought a lemon or a turd).


SJ

Txvestor

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Re: Fairfax 2018
« Reply #202 on: February 16, 2018, 09:30:06 AM »


Because it is a hell of lot easier to be negative...join the club!

If the crowd was not negative than the price would be much much higher and we would not even be having any conversation.


Well said and absolutely true. I would be skeptical about anyone stating that they know AWH book
inside out 100%. Its not possible. The Cat losses were higher than at other fairfax insurance subsidiaries and Prem hinted at some modifications to underwriting. The part that concerns me is the
$50M adverse development from a claim(s) they took this Q. That is over and above the Cat losses.
Based on the worse than Fairfax Cat losses and this additional adverse development, if anyome can cleerly categorically why it would be wront to question AWH I would be interested. The jury is out as far as I am concerned. This is a sizable and dilutive acquisition mind you.
I think barring wacky investments by Prem(which he appears intent on tempering) and things going terribly wrong at AWH, the path to $2B a year in BV gains is not terribly difficult to envisage.
At 8% equity gains, an average 3.5-4% bonds return, and 95% CR on 15B in written premiums gets you there. And as Prem pointed out thats $70/share/yr. on that basis in the current market Fairfax should be a stock closer to $1000 than to $500, but to my mind the unknowns stand in the way, which is why it teades where it currently does. The good part is fixing that is within grasp.

I'm not sure that it's a simple question of being negative.  The adverse development is definitely a concern.  Does it end in Q4 or do we see more in the future?  Was it caused by bad luck, or is it a symptom of bad underwriting (under pricing and poor adjustment practices)?  Is it something that fixes itself, or can FFH find somebody to go in and fix it?

Those are legitimate questions.  Allied might be a decent deal, but the first few quarters are harkening back to the massive reserve adjustments of TIG and C&F.  But, this time FFH doesn't have the SwissRe cover, right?  The good news is that TIG and C&F were long-tail which is where the worst adverse development tends to appear.  But, I'd say the jury is still out (this is true of all acquisitions -- it takes a bit of time to determine whether you bought a lemon or a turd).


SJ

racemize

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Re: Fairfax 2018
« Reply #203 on: February 16, 2018, 09:38:10 AM »
On the call, they said that adverse development was from one casualty claim (it must have been a whopper).  Otherwise they are happy with underwriting and that standards are similar to FFH. 

Dazel

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Re: Fairfax 2018
« Reply #204 on: Today at 04:14:36 AM »

The insurance business they have will create a Markel and Berkshire type outcome. But you get the shares now at the level where there is the doubt of that outcome.