Author Topic: Fairfax 2018  (Read 138074 times)

Tommm50

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Re: Fairfax 2018
« Reply #380 on: May 03, 2018, 07:45:56 PM »
Doesn't it count?


StubbleJumper

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Re: Fairfax 2018
« Reply #381 on: May 04, 2018, 05:10:20 AM »
I was a little surprised to see that FFH moved ~$5b from cash equivalents into treasuries.  Looks like they are mainly 1-5 year treasuries, so that would likely be a YTM of what 2%, 2.25%?  So, that's probably $100m annually of incremental income.  It was the right thing to do, but I'm surprised that it was done with such conviction (ie, magnitude and speed).  There's a good chance that these expire in 2 or 3 years and will be re-rated favourably as interest rates climb.

I'm not sure that I like the underwriting results.  During the last conference call, Prem spoke of rate increases for renewals, but given the accident year CRs, you'd be hard pressed to see the benefit of any rate improvements.  Renewals are stronger in Q2, so maybe things will get better from here?


SJ

ourkid8

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Re: Fairfax 2018
« Reply #382 on: May 04, 2018, 05:15:53 AM »
At the Fairfax shareholder dinner, Mr. Bradstreet said they are all in 1 year treasuries.

I was a little surprised to see that FFH moved ~$5b from cash equivalents into treasuries.  Looks like they are mainly 1-5 year treasuries, so that would likely be a YTM of what 2%, 2.25%?  So, that's probably $100m annually of incremental income.  It was the right thing to do, but I'm surprised that it was done with such conviction (ie, magnitude and speed).  There's a good chance that these expire in 2 or 3 years and will be re-rated favourably as interest rates climb.

maxthetrade

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Re: Fairfax 2018
« Reply #383 on: May 04, 2018, 06:24:10 AM »

StubbleJumper

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Re: Fairfax 2018
« Reply #384 on: May 04, 2018, 07:51:29 AM »
At the Fairfax shareholder dinner, Mr. Bradstreet said they are all in 1 year treasuries.

I was a little surprised to see that FFH moved ~$5b from cash equivalents into treasuries.  Looks like they are mainly 1-5 year treasuries, so that would likely be a YTM of what 2%, 2.25%?  So, that's probably $100m annually of incremental income.  It was the right thing to do, but I'm surprised that it was done with such conviction (ie, magnitude and speed).  There's a good chance that these expire in 2 or 3 years and will be re-rated favourably as interest rates climb.



Thanks, that's helpful.  so they've probably locked in a YTM a shade better than 2%.  And it'll likely be higher when the capital is re-invested next winter.


SJ

Cigarbutt

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Re: Fairfax 2018
« Reply #385 on: May 04, 2018, 08:00:05 AM »
I was a little surprised to see that FFH moved ~$5b from cash equivalents into treasuries. 

I'm not sure that I like the underwriting results.  During the last conference call, Prem spoke of rate increases for renewals, but given the accident year CRs, you'd be hard pressed to see the benefit of any rate improvements.  Renewals are stronger in Q2, so maybe things will get better from here?

SJ

Three aspects:

1-on the underwriting side, Q1 to Q1 comparisons have limited value but I would say that 2018 Q1 results were satisfactory because a) accident yr CR went from 99,6% to 99,1% and AWH reported below 100% with minimal positive reserve development. So, no major surprise and no major break in a relatively favorable trend.

2-on the operational leverage side, surprised too that disclosures don't show much in terms of increased cat exposure. Various industry reports tend to show a persistence of soft conditions in most other areas. Most of the growth in NPW came from Odyssey Group (insurance lines). For AWH, Q1 typically shows higher premiums versus the rest of the year and, compared to Q1 last year, NPW increased about 9% to 735 million which should result in around 2,3 billion NPW for the year.

3-on the investment side, the significant capital shift on the fixed income is not indicative of reach for yield. For this aspect, FFH's position continues to be unique in the industry.

FairFacts

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Re: Fairfax 2018
« Reply #386 on: May 04, 2018, 09:35:24 AM »
Prem Watsa announced that he will no longer host the conference calls, handing over the baton to Paul Rivett.

He sounded a little down beat in the announcement section but perked up during the Q&A. He focused (as he always does) on the Culture, Long-term, conservative approach. "We have a tremendous amount of flexibility".

dutchman

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Re: Fairfax 2018
« Reply #387 on: May 04, 2018, 11:51:02 AM »
is fairax still perceived as a market hedge?
Maybe it's my imagination, but it's usually down when the markets up and vice versa.

chrispy

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Re: Fairfax 2018
« Reply #388 on: May 06, 2018, 04:59:06 PM »
They have short duration bonds and a lot of cash. While they might be considered a hedge, it is far from how things were a couple of years ago

Scunny Bunny

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Re: Fairfax 2018
« Reply #389 on: May 07, 2018, 01:00:57 AM »
This company is at the outer edge of complexity for me because of the fact much of the associated company equity (TCI apart) is held by the insurance subs and the statutory disclosure of some of the listed subsidiaries is different to FFH interpretation and carrying values at the consolidated level.  I try to focus in on what I am paying for the insurance book relative to peers since in the past few years (ex-2017) it's been an excellent business.  I did a valuation in May last year suggesting at the time the insurance business was valued at about 1.3x Tangible book. At that time the shares were just over C$600, everyone on this board was very downbeat. So we've had an 18%ish return & that's been fine.

A few obvious things. The level of realised accounting profits in the past nine months is up there, especially since it mainly emanates from India - TCI deconsolidation of Quess, sale of First Capital etc. I suppose you can say it independently more than verifies the carrying values, but I would like to see a higher level of recurrent earnings, which of course is held back by investment performance.

All care and no responsibility here. To get to an adjusted tangible book, we've obviously got to make a heap of adjustments. I reckon tangible book within insurance and run off is about US$9.5billion, excluding the associates held within the insurance funds. Revaluing the parent capital etc for changes in value of associates (I am not going through the work -it's pretty complicated), deducting these values from the share price to get a price for the insurance business, I reckon we are paying about US$488/share for something with TBV of $340/share (remember the consolidated TBV is only US$250/share at end March 2018).  That's about 1.44x TBV, up from 1.3x about a year ago. I'm a holder, not a buyer.

In comparative terms, RNR trades at 1.2x TBV and is down 7% over a year; RE trades at 1.12x TBV and is also down 7% - both being buried by the natural disasters of 2018. (no pointing out MKL thank you). So Fairfax has got relatively more expensive versus a couple of straight reinsurers. I also wonder about the Allied World deal. Please bear in mind I live in Australia where we have our own special global insurance take on lousy investing, crazed acquisition, under reserving and perennial earnings disappointment called QBE which trades at 1.8x TBV.