Which subs do you believe received the capital?
How would the average investor determine for themselves in an annual or quarterly report which subs are cutting it close to requiring capital? Any walk thorough or guidance would be greatly appreciated.
Well, the quick way to eye-ball it is to look at page 95 of the AR which depicts dividend capacity, because that gives you a sense of "excess capital." Then you can go to page 195 and look at the premiums:surplus ratio.
We know that last year, FFH drew a divvy from C&F and then for whatever reason, reinjected some capital. When you look at C&F's dividend capacity on page 95, it was $140m, and then when you look at C&F's premiums:surplus ratio on page 195 it's 1.7:1. Usually you don't see that ratio go above 2:1. So, with a surplus of $1.4B, perhaps C&F could bump up its net written premiums by $500m to $2.8B (see page 16). The problem is that C&F increased its net written by 18% during 2019, and 33% in Q4 2019 compared to Q4 2018 (page 5). So you have a sub that looks to be a little lean on capital, received an injection in 2019 and is probably growing its premium at a pace of 20%+. It cannot sustain that kind of premium growth throughout 2020 without a capital injection.
Northbridge is in a similar situation so they probably would benefit from a bit of capital too, but it's a less pronounced "problem."
Allied has lots of capital, while Zenith and Brit did not grow their book during 2019. Odyssey has lots of capital, but it has also shot out the lights in the past when pricing got stupid, so it would not at all surprise me if their book could outgrow their capital.
SJ