Author Topic: Fairfax 2020  (Read 80664 times)

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2475
Re: Fairfax 2020
« Reply #530 on: July 31, 2020, 09:32:49 PM »
...
----------------
Anybody understands this statement: "The losses were principally comprised of incurred but not reported losses that represented on a net basis 70% of the COVID-19 losses reported."
is that like how banks do loan losses provisions. ? what does it mean incurred but not reported.
Disclosure: FFH is still on my radar but involves only peripheral vision.
Reported loss includes has occurred and has been reported to the company. Based on that, over time, companies have to "adjust" what they expect will happen in the future. Insurers vary in terms of the speed and extent of recognition of future potential developments. For Covid-19, Markel, for example, reported high losses in Q1 with a high component of IBNR, suggesting a pro-active stance. Others have decided to wait and see the future development before booking additional losses. What is very unusual about this virus is that 1-it is a major event (large losses expected), 2-models don't really exist as global pandemics happen only rarely and 3-unlike a hurricane or other major catastrophe, the virus event and related consequences are ongoing (uncertain duration). i think the statement made by FFH implies possibly a degree of conservatism reflecting the underlying uncertainty and long-tail nature of future claims.


Pedro

  • Newbie
  • *
  • Posts: 16
Re: Fairfax 2020
« Reply #531 on: August 02, 2020, 09:26:05 AM »
"i think the statement made by FFH implies possibly a degree of conservatism reflecting the underlying uncertainty and long-tail nature of future claims."

I agree & would add that FFH has continued favourable reserve development YOY so convservative reserving is their historical norm.


Cigarbutt

  • Hero Member
  • *****
  • Posts: 2475
Re: Fairfax 2020
« Reply #532 on: August 02, 2020, 06:12:55 PM »
"i think the statement made by FFH implies possibly a degree of conservatism reflecting the underlying uncertainty and long-tail nature of future claims."

I agree & would add that FFH has continued favourable reserve development YOY so convservative reserving is their historical norm.
The Covid impact on (re)insurers is a mixed bag and there are segments that clearly have benefitted. Not a big deal for Fairfax but, with decreased mobility, car insurers don't seem to complain. That aspect, however, may help to explain the otherwise unusual favorable development in some of the segments. It will take time to figure out but Fairfax has, in the latest part of the cycle, showed better than average (relative basis) favorable development but there is no evidence that shows that it will completely diverge compared to industry-wide trends.
Another aspect of the Covid issue is duration and development patterns. For workers comp lines (Zenith), the reserve development (from claims not still incurred but that need to be priced beforehand) will be influenced by the presently unknown evolution of the virus problem, the public policy responses to it as well as future legislation for coverage. Event cancellation settlement should be straightforward but, even if the insurers' legal position in general appears strong for the business interruption claims, the extent of those claims remain presently unknown. Typically (one would need to assess specifically for Fairfax; i assume they use the usual policy language), the BI contracts include a specific duration (limit) clause but, if history is any guide, BI claims after previous catastrophes took a while to manifest. There are a lot of businesses looking at their options now. It would be expected that most claims will have clearer visibility when legal actions are taken (or not) somewhere around 2021. It is possible that some of these claims have already been "reported" without a clear quantifiable and specific claim amount. Sometimes, the IBNR account includes the typical not reported claims but may also include a "pipeline" reserve where a claim is considered in process, which results in some 'flexibilty' for reporting purposes. It appears that the unfavorable reserve development recognized by Fairfax for the BI claims should eventually reverse.

cwericb

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1346
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8988
Re: Fairfax 2020
« Reply #534 on: August 05, 2020, 04:24:16 PM »
Seeking Alpha article on Fairfax.

Fairfax Financial Holdings Ltd.: Undervalued But No Catalyst In Sight

https://seekingalpha.com/article/4364646-fairfax-financial-holdings-ltd-undervalued-no-catalyst-in-sight?utm_medium=email&utm_source=seeking_alpha&mail_subject=frfhf-fairfax-financial-holdings-ltd-undervalued-but-no-catalyst-in-sight&utm_campaign=rta-stock-article&utm_content=link-0

The gist of the article...nothing wrong with it...it's cheap...but no catalyst.  Just to get back to book value is a 40% return...what catalyst do you need for that?  Cheers!
No man is a failure who has friends!

villainx

  • Sr. Member
  • ****
  • Posts: 282
Re: Fairfax 2020
« Reply #535 on: August 05, 2020, 07:00:45 PM »
Apologies as a slightly embittered Fairfax holder, but - I remember another thread where it was posed that if one wasn't comfortable holding on to (sub or fairfax main), one should get out.  Unfortunately, ... I got out.  I don't see the point of investing based on trust that things will improve ... when there are zero signs that things are improving.  I love folks contributing here, but i got out of my (very small) share of Fairfax.

Xerxes

  • Sr. Member
  • ****
  • Posts: 291
Re: Fairfax 2020
« Reply #536 on: August 06, 2020, 08:37:30 PM »
I ll say this.

The very fact that FFH is unable to do both recap itís insurance subs and buyback significantly at the same time is an pocket of opportunity that provides a not moving share price looking for a better day.

The fact that Buffet refused to buy back it own share and significantly deploy capital in Q2 was also a pocket of opportunity.

Lastly on FFH BV my sense is that with the write-offs on some of the Associates at the end of Q1, the stack that made up its BV has been de-risk of bias towards those names. Therefore as the BV is re-build it will be on strength of its better businesses.

When the BV gets close to where it was in dollar terms in the coming quarters, I would prefer the post-Q2 stack of BV than the pre-pandemic stack of BV. Same dollar value, but better tilt toward less impaired names.

My weird observation
« Last Edit: August 06, 2020, 08:39:49 PM by Xerxes »

ander

  • Full Member
  • ***
  • Posts: 183
Re: Fairfax 2020
« Reply #537 on: August 07, 2020, 08:14:38 AM »
US based investors do you buy the local in Canada or FRFHF? The FRFHF not as liquid and wider bid / asks. Any other considerations?

TwoCitiesCapital

  • Hero Member
  • *****
  • Posts: 2655
Re: Fairfax 2020
« Reply #538 on: August 07, 2020, 09:42:01 AM »
US based investors do you buy the local in Canada or FRFHF? The FRFHF not as liquid and wider bid / asks. Any other considerations?

I buy both pending which account has the availability of the cash.

FRFHF is lower liquidity, but I do all my trading with limit orders and haven't typically had much trouble entering or exiting.