Fairfax Financial is a financial holding company based in Toronto, Ontario, which is engaged in property, casualty, and life insurance and reinsurance, investment management, and insurance claims management. The company operates primarily through several subsidiaries, including Odyssey Re, Northbridge Financial, Crum & Forster and Zenith Insurance Company.
Fairfax is led by chairman and CEO Prem Watsa. Watsa controls nearly half of Fairfax; his value-oriented investing strategies have been compared to those of Warren Buffett.
Maps, Directions, and Place Reviews
History
Markel
Fairfax was incorporated as Markel Service of Canada on March 13, 1951, and continued under the Canada Business Corporations Act in 1976. The name was subsequently changed to Markel Financial Holdings Ltd.
In 1984, Prem Watsa left GW Asset Management to found his own asset management firm, Hamblin Watsa Investment Counsel Ltd. together with his former boss from Confed, Tony Hamblin. Tony was the Chief Investment Officer at Confed. The five founding partners were: Tony Hamblin, Prem Watsa, Roger Lace, Brian Bradstreet and Frances Burke.
In 1985, Watsa took control of Markel Financial, a Canadian-based specialist in trucking insurance. The company was controlled by the Virginia-based Markel family. The company was almost bankrupt, but Watsa figured it just needed a capital injection. Watsa hit it off with Steven Markel.
Fairfax Financial Holdings Limited
In May 1987, Watsa re-organized Markel Financial Holdings Limited and renamed it Fairfax Financial Holdings Limited (FAIRFAX: short for "fair, friendly acquisitions").
From 1985 to the end of 2010, Fairfax Financial had a compound growth rate of approximately 25% in book value per share (per year), it's about 243 times what Fairfax began with in 1985.
Prem Watsa has served as chairman and chief executive officer of Fairfax Financial Holdings Limited (formerly Markel Financial Holdings) since 1985 and as vice president of Hamblin Watsa Investment Counsel since 1985. Mr. Watsa, directly, and indirectly through 1109519 Ontario Limited, The Sixty Two Investment Company Limited and 810679 Ontario Ltd., owns the controlling equity voting interest of Fairfax Financial Holdings Limited("Fairfax"). He owns roughly 10% of Fairfax, which accounts for 99% of his personal wealth. His 10-for-1 multiple voting shares give him just over 50% ownership.
Subprime mortgage bubble
As early as the 2003, in an annual report issued by the company, chief executive Prem Watsa raised concerns about securitized products and talks about the subprime mortgage crisis and the United States housing bubble.
In an interview in the Globe and Mail in 2007, Mr. Watsa said believed that the global credit squeeze is in its "early days," and indicated he believed there may be similarities to the Japanese asset price bubble.
Recent years
As of December 31, 2010, Fairfax had total assets of approximately $31.7 billion, and its revenue for the prior twelve months was approximately $6.2 billion. Since Watsa took over, the company book value per share has compounded by 23% per year, while the common stock price has followed the growth at 19% per year.
On September 23, 2013, Fairfax made an offer to purchase cell phone maker BlackBerry for $4.7 billion or $9.00 a share. BlackBerry announced it had signed a letter of intent but would be open to other offers until November 4, 2013. Fairfax already held 10% of BlackBerry.
Fairfax Financial has over 8,200 employees worldwide (5,000 of them in the United States). There are just 30 employees at head office in Toronto.
Fairfax Cleaning Services Video
Hamblin Watsa Investment Counsel Ltd. (HWIC)
Investment performance
Fairfax's internal money management firm, Hamblin Watsa, earned 19.9% compounded returns annually, on its stock investments (includes Equity Hedging) between 2000 and 2009. The investment team is led by Brian Bradstreet, Roger Lace, Sam Mitchell and Chandran Ratnaswami. The fixed income/CDS portfolio managers team has only two members, Brian Bradstreet and Enza LaSelva.
The following table shows the time-weighted performance of HWIC vs S&P 500 Index and the BofA Merrill Lynch U.S. Corporate Bond Index.
At December 31, 2008, Fairfax's investment portfolio of $18.4 billion consisted of approximately 46% ($8.4 billion) of bonds, approximately 30% ($5.5 billion) of cash and short-term investments and approximately 21% ($3.8 billion) of common stocks. Included in the bond portfolio are $4.0 billion of tax-exempt bonds approximately 87% of which are insured by Berkshire Hathaway Assurance Corp.
HWIC bet against the housing bubble
The investment team of HWIC is benefiting from the subprime fallout, like John Paulson's New York-based Paulson & Co., Kyle Bass' Hayman Capital, Andrew Lahde's California-based Lahde Capital, Julian Robertson's "Tiger Cubs" (formerly known as "Tiger Management Corp."), and Michael Burry's Scion Capital (White Mountains Insurance Group is a minority investor in Scion Capital LLC), they have used derivatives to bet on the housing bubble. As of September 30, 2007, Fairfax and its subsidiaries own an enormous credit default swap (CDS) book with a $18.5 billion notional amount and an average term to expiry of 4.2 years, on about 25 to 30 companies, the majority of which are bond insurers and mortgage lenders. The CDS book had a cost of $344 million, and a market value of $546 million. The market value of these swaps have fluctuated significantly in the 3rd quarter of 2007 from less than $200 million at the end of June, to $537 million at the end of July to almost $1 billion (twice that value) in August to $544 million at the end of September.
In the housing bubble and financial crisis years of 2008-2009, Fairfax was as one of the uniquely few companies that was able to grow through outstanding investment returns its common shareholders' equity base from $4.1 billion to $7.4 billion - an increase of $3.3 billion - resulting in an increase in book value per share of 61% (not including dividends). This was far more than any company in the financial industry.
Subsidiaries
- Brit plc an international insurance and reinsurance group was acquired by Fairfax in 2015
- Odyssey Re based in Stamford, Connecticut, underwrites treaty and facultative reinsurance as well as specialty insurance business (100%-owned by Fairfax).
- Northbridge Financial based in Toronto, provides property and casualty insurance through its Commonwealth, Federated, Lombard and Markel subsidiaries, primarily in the Canadian market as well as in selected U.S. and international markets (100%-owned--Fairfax completed the privatization of Northbridge on January 13, 2009).
- Crum & Forster based in Morristown, New Jersey, is a property and casualty insurance company.
- Zenith Insurance Company based in Woodland Hills, California, is a wholly owned subsidiary of Fairfax. Zenith has been a specialist in workers' compensation insurance. Fairfax purchased 100% of Zenith National Insurance Corp for approximately $1.3 billion on May 20, 2010.
- Falcon Insurance, based in Hong Kong, writes property and casualty insurance.
- First Capital based in Singapore, writes property and casualty insurance.
- The U.S. runoff group consists of TIG, International Insurance and the Fairmont entities
- The European runoff group RiverStone Insurance UK and Dublin, Ireland-based nSpire Re (The European runoff group consists of RiverStone Insurance UK and Dublin, Ireland-based nSpire Re)
- Hamblin Watsa Investment Counsel Ltd. HWIC was founded in 1984 and provides asset management for all of Fairfax's subsidiaries
- Cunningham Lindsey provides insurance claims services (43.6%-owned)
- MFXchange, established in 2002, provides technology services for Fairfax and the insurance industry.
- Group Re
- ICICI Lombard is a 74/26% joint venture between ICICI Bank Limited, India's second-largest bank and Fairfax Financial
- Pethealth Inc. based in Ontario, Canada, with offices in the UK, and the USA was acquired by FairFax in November 2015.
Other investments
- Fairfax Asia
- Fairfax Brasil
- Polish Re
- Advent Capital (Holdings) PLC
- Alliance Insurance
- Alltrust Insurance Company of China
- BlackBerry Ltd
- General Fidelity Insurance Company
- Gulf Insurance Co.
- First Mercury Financial Corporation
- The Pacific Insurance Berhad
- Jordan Kuwait Bank
- ICICI Lombard
- Overstock.com
- Chou Associates Fund
Other notable transactions
- AbitibiBowater Inc. (new--scheduled to close on March 31, 2008)
Source of the article : Wikipedia
EmoticonEmoticon