Monday, August 06, 2007

A Peak Inside Fairfax's CDS Portfolio

Given the enormous volatility going on in Fairfax's CDS portfolio, I thought i might try to shed some light on the matter. Below are some of the major holdings for a subsidiary, Odyssey Re America, at end of December 2006. Prem has stated that some of these are looking for capital appreciation, while others are to hedge their reinsurance recoverables and business. The ones in bold are the ones I assume were for investment rather than hedging purposes.

Company / notional amount in millions
Ace Holdings - 110
Allianz France - 130
Societe Generale- 175
Aegon - 105
Swiss Re- 75
Ambac - 110
AIG (?) - 330
Countrywide- 130
Freddie Mac- 235
Hanover - 155
JP Morgan - 75
MBIA - 65
MGIC - 205
PMI Group - 230
Radian - 260
Washington Mutual - 210
XL Capital - 200

Most of the counterparties for these deals are Citibank, Duetsche Bank, and Barclays. I'm particularly glad to see Countrywide, MGIC, PMI, and Radian among the bigger holdings on that list, especially since I'm not too optimistic on their futures and because their debt protection costs have been soaring the past few days. I'll be watching these names closely for updates.


halfhenry said...

Thanks Nick,

I looked in their annual and couldn't find more information about the swaps by searching for credit default.

Nnejad said...

Yes, I had to go through US insurance filings in order to find this out. These numbers exclude a lot of the CDS portfolio, but you can assume that the composition is mostly the same across the other Fairfax subsidiaries.

Anonymous said...

Just one question.

Are the default swaps owned against guarantors (Ambac, MBIA, Radian, MTG) owned against the regulated insurance subsidiary or against the holding company? It makes a big difference.