Sunday, April 27, 2008

From Fairfax's 2007 AGM Slides:


For those conservatively positioned, industry losses from MBS and Corporate bonds could be a blessing which forces stronger pricing/underwriting profits.

Recently, I ran across a small-cap California insurer. It was trading for 53 million with shareholder's equity of 70 million. It also generated 80 million in float, and its investment portfolio was almost completely invested in US treasuries. To top it off, their operations were generating an underwriting profit while also heavily re-insuring their business. That to me was a bargain which beats holding cash any day.

4 comments:

Nosedive said...

What is that insurer?

Ethan said...

I imagine this is UNAM. Some good discussion on this company in the yahoo finance message board.

Anonymous said...

If it's UNAM I'm not sure I'd bother directing money to it that could be invested in FFH/ORH. UNAM has investments of about 3x current mkt cap which is very similar to ORH at this point. I don't think there is much doubt that the Hamblin Watsa investors are a better bet to produce higher returns from these investable funds.

Anonymous said...

As a former California banker, I've seen many small insurers show years of underwriting profit despite a warped premium-to-risk ratio. There are so many small fish that the premiums are depressed and the underwriting process is much more "instinctive" than you might imagine.

Needless to say, a large earthquake will wipe out many of the liability and property insurers, regardless of their A.M. Best ratings.