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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (60381)	2/14/2018 7:17:34 PM
From: Graham Osborn	Read Replies (2) \| Respond to of 78735

FRFHF has 4.9B in holdco/ insurance debt and 1.5B in noninsurance debt. Although Fairfax does not guarantee the noninsurance debt I count it anyway since the purpose is to measure risk, and a struggling subsidiary affects the parent whether or not the parent chooses to sacrifice it. So that accounts for the 6.4B in LT debt. Book value is 11.6B and goodwill is 5.8B for tang book of 5.8B. So LT debt exceeds tang book. Cash and short-term investments is about 400M - the rest is bonds and stocks which I don’t count. No insurance liabilities counted. As far as the underlying question of what ratios should be used to measure risk at an insurer, whether you consider tangible equity or tangible equity plus discounted float depends on how renewable you consider the float to be. Buffett considers float more valuable than equity - I guess that's true in a low-interest rate environment. I tend to prefer the more conservative ratios.