Fitch Affirms Fairfax & Odyssey Re, Removes Watch Negative; Outlook Stable.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings of Fairfax Financial Holdings Fairfax Financial Holdings Limited TSX: FFH.SV NYSE: FFH is a Toronto, Ontario based financial services holding company which, through its subsidiaries, is engaged in property, casualty and life insurance and reinsurance, investment management and insurance claims Limited (Fairfax), Odyssey Re Holdings Corp. and its insurance subsidiaries (Odyssey Re), and TIG n. 1. A game among children. See Tag. 2. A capacious, flat-bottomed drinking cup, generally with four handles, formerly used for passing around the table at convivial entertainment. Holdings Inc. (TIG). All ratings are removed from Rating Watch Negative. The Rating Outlook is Stable. The holding company ratings of Crum & Forster Holdings Corp. and the insurance company ratings of Crum & Forster Insurance Group, Northbridge Financial Insurance Group and TIG Insurance Group are not affected by this action. (See complete list of ratings below) The rating action reflects a reduced level of uncertainty following a series of restatements over the past nine months related to the company's finite reinsurance Finite Reinsurance A type of reinsurance that transfers over only a finite or limited amount of risk. Risk is reduced through accounting or financial methods, along with the actual transfer of economic risk. contracts and for numerous other accounting errors. While Fitch is concerned about the internal control weaknesses demonstrated by the erroneous accounting, the restatements in total were not significant relative to the company's capitalization. The rating action also reflects Fitch's favorable view of Fairfax's recent decision to reduce its ownership interest in Odyssey Re from 78.5% to approximately 60%. Although this partial sale reduces Fairfax's future consolidated earnings and upstream dividend capacity, it demonstrates the company's favorable financial flexibility in generating sources of cash. Furthermore, the reduced Fairfax ownership improves Odyssey Re's financial profile by lessening the ability of Fairfax to upstream dividends out of its strongest insurance subsidiary. The Stable Rating Outlook reflects that Fitch's ratings of Fairfax and its subsidiaries incorporate a certain amount of risk related to the ultimate potential negative effect of issues surrounding the company's use of finite reinsurance and transactions in Fairfax securities. These issues have led to various subpoenas received by Fairfax, its CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Prem Watsa, its subsidiaries, its independent auditors and a shareholder, in addition to a class action lawsuit class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax filed by the company's debt holders. However, to the extent that the ongoing investigations by the Securities and Exchange Commission (SEC) and the U.S. Attorney's office for the Southern District of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of bring about a civil action against the company that considerably weakens the companies' franchise, reputation, and competitive position, particularly for Odyssey Re as a reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. , or results in significant fines and/or penalties levied, the ratings could be negatively impacted. Fairfax reported solid underlying underwriting results through the first nine months of 2006, with all ongoing insurers reporting combined ratios under 100%. Fairfax also commuted a $1 billion corporate insurance cover with a Swiss Re subsidiary in early August 2006, which resulted in a pre-tax and after-tax loss of $412.6 million in the third quarter 2006. While Fitch has always adjusted the reported results of Fairfax to exclude the finite benefit from the Swiss Re Cover and other similar contracts, the commutation is still viewed favorably as it reduces reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. credit risk, lowers interest expense on funds withheld, improves liquidity and provides for greater transparency of results. The following ratings have been affirmed with a Stable Rating Outlook and removed from Rating Watch Negative by Fitch: Fairfax Financial Holdings Limited --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) 'BB-'; --$62 million unsecured notes due April 15, 2008 'B+'; --$464 million unsecured notes due April 15, 2012 'B+'; --$100 million unsecured notes due Oct. 1, 2015 'B+'; --$184 million unsecured notes due April 15, 2018 'B+'; --$98 million unsecured notes due April 15, 2026 'B+'; --$91 million unsecured notes due July 15, 2037 'B+'; --$134 million convertible notes due July 15, 2023 'B+'. Fairfax, Inc. --Issuer Default Rating (IDR) 'BB-'; --$68 million exchangeable notes due Nov. 19, 2009 'B+'. Odyssey Re Holdings Corp. --Issuer Default Rating (IDR) 'BBB-'; --$50 million series A unsecured notes March 15, 2021 'BB+'; --$50 million series B unsecured notes due March 15, 2016 'BB+'; --$40 million unsecured notes due Nov. 30, 2006 'BB+'; --$35 million convertible notes due June 15, 2022 'BB+'; --$225 million unsecured notes due Nov. 1, 2013 'BB+'; --$125 million unsecured notes due May 1, 2015 'BB+'; --$50 million series A preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. 'BB'; --$50 million series B preferred shares 'BB'. Odyssey America Reinsurance Corporation Clearwater Insurance Company --Insurer financial strength 'BBB+'. TIG Holdings, Inc. --Issuer Default Rating (IDR) 'BB-'. TIG Capital Trust I --$37 million trust preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. due 2027 'B'. The following ratings remain unchanged by Fitch: Crum & Forster Holdings Corp. --Issuer Default Rating (IDR) 'BB-'; --$300 million unsecured notes due June 15, 2013 'B+'. Crum & Forster Insurance Company Crum & Forster Indemnity Company The North River Insurance Company United States Fire Insurance Company --Insurer financial strength 'BBB-'. Commonwealth Insurance Company Commonwealth Insurance Company of America Federated Connected and treated as one. See federated database and federated directories. Insurance Company of Canada Lombard General Insurance Company of Canada Lombard Insurance Company Markel Insurance Company of Canada Zenith Insurance Co. (Canada) --Insurer financial strength 'BBB'. TIG Indemnity Company TIG Insurance Company TIG Specialty Insurance Company --Insurer financial strength 'BB+'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure. |
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