S&P Lowers Fairfax Financial and Sub Rtgs; Otlk Neg.Business Editors
NEW YORK--(BUSINESS WIRE)--Standard & Poor's
Feb. 12, 2003--Standard & Poor's Ratings Services Ratings Service
A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. said today that it lowered its counterparty credit rating on 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 Ltd. (Fairfax) to 'BB' from 'BB+' because of concerns about Fairfax's ability to maintain adequate liquidity at the holding company.
Standard & Poor's also said that it lowered its counterparty credit rating on 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., which is Fairfax's subsidiary, to 'BB-' from 'BB'. The outlook on both of these companies is negative.
These rating actions follow Fairfax's earnings announcement for the fourth quarter of 2002. The results for the quarter were mixed: underwriting results (excluding runoff Runoff
The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape.
If the "tape is late" then it can take a long time to print off all the closing prices. operations) improved significantly, but there is the potential for liquidity strain in 2003.
Historically, the counterparty credit and senior debt ratings on Fairfax enjoyed nonstandard non·stan·dard
1. Varying from or not adhering to the standard: nonstandard lengths of board.
2. notching because of the significant cash balances held at the holding company. In the case of Fairfax, the nonstandard notching resulted in a two-notch differential between the ratings on the insurance operations and the holding company. Standard & Poor's has a negative view on yesterday's announcement that the company will repay, using the internal cash resources of the holding company, the C$207 million of redeemable hybrid income overnight shares (RHINOS) maturing Feb. 24, 2003. The subsequent reduction in holding company liquidity in a year when the company has more than C$400 million of maturing obligations (excluding the RHINOS) is a concern, especially because access to the public capital markets appears to be limited for Fairfax at this time.
Fairfax's underwriting results (excluding the runoff business) for the quarter and full year improved considerably in each of its core businesses, which should favorably affect the future earnings, dividend capacity, and capitalization of the insurance operations--assuming reserves for the continuing operations continuing operations
Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the develop favorably and underwriting discipline is maintained. In the earnings call, the company mentioned it had close to $670 million of dividend capacity, the bulk of which was related to ORC Orc
monstrous sea creature; devours human beings. [Ital. Lit.: Orlando Furioso]
See : Monsters Re and Fairfax's offshore operations. Although the company does have significant dividend capacity, management's ability to have full access to those funds is likely to be constrained con·strain
tr.v. con·strained, con·strain·ing, con·strains
1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force.
2. by the capital considerations of those operations.
"Standard & Poor's will continue to monitor the company's progress in underwriting, reserving, and liquidity management," said Standard & Poor's credit analyst Matthew T. Coyle. "To the extent management can demonstrate a sustainable track record of improvement in these areas, Standard & Poor's will maintain its current ratings and possibly reconsider its negative outlook on the organization. Conversely, a material deterioration in any of these areas would likely result in a downgrade Downgrade
A negative change in the rating of a security.
For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. ."
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Credit Ratings Actions.
Copyright 2003, Standard & Poor's Ratings Services