Company Denies Relationship with Fitch

Company Denies Relationship with Fitch

By Matt Brady

NU Online News Story, Sept. 2, 4:29 p.m. EDT?Toronto-based property and casualty insurer Fairfax Financial Holdings Limited asked that its listing be withdrawn from Fitch Ratings after the agency placed Fairfax, its subsidiaries and affiliates on Ratings Watch Negative.[@@]

Fitch cited increasing concerns about liquidity pressures as the reason for the move, as well as an increasing lack of transparency in the company's public disclosures.

Because the company does not maintain a relationship with Fitch, and thus does not provide it with information that the public would not be privy to, the agency has made its decision based on Fairfax's public disclosures.

Fairfax reiterated Tuesday that it has not had a relationship with Fitch since the spring of 2003, and repeated its call for its ratings to be withdrawn. It may get its wish, as Fitch noted in its announcement of the move that, barring an increase in its "comfort level," Fairfax's ratings will likely be downgraded and/or withdrawn within the next several weeks.

"A withdrawal will occur if Fitch determines that the company's disclosures do not allow for a reasonable assessment of the financial health of Fairfax as a whole," the agency said.

Fitch said it believed that Fairfax may have already averted a liquidity problem in the second quarter, when it was provided with $200 million by Odyssey Re, which it controls a majority of, in an "arm's length" fee-based transaction.

"If such an 'arm's length' transaction could not have been arranged," the agency said, "Fitch is concerned whether Fairfax's cash balances would have been largely depleted if it had to cover the $200 million funding requirement."

Additionally, Fitch said that Fairfax's public disclosures are becoming increasingly opaque. "While Fairfax's financial disclosures have become more voluminous over the years," Fitch said it "has been concerned by an increasing lack of specific and readily available disclosures."