Hoodlum

my understanding is that there are significant tax losses that can now roll up to Fairfax since they took them private. They just need to break even on earning going forward.

+1 Nice find!

I was interested in seeing how long they have to take out the minority owners of their subs. While the Brit minority position was bought back in December, I decided to go back to the 2023 annual report to see how Allied, Brit and Odyssey compared in this regard. Fairfax had until 2027 to purchase the Brit minority position but I suspect they had to do this in December, before the splitting of KI Insurance from Brit. Fairfax needs to acquire the remaining 16.6% Allied World position by next year and so they are likely next. The exact timing will be dependent on how they want to prioritize stock buybacks this year, specifically as it relates to closing out more of their TRS position. Comprised of call options on the non-controlling interests in Allied World, Brit and Odyssey Group, which expire in 2026, 2027 and 2029, respectively. At certain dates subsequent to expiry of a call option, the non-controlling interests may request an initial public offering of their shares, the structure, process and timing of which will be controlled by the company; in certain circumstances, the non-controlling interests may request a sale of the respective operating company to a third party.

oops. You are right. I should have looked at that more closely. Still not seeing anything for the 60.

Fairfax was NOT added to the index. https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-889012339.html

Jenn has a new role at Fairfax. It will be interesting to see how this new role evolves. https://www.fairfax.ca/press-releases/executive-announcements-2025-03-07/ We are thrilled that Jenn will continue with Fairfax by serving in her new role as Chief Business Officer where she will work on key strategic initiatives designed to support our growth, while ensuring her successor, Amy, is well supported in her transition. Edit: A bit more from the Annual report Jenn’s experience will be a huge asset as she transitions into a new role at Fairfax, working with Peter Clarke and the other executives of Fairfax on key strategic initiatives designed to support the company’s growth and increased complexity, while ensuring her successor, Amy Sherk, is well supported in her transition.

It looks like the AGT Rail sale did go through in January, likely just before the Tariffs became more known. It doesn't look like there will be a dividend but instead money will be used to pay debt. "In early 2025, AGT completed another important step in their transformation by selling its Canadian rail and infrastructure assets for proceeds of Cdn$192 million. The deal provides AGT with the use of the rail assets under a long-term supply agreement. The sale proceeds will be used primarily for debt reduction and optimization of the company’s capital structure. These developments have led to stronger free cash flow and value creation. AGT’s global pulse sourcing and processing capability is also expected to become increasingly valuable as the total addressable market for plant-based protein expands. Fairfax’s 66% stake in AGT is currently carried at an enterprise-to-EBITDA ratio of 6x"

Quess Corp received approval for their demerger today. The 3 separate entities are expected to be listed within 2 months. https://m.economictimes.com/tech/technology/with-nclt-nod-in-place-business-services-provider-quess-to-list-new-firms-on-exchanges-in-two-months/amp_articleshow/118766297.cms

I still think AI is behind it. They can’t seem to make up their mind if Fairfax or Constellation is among the top 3 overvalued Canadian companies. I can’t understand how any investor would rely on their analysis. https://www.morningstar.ca/ca/news/261728/top-3-overvalued-canadian-stocks-.aspx

thanks @nwoodman for putting that together. I noticed that FCL paused the Canola crush facility in January due to political uncertainties https://www.fcl.crs/news-reports/news/article/FCL-pauses-projects-related-to-proposed-Integrated-Agriculture-Complex Also, the rail acquisition by GCM Grosvenor which was expected to close in late q4/q1, seems to be hung up at the government approval stage. The optics would look very bad if the Canadian government would approve this right now. So it would not surprise me to see this get cancelled or delayed.

I found it interesting that RBC posted a small writeup on AGT Foods this week. I wonder if Fairfax is considering an IPO at some point after taking it private 6 years ago. AGT had $3B in revenue last year. https://thoughtleadership.rbc.com/food-first-how-agriculture-can-lead-a-new-era-for-canadian-exports/ How to be a global champion AGT Food and Ingredients—The value of processing clusters Pulses and plant-based product supplier exports to more than 100 countries. Primary markets: Türkiye, Algeria, Iraq and the U.S. Growth markets: India, South Africa, Saudi Arabia, and United Arab Emirates. Export strategy: Its ability to handle and process high volumes of pulses grown in close proximity to processing facilities in western Canada has boosted its export ambitions. AGT has an integrated supply chain from farm gate to global distribution, and has expanded its ownership into export-oriented packaged foods and value-added processing infrastructure and bulk and containerized freight handling and transportation. International business has also been driven by expanding offices and processing capacity in Türkiye, Kazakhstan, United Kingdom, Australia, Europe, U.S., South Africa, and India. Growth strategy: Acquisitions and new capacity to expand processing within production clusters have enabled AGT to become a global exporter of value-added pulse and durum wheat food products. It has also positioned AGT to go from a buyer and exporter of commodities to retail products with over 21 facilities across Western Canada. AGT is investing and engaged in research and development to create novel products and processing systems.

Huron University gets $10M donation to launch Canada’s first Fairfax Centre for Free Enterprise https://www.ctvnews.ca/london/article/huron-university-gets-10m-donation-to-launch-canadas-first-fairfax-centre-for-free-enterprise/ “We are making a statement: that we believe in Canada, and that it can be the land of opportunity for everyone, and that the free enterprise system that has helped to make the country what it is today should be recognized, maintained and cultivated for the benefit of all Canadians. We believe that Huron University can help lead a revival of the entrepreneurial spirit that is key to our shared future,” said Prem Watsa, chairman and CEO of Fairfax.

Ahh. That makes sense. So there will be some benefit for Fairfax to wait for the most opportune time to do the IPO. Does Fairfax have the final say on the IPO timing, based on their 50.6% Voting share?

Thanks @nwoodman for this detailed review of Ki Insurance. For some reason I though I had read that Fairfax owned 40% of Ki Insurance, instead of the 20% ownership. I will need to lower my expectations on any Book impact once we do see an IPO for this.

I think one day we and the market will be talking about KI insurance as the big surprise, similar to how the sale of the Pet insurance business surprised us. Except KI will be on a much larger scale.

I agree that it was the timing during Covid that makes this look so amazing in hindsight. We will likely see a similar situation with the Odyssey Re deal with OMERS. I suspect Fairfax is also paying relatively little to hold the TRS on their shares, as that was also done during the same period. it is quite amazing how Fairfax took advantage of the short low interest period during Covid, but also recognized that interest were going to jump and prepared for that as well. Not only in relation to their long bonds but also likely realizing how inflation and higher interest rates was going to drive growth quickly. A mini book could be created from these short years, once all is said and done.

I am beginning to think his analysis is AI generated.

Peter included this comment as a part of his presentation. I wonder if Fairfax is now leaning more towards higher constant interest rates and so may not lock in to additional long bonds until they become even more favorable. The possibility of a long period of US tariffs could also be fueling this thinking. Also, if rates stay where they are, which we think they might, interest income could be even higher over the next few years

I found this from the 2021 Annual Report. Fairfax now has the option to reacquire the minority interest in Odyssey Re. The company has the option to purchase the interests of CPPIB and OMERS in Odyssey Group at certain dates commencing in January 2025.

Yes, this is becoming a new tailwind that is not being accounted for in analyst estimates.

@Viking Would Blizzard Vacatia also fall under ‘non-insurance consolidated companies’. If so, I would presume Fairfax's investment of $835M for 50% equity would get Blizzard Vacatia close to the top 5 in this group and would add to this groups earning in 2025.

It looks like we will need to wait for the conference call to find out if there was any material change in bond duration.

Could there be Employee share purchases in Q4 that need to be accounted for?

I see the combined losses on Hurricane Milton and Helene was $304M. Less than what I expected and it would seem less than the industry as a whole based on prior hurricanes. It looks like our risk models are holding up well compared to the competition.

We did see some info on both of these previously but now we see the details of the transactions. It will be interesting to hear more about Blizzard Vacatia as that is a notable investment and at 50%, a significant share of the company. I wonder what the dividends would look like in Q1.