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  1. I largely agree with your sentiment although I find some relief in the fact we're still one year away from end of the 2nd perf fee measurement period. However, it doesn't look good especially after the losses reported in IIFL and NCML assets. Next 3-yr perf fee measurement period ends 12/31/20 so while the carry has not crystallized it still reported as a liability on the BS showing $50M value as of 12/31/19. When you put the $50M in the context of being used to incentivize the management of FFXDF sitting within FFH holdco as the GP then it is easier to see how quickly this becomes very material. Now to Prem's credit, Fairfax is the only company I have seen report share dilution impact in such a transparent and clear way in the financial statements. They literally include a table in stmts (pg 93 of 2018 report) showing the per share value waterfall assuming no perf fee compared to actual post-performance fee dilution. I love this!
  2. If BRK fell 50% tomorrow, how much do you believe Buffett could reasonably allocate to share repurchases assuming he is not willing to risk the solvancy of the insurance segment? It may not be as much as many think with the figure likely less than $50B but above $25B. Obv it is meaningful if valuation is cut by 50%, but likely <20% accretion to BVPS even under these scenario. Unclear, if market re-rates the equity due to the resulting boost in the assets to equity leverage ratio. et. Either way, the limited repo activity and the historically low leverage ratio is signaling his view the BRK equity is close to fair value. Buffett use to demand 50% discounts to IV and I realize the hurdle is much lower these days but I believe the reported 15% discounts being discussed is not registering as firesale in his eyes.
  3. Some have mentioned the debt but anyone have quality view on its development? I've seen analyst's call them out on the call as it tests the top end of the mgmt targets. They trumpet the cash balance but that is dwarfed by the insurance liability. Relative to 1H 2019 cash claims paid, it implies about 1 year worth buffer. No real allowance or a major CAT event, I think. Compared to MKL and BRK's insurance segment appears much more aggressively capitalized. Thoughts? Thanks
  4. Closer to 1.1x when accounting for the $800 million in gains from fare value adjustments to investments in associates. Maybe even a little less when considering unrealized gains in investment portfolio since end of March - probably in the ballpark of $150-200M overall. Yeah I can definitely appreciate that adjustment but I can see an argument to also adjust for the goodwill & intangibles which represent ~45% of common equity. I found FFH has a relative high level of these intangible assets. On a P/TBV FFH aint that cheap compared to peers. @ fairfacts you are correct about the Allied CR
  5. appears to be solid print across many fronts. my big concern was allied reserve developments and it looks like small redundancy and 94% CR for Q. At $560/share implies 1.2x Q1 BVPS so needs strong results to support valuation but not very demanding compared to peers imo
  6. Is a dinner going to be organized by COB w/ Prem attending for charity? I heard it has been organized in past years. I would like join and not sure who to contact.
  7. I enjoyed the letter thoroughly and though not my favorite it complements the 60+ annual letter collection well (includes BPL in count). The subtle implication throughout the letter is the almost unrealistic level of capital that will need to be deployed over the next 10 years in order for BRK to have a reasonable shot of beating the market. I think it is becoming clear that a more robust capital return will need to be implemented so as not to hurt investors. Do the simple math and to see the huge challenge that besets the organization at a time when stability will be tested with a likely leadership transition. In order to compound book value at just 10% implies >$550B will have to be deployed over next 10 years which is 1.6x more than has been deployed in the previous 53 years. At the current P/B this will yield just a 6% IRR assuming P/B is 1x exit. He is almost telling us to read between the lines of what he said about why investors are often left frustrated with money managers besides fees. It is b/c gross returns often suffer as capital levels become larger and larger and the opportunity set remains the same size. The 53 year BRK record is amazing delivering a 20% IRR but look at the past 10, 15, and 20 year record on the BVPS growth and stock return. BVPS grew 9%, 11.5%, and 10.6% for 20Y/15Y/10Y periods it is no wonder the stock has delivered 8.9%, 11%, and 8.1% IRRs, respectively, over the same period. Yes it is ahead of the market in by a slim margin in the longer periods but I think this frustrates Buffett more than anyone can imagine. He is the guy that use to crush the market and he knows the margin of outperformance will only grow narrower over time, which at a point will only guarantee in line performance at best. Btw, 20 year BVPS growth and stock returns match incremental returns on capital given BRK as deployed about $293B which generated about $32.5B in incremental AT earnings or 11.1% ROIIC. Somehow the math always works out in the LT and Buffett understands this better than everyone.
  8. Mgmt has implied they are comfortable with BS leverage so against this assumption you would expect more repo activity unless the expected return on other investments is that much higher. At current levels, I see a 14% yield on cost for repos that delivers a 19% IRR if you re-rate to 1.5x assuming the capital base earns a AT 15% ROE. How many investments offer that level of returns in this environment when adjusting for the risk? Not much risk in repurchasing your own stock.
  9. One data point from the release that continues to bug me is the repo activity. On the Q3 call Prim made a point to say the deviation between IV and book had never been wider in the 32 year history of FFH. He then highlighted the Q4 (subsequent to period end) activity on the call noting 166k shares were repurchased in October for $87M. So basically I thought we were going to see bigger number than we did because just 18k shares were purchased following the Q3 call bringing the Q4 activity to 184k shares or $94M. Given the big AT cash flows from the asset sales, this level of repo I found disappointing because what better message to send to the market. Also on the 08/24/17 asset sale call he explicitly stated "the first use of that (cash) will be our stock". Any thoughts?
  10. Viking your comments and obvious experience with FFH is very much appreciated. Based on Prem's comments from the Q3 call, I am hoping to see a high level of repo activity once results are released, especially, given the asset sales have closed. Im paraphrasing but he basically said differential between book value and IV is at the widest level in his 32 years at the company. Secondly, I am focused on Allied adverse reserve developments though Prem said it was a one-off in Q3 results. Lastly, a firmer guide around the hurricane CAT losses and pricing outlook.
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