Viking

spek, it is possible that the Fairfax stock price may carry a permanent hold co discount moving forward given the reasons you state above. We will see. What i do know is Fairfax’s stock is very volatile. Wicked drops and wicked moves higher. I think you are going to earn an easy 10 or 15% over the next 4-6 months on your purchase of shares below US$400 on Friday. I backed up the truck last fall and have sold and bought shares (around a core position) a couple of times since then. I have been adding to my position during this recent decline. And i will lighten up when we get the next spike higher. So i am happy to hold a core position given i like how the company is positioned today. And i am also happy to take advantage of the volatility in the stock by flexing my position up and then back down. On complexity: Yes, Fairfax is a complex animal. I do think they have made some moves in recent years that have helped. One significant example is selling Riverstone/runoff. Was anyone able to value this part of Fairfax? Or build it into their valuation of the company? Other recent examples: selling APR to Atlas, IPO of Boat Rocker, IPO of Farmers Edge, reverse takeover of Horizon North by Dexterra. Publicly traded positions are much easier to follow and value for outside investors. But, i completely agree, Fairfax is very complex and this does make it very difficult to do a ‘sum of the parts’ kind of valuation. ‘Questionable execution’ will always be a watch-out for me. While i remain encouraged by what i have seen from Fairfax management over the past couple of years (in aggregate) i also have my eyes wide open. I think the core driver of the current very low valuation of the stock is very poor past performance. Fairfax’s performance (BV, stock price) has been terrible for 7 or 8 years. It will take more than 9 months of outperformance to win back support from the investment community. What is it going to take to get Fairfax shares more fully valued? Improved performance. Over a couple of years (not one or two quarters). If Fairfax is able to string together 2 or 3 years where they increase BV by 12-15% my guess is the stock price will pop. Earnings growth and multiple expansion is a beautiful thing for investors. So while the performance at Fairfax the past 3 quarters has been stellar we need to see this performance sustained. The other factor that will help the share price are stock buybacks. Fairfax has been ‘cash poor’ the past few years. And during the pandemic rising debt levels jumped further. The Riverstone / Brit sales have helped Fairfax bring debt levels down. The insurance subs look pretty well capitalized given their earnings and the performance of their equity holdings. And as we come out of the pandemic (improving US and global economies) this should lead to improving cash earnings at Fairfax. Higher equity markets will also allow Fairfax to start to harvest some equity positions. And what will they use growing free cash flow for? Stock buybacks look like a pretty easy decision. Here are some other thoughts: 1.) RFP: what you do with Resolute really depends on what your view is of lumber. And this depends on where you think new home construction is going in the US over the next 5 years. Another factor is what the opportunity is for Resolute to sell some of their non-lumber operations. Bottom line, i understand why Fairfax may want to wait a little longer and see how things play out. (i.e. are we in the early days of a commodity super cycle?) 2.) Stelco: same as RFP 3.) Africa / CIB (Egypt) / International insurance operations - I think John Templeton was a mentor to Prem and the Fairfax team in the earlier days. This influence may partly explain what we see at Fairfax with some of their international insurance and equity holdings. Lauren Templeton (great niece of John) is on Fairfax’s board. Sanjeev might be able to provide a little more insight here. - Fairfax Africa WAS an absolute train-wreck for shareholders. We will see how the partnership with Helios works out. I am neutral on Helios (not a concern nor do i expect big things…). I don’t view it today as an issue. - CIB: although the bank has performed well over the years, it has been a poor investment for Fairfax (driven by currency devaluation driven by political situation). And it is a big position (US$280 million Sept 30). Continued ownership of this position is a head scratcher for me. 4.) in terms of the core insurance businesses Brit is the watch-out for me (even before the CEO going on leave). Fairfax has owned it long enough that i am not expecting and big negative surprises. I am just not sure how profitable the platform can ever become. The good news is Fairfax has done a good job over the years of winding down businesses that do not meet their underwriting standards. I think we also need a few more years of results to see what kind of a business Allied will become. No concerns; just not sure. 5.) in terms of the international insurance businesses, Fairfax has had outstanding success in Asia (First Capital was sold for $1.6 billion). What i like is they appear to be implementing pretty good underwriting discipline into each of the various international operations. The operations in aggregate were writing at a CR under 100 in 2020. Hopefully this continues moving forward. Bottom line, this collection of assets has moved from ‘red flag’ to ‘monitor closely’ for me. These are clearly long term plays for Fairfax.

Gulf Insurance Group (GIG) is an under the radar asset for Fairfax. Fairfax owns 43.6% stake - that is what is currently posted on the Fairfax web site - paid $209 million in 2010. Fairfax is in partnership with KIPCO (they own more of GIG than Fairfax does). Sept 7, GIG closed its significant US$475 million acquisition of AXA’s/Kanoo’s MENA operations; i think they paid < 10PE. GIG certainly looks well positioned in the region after this acquisition. GIG is traded on Kuwait stock exchange (not very liquid given significant size of Fairfax and KIPCO positions): - share price = 0.888KWD = US$2.94 - shares outstanding = 284.57 million - market cap = US $837 million - Fairfax position value (43.6%) = $365 million ——————————-## Gulf Insurance Group CEO Khaled Saud Al-Hassan said in an interview with “Al Arabiya” today, Tuesday, that the acquisition of the entire stake in “AXA Gulf” by Gulf Insurance is part of the group’s strategy to increase revenue and its presence in the Arab region. He added that Gulf Insurance is currently present in 11 countries and its revenues totaled $ 1.5 billion in 2020, and the acquisition is part of the board’s policy for regional expansion and leadership in Arab insurance markets. operations and net profit. Gulf Insurance Group CEO explained that Gulf Insurance Group is present in countries including Egypt, Algeria and Turkey, as well as other Arab markets, and these countries account for 50% of the group’s total revenues and Kuwait accounts for the remaining percentage. Khaled Saud Al-Hassan indicated that the acquisition of AXA Gulf will increase the group’s revenues to $ 2.5 billion, making it the largest player in the Arab insurance market and is present in 13 countries, adding Qatar, Oman and Abu Dhabi after the acquisition, in in order to serve customers and shareholders. - https://asumetech.com/gulf-insurance-in-al-arabiya-the-acquisition-of-axa-brings-revenues-to-2-5-billion-dollars/ ——————————- Overview of GIG before the acquisition: http://www.gulfinsgroup.com/Home/Investor-Relations/Investor-Presentations

Just came across this news story. Perhaps partially explains the weakness in Fairfax shares today. Brit certainly has had a tough couple of years. Hopefully the CEO is ok. https://www.insurancebusinessmag.com/uk/news/breaking-news/brit-ceo-takes-leave-of-absence-interim-ceo-appointed-311531.aspx

I have updated my spreadsheet that captures Fairfax India's publicly traded equity holdings. In Q3 the publicly traded holdings were up nicely... about $150 million. With 142 million shares outstanding this will add increase BV by $1.00/share. At end of Q2 BV for Fairfax India was $19.26. At the end of the dutch auction the reduction in share count increased Q2 BV to $20. So my guess is Q3 BV for Fairfax India will be north of $21/share. With shares trading at $13.10 today my guess is P/BV is approaching 0.60 I do not capture the impact from the completed Chemplast Sanmar IPO. I am going to wait and get the details when Fairfax India reports Q3 results. My guess is the IPO should increase BV higher. Chemplast Sanmar went public at about INR 536 and shares increased 14% to 612 on Sept 30. Proceeds from the IPO were already used to reduce leverage at Chemplast Sanmar which is nice to see. We also with the completion of the partial sale of Anchorage to OMERS we will see how it flows through results. And we will likely get a little more information on Fairfax India's newest acquisition Maxop Engineering Corp. Bottom line, the management team at Fairfax India has built a pretty nice collection of assets that are performing very well. PS: tab 1 in the spreadsheet also captures Fairfax's octopus of assets for those who did not see my post on the Fairfax thread Fairfax Equity Holdings Sept 30 2021.xlsx

Attached below is an estimate of the changes in Fairfax's stock portfolio for Q3 (to Sept 30). The goal of the spreadsheet is to get a general estimate of what is going on under the hood. Not all of Fairfax's holdings are captured in the spreadsheet so reported results will be different. After two blow out quarters, in Q3 the mark to market holdings are down in value about $270 million = $10/share (about 26 million shares outstanding). The Associate & Consolidated equities are down about $110 million = $4/share (not captured in earnings). So in total all the positions captured in the spreadsheet are down about $380 million = $14/share. This is about a - 3.3% change in the portfolio I track. One item not captured in my spreadsheet is Digit; when it is approved the revaluation will result in an increase of $46/share for Fairfax. Not sure if we will see this in Q3. Big movers: Blackberry - $250 million Farmers Edge - $140 Eurobank - $80 FFH TRS - $65 Atlas + $120 Quess + $65 Foran Mining and Ensign Energy have been added. As per usual, please let me know if you see any big errors Fairfax Equity Holdings Sept 30 2021.xlsx

Regarding the recent Chemplast Sanmar IPO can someone help me out with what the total share count is and what Fairfax India’s % ownership is? i have tried to figure it out and i must be a little brain dead because i am striking out. I want to add it to my spreadsheet that tracks all the different Fairfax India holdings

Great discussion. Yes, for investors buying shares today in the low $13 range there appears to be lots of upside. With Q2 BV (using post buyback share count) at $20 shares are trading today at a 35% discount; hard to see this getting much larger (although nothing would surprise me). My preference is to own the shares of Fairfax India through Fairfax. However, i do have a trading position in Fairfax India and i have been in and out of the stock a couple of times so far this year. I bought again this week at $13.30. Building on one of Petec’s earlier comments, i think Fairfax wants to grow the size of Fairfax India. I think Prem wants to invest more heavily in India and Fairfax India is the vehicle. But how do you raise significantly more capital to accelerate your growth with the shares trading at $13? As ICUMD mentioned, liquidity is a big issue. I experience the challenge buying and selling the stock (lack of liquidity). So the stock is likely off limits for most large funds. So they really do need to materially increase the float if they expect to attract the big money. The question is how do you do that with the stock trading at $13? And buybacks only make this problem worse. The management team at Fairfax India must also be going a little stir crazy. They made a number of purchases 5 and 6 years ago. They then spent a few years getting the holdings positioned to succeed. Most of the companies they own are very well positioned, with strong management teams. They are executing well and business results are very good. And their stock prices of the various publicly traded holdings are up significantly in 2021. My guess is the management team at Fairfax India is ready for more. Perhaps this is where an Anchorage IPO comes in to play. Perhaps Anchorage also becomes the vehicle to attract a significant amount of new capital. Perhaps the plan with Fairfax India is to simply let it chug along. Continue to buy back stock at a significant discount to BV. Fairfax will see its ownership of Fairfax India continue to increase fairly significantly every year. Chug chug chug…

I think part of the plan to get Fairfax India trading close to BV is to get more of the private holdings trading on public exchanges via IPO’s. - Chemplast Sanmar done - Seven Islands in process (still i think) - Anchorage in 2022 (timing correct?) If these companies all become publicly traded then most of Fairfax India’s holdings will be publicly traded and it will be very easy to understand and calculate book value. ———————— Fairfax India has a big decision to make with where to invest its free cash flow. The stock is so cheap buying back the stock is an easy decision. However, the management team has a very good track record with their equity investments. Not surprisingly we are seeing them do both. My guess is they would much prefer to grow the company (not shrink it).

Great summary. Thanks for posting

Fairfax India has had a very active 2021. They had two sales booking large gains. They made two small acquisitions with one being a brand new position in a new industry. Completed a relatively large share buyback. Former private holding completed IPO. Another private holding is looking to go public via IPO. The Anchorage sale is informative. One of the theories for why Fairfax India is trading so far under BV ($13 vs $20) is no one believes the valuation of BIAL that is reflected in BV. Fairfax India now owns 10% less of BIAL and was able to monetize the position at full value. Yet the shares continue to trade at $13. I wonder if Fairfax cares about the very low price of Fairfax India. I wonder why someone like OMERS does not approach Fairfax about taking it private. Great way for a big pension fund like OMERS to get exposure to India; solid management; great assets; cheap price. Maybe they go 50/50 with Fairfax ———————— Summary of Fairfax India activities: 1.) April: sale of Privi for $163 million; gain was $134.6 million. 2.) April: increased stake in Fairchem Organics - added 2.331 million shares; cost $18.1 million; ownership increase from 48.8% to 66.7% 3.) Aug 11: completion of dutch auction - 7.047 million shares repurchased at cost of $14.90/share ($105 million) - buyback increased BV to $20/share (was $19.26) 4.) Chemplast Sanmar IPO completed - proceeds used to reduce debt which is very high; another example of getting a holding in the proper position to succeed moving forward. - this is a significant position for Fairfax India; will now be much easier to value the position 5.) Sept 16: Anchorage sale completed for proceeds of $129 million - effective ownership of BIAL reduced from 54% to 49% 6.) Sept 16: new investment in Mapox Engineering Corp - $30 million for 51% in Q4; $36 million for 16% in 2H 2022 pending: 7.) Seven Islands IPO I think there has also been mention of a possible Anchorage IPO in 2022. Something to watch.

Page 10 of FFH 2020AR has ‘carrying value’ of $9.66/share. Q2 BV (adjusted for share buyback) is $20. Stock is trading at $13.

My guess is inflation will be a hot topic on Q3 conference calls. Transitory or not? Just another reason for the current hard market to last longer. in terms of Fairfax i am not sure how inflation will impact them. The insurance side of their business has developed into a real strength. And given their investment positioning with their bond portfolio (very low duration) they see higher interest rates in the future (with rising inflation being the leading cause). The size and makeup of the equity portfolio may also serve as a partial hedge of sorts.

Glider, yes, it will be interesting to see where the CR goes in the next few years for Fairfax. In the current quarter Fairfax is likely now in the third year of getting price increases (rate on rate on rate). However, it will take time for written premiums to become earned. And if loss picks are more conservative this will also delay the benefits of current pricing flowing through to reported results - some of the benefit will come via reserve releases in future years. Significant top line growth will also lower the expense ration (and result in lower CR). Every quarter from here that we continue to get strong top line growth is just gravy. When doing some back reading i was surprised to learn that Fairfax had a pretty spectacular 4 year run consistently posting a CR in the low ‘90’s: - 2013: 92.7 - 2014: 90.8 - 2015: 89.9 - 2016: 92.5 The driver if these stellar numbers was Odyssey Re, who posted an average CR under 85 over these 4 years. I was not following Fairfax closely at the time so was not aware what they had accomplished. In a recent report RBC also stated that Fairfax tends to write more long tailed business than its other insurance peers. Long tail business usually earns a higher CR. However, regulators allow the investment portfolio of long tail business to have a higher equity weighting. Not sure how accurate RBC’s comments are.

Given the recent large share buyback by Fairfax India i was wondering what Fairfax’s ownership position now sits at. Answer? 36.6% I am including all Riverstone UK shares in this calculation. Fairfax India certainly has been a very good investment for Fairfax. Over the past 6.5 years Fairfax India is built an outstanding collection of companies and book value has been growing nicely (sits at US$20 with new share count). Fairfax has seen its ownership % of Fairfax India increase significantly from 28% to 36.6% today = 31% increase in 6.5 years. And as Fairfax India continues to buy back shares (likely aggressively given how low the stock price is today) and pay Fairfax its performance fee in shares we should see Fairfax’s ownership of Fairfax India top 40% in the next couple of years. ———————————- Math: Fairfax owns 52.104 million share of Fairfax India. As of Aug 2021 Fairfax India had 142.277 million shares outstanding (after dutch auction). Dec 31, 2019 Fairfax owned 51.558 million shares of Fairfax India (page 115 FI AR). In March of this year Fairfax earned 546,000 additional shares (3 year performance fee). ———————————— Here is an approximate summary of the approximate step up in Fairfax’s share ownership in Fairfax India.: 1.) Back in Jan 2015 (inception) Fairfax owned 28% of Fairfax India (30 million shares). 2.) Jan 2017 capital raise Fairfax boosted their stake to 30.2% (+12.34 million shares). 3.) 3 year performance fee payment to Dec 2017 (paid in shares) boosted share to 33.6% (7.664 million shares). 4.) 3 year performance fee payment to Dec 2020 = 546,000 shares.

Agreed. Energy is perhaps instructive.. only 9 months ago nobody wanted to own energy. Broken forever. Complete dog with fleas. The narrative today around energy is completely different. ‘Strong fundamentals’. And we could be shifting to the ‘castles in the air’ phase in the coming months. Now everybody loves energy! i have no doubt that as long as Fairfax continues to deliver solid results the stock price will respond eventually. It is just coiling further back like a spring. Mr Market just hasn’t decided its time has come yet. This is just how the stock market works. The key now is patience. The big money is made by sitting tight and doing nothing

The Greek PM did a 10 minute interview on Bloomberg a few days ago. Very smart individual. Greece has lots of tailwinds (competent, pro business government with a majority being just one). Given its size and low very valuation, Eurobank should be a strong performer for Fairfax’s equity portfolio for the next few years.

Well it looks like the US 10 year bond yield is starting to move again. It is trading at 1.48% up from 1.3% in the past week alone. It will be interesting to see how high we go from here in the coming months… 1.75%? 2%? Fairfax’s bond portfolio is positioned extremely well for higher rates (given its VERY short average duration). Higher rates will cause a small hit to BV (on the few longer dated bonds they hold). However, as rates move higher they will have the opportunity to invest some of their portfolio (earning very little today) which will increase interest and dividend income in the future. I do not expect Fairfax to do much with its bond portfolio until rates are much higher than they are today. Bottom line, higher interest rates are a tail wind for Fairfax. The second and bigger (in the near term) impact on Fairfax from higher interest rates is its impact on the equity portfolio. Higher interest rates usually causes a sell off in big tech (with massive market caps) and this money shifts into smaller cap stocks, many levered to the reopening trade/value/emerging markets. So we may see another large increase in the value of Fairfax’s equity portfolio in Q4. The stars are aligning for Fairfax: 1.) hard market in insurance pricing (yes, late innings) 2.) higher bond yields creating opportunity to reinvest 3.) continuing / significant increase in value of equity holdings 4.) Digit IPO in 2022 or perhaps 2023 (not that far away) 5.) opportunity to repurchase shares with stock trading at historically low valuation Now let’s see what actually happens ————— PS: i wonder if we are not seeing the beginning of the re-opening trade Act 2. This Act anticipates an increase in global economic activity (not just the US) as global vaccination rates increase and we get to the other side of the Delta variant.

Glider, Digit certainly continues to be a head scratcher for me (lack of impact of Fairfax stock price since the news came out). The only think that makes sense to me is Mr Market does not believe the higher valuation is valid. So it is ignoring it. What is interesting is the whole Indian stock market is on a tear. What is going on with Digit is not out of the ordinary. If Digit is able to execute an IPO in 2022 i think we will start to see it reflected in Fairfax shares. Bottom line, Digit continues to grow its business very well and is just another of the many tailwinds for Fairfax. ————————— India could surpass the UK as the world’s 5th largest stock market by 2024, Goldman says - https://www.cnbc.com/2021/09/21/goldman-sachs-india-start-ups-ipo-report.html - Indian start-ups have raised $10 billion through IPOs so far this year — more money than was raised in the last three years, Goldman Sachs said in a report dated Sept. 19. - The pipeline for future public listings is expected to remain robust over the next two years, the investment bank said in a new report dated Sept. 19. - Based on Goldman’s calculations, as many as 150 private firms could potentially list on the stock market over the next 36 months, adding as much as $400 billion of market value.

Here is my take: 1.) my guess is Prem will not be buying more shares. A year ago, in the teeth of the pandemic, he sent the market an important signal: his baby - Fairfax - was fine. Not necessary today. Yes, he will make a shitload of money from that purchase… but the guy is already worth billions… does anyone think he really needed to buy more Fairfax shares? 2.) the TRS was purely being opportunistic at a time Fairfax was cash starved. My guess is it is also a short term position (less than 3 year hold). They are no longer cash starved so why add to TRS? And I think the TRS position is weird; analysts don’t know what to make of it. Companies don’t do these sorts of things given the optics/outsized reward to juice your stock price in the short term. Now do i think Fairfax will do anything unethical? No. Sometimes that are too creative/smart for their own good. - selfishly i like the TRS because it HIGHLY motivates Fairfax to perform actions to get a higher stock price (which is what i also want). 3.) buy back shares on the open market: YES. Prem has telegraphed many times that big buybacks are coming. I believe him. The issue is timing… when? Priorities for cash right now are: - take advantage of hard market for insurance: it looks like we might be in the later innings of the hard market (perhaps mid to late 2023 end?). Earnings at insurance subs is solid; investment marks are VERY favourable. This suggests the insurance subs have all the $ they need today to take advantage of the hard market. - reduce leverage: DONE. Recent sale of Riverstone UK and 14% of Brit delivered proceeds of $1.075 billion. Credit line has been fully repaid. Hold co cash is at $1.7 billion. - stock buybacks are kind of like the next big obvious thing on the list of things to do with excess cash. The problem is Fairfax is not flush with $1 billion in extra cash today. Borrowing the money is not an option (would increase leverage). We are also in the midst of hurricane season. And Sept Oct can be ugly months for financial markets. So to get a big buyback Fairfax needs to do something that would bring in a big chunk of cash. So my guess is we do not see a big buyback until 2022. If we get a melt up in stocks in Q4 perhaps Fairfax starts to selectively harvest some gains. Or perhaps Fairfax does something totally unexpected… like when they sold First Capital or Riverstone. A very under appreciated part of Fairfax is how creative they can be at times. So bottom line i expect a big stock buyback in the next 18 months (min 5% of shares outstanding) and i have no idea where they will find the money to do it 4.) reduce leverage: as stated above done with Riverstone/Brit sale. 5.) share price agnostic: perhaps the most likely outcome is we see Fairfax post good earnings and beginning in Q4 start taking out 1% of shares each quarter (at a cost of about US $110 million). The slow and steady approach. 6.) spend excess cash on a big acquisition (stubblejumper added this one): Prem has said pretty clearly big acquisitions of new insurance companies will not be done; let’s believe him on this one. Fairfax has made a number of $100 million ‘ish investments in 2021 and we will likely see this continue into 2020. - they do want to buy the 30% of Allied they do not currently own; i would be surprised if this has to happen in the next year or two. The bottom line, as per usual, Fairfax has lots of great USES of cash. What i like is they are finally getting to a stage where we should also start to see increasing SOURCES of cash.

Blackberry is in the sweet spot right now in so many verticals. 1.) pending patent sale. How much? No idea. Could be big. Or not. Could close. Or not. 2.) are electric vehicles a big deal moving forward? I think so. Blackberry is aligned with 24 or 25 EV manufacturers (‘working’ on the 25th). Is this a big deal? No idea. But it could be. 3.) Is the car as an electronic device important? Is software to manage the information and use cases of a car as an electronic device valuable? Hello Ivy. Probably very valuable. But not sure. 4.) is cybersecurity important? I think so. How important? Super duper important. What inning are we in? Two? I have no idea what Blackberry is worth today. I do know that it is doing business in many crazy important verticals. That are in the very early innings of their life cycle. All companies in these verticals are valued at nosebleed levels; they are valued at future potential and Blackberry has that in spades right now. What i don’t understand is why someone has not taken them out yet. One of my concerns with Blackberry is if Prem wants to see it stay Canadian (and the easiest way to make that happen is to keep it under Fairfax control). Or perhaps there are national security issues. If so perhaps the plan is to sell it in digestible pieces starting with the patent portfolio. Bottom line, if they start to get more traction (growth) with EV, Ivy and cyber the stock will look cheap at US$10. Does anyone know what the rumoured selling price is for the patent portfolio that was mentioned on the call? PS: i apologize if i am sounding like a Blackberry bull… it is happening by accident

Xerxes, at the time Prem bought shares (June 2020) there was NO visibility on vaccine’s: efficacy level? When they would be approved by FDA? When they would be available for the public? So it was pretty much impossible to forecast economic growth moving forward. We all saw the shit show that played out in countries like Italy and Iran (or China). Lock downs were the order of the day. In Oct 2020 Fairfax was trading under US$270 a share; well below the price level Prem had bought shares at. It was not until November that we got the crazy good news from Pfizer and Moderna. And then ‘value’ stocks (Fairfax and its equity holdings) rocked - the reopening trade was born. When Prem bought Fairfax in June 2020 you have to value Fairfax with the information available at that time. And, yes, you value Fairfax today with what is KNOWN today; and we know we have vaccines that are very successful in combatting the virus. So Fairfax’s current business should be valued much, much higher. And its growth potential is MUCH higher today. Given what was known at the time of purchase (then and now) i think Fairfax is much cheaper at todays prices

Stubblejumper, my read is Fairfax has has one catastrophic bad investment that cost past shareholders something in the range of $4 billion - their shorting strategy. 2020 saw the last hit as they finally closed out their position. This ‘position’ resulted in Fairfax posting pretty terrible investment results for the 7-8 years to Dec 31 2020 (in agreggate). And this was the direct cause of minimal growth in book value over the same time frame. And, of course, the stock price has significantly underperformed as a result. If we take the losses from shorting out of the equation i am not sure their investment results would come in as terrible - perhaps a little below average. We now know the shorting issue is no longer an issue (for those buying the stock today at US$420) so we can take that issue off the table. But I think there is much more change going on in Fairfax with how they are managing and looking at their portfolio of equity investments. This change has been playing out slowly the past couple of years. As an aside, I wonder if Paul Rivette leaving was not also part of the change (as it doesn’t look to me like he has ‘retired’ to spend time with family :-). I am not trying to bad mouth Paul; but i wonder if it was not a ‘fit’ issue in terms of where Fairfax wanted to go with its investments in the future - Fairfax simply wanting to move in a direction that Paul was not happy about. (As an example, I think Fairfax Africa was Paul’s idea initially and then his responsibility to execute - perhaps just one example of old Fairfax and we now see new Fairfax with Fairfax Africa merged with Helios.) So , other than not shorting, what else has happened at Fairfax specific to their equity holdings? Partnering with strong management teams looks to be a much more important criteria when making new investments. More recent purchases, like Atlas and Stelco, have come with strong management teams. And the results have been stellar so hopefully this gets hard wired at Fairfax. Fairfax has made another important changes in recent years in how they manage their investment portfolio. The many poor investments made pre 2019 have been largely addressed. APR and Fairfax Africa are two obvious examples here (merged with strong external management teams in Atlas and Helios). They have also done a stellar job of getting their equity holdings positioned to succeed moving forward so some strong companies at acquisition are in an even better situation today. I am thinking of Dexterra and their reverse takeover of Horizon North as an example here. Fairfax’s fix for Eurobank (merger with Grivalia) is looking very good. Eurobank already had good management; it needed a balance sheet fix. Fairfax India provides a great example of how 10 or 15 seemingly small decisions over 5 or so years adds up to create a very strong collection of assets. Once Andy Bernard was put in charge of all the insurance companies the underwriting results of the insurance companies improved dramatically over the next decade - it took 5 or 6 years for the changes Andy implemented to consistently come through in the operating results of the various insurance subs. I am wondering if the same thing has not happened on the equity investment side of the business - it looks to me like a new person has been in charge of the equity investments for the past 3 or 4 years and they are slowly revamping how the collection of assets in the portfolio are selected (new purchases) and managed (existing holdings). Lead by strong external management teams. Decentralized operations (minimal involvement from Fairfax HO). Set them up to succeed. Hold them accountable to perform (be profitable and fund their own growth). And it looks to me like they are hitting the ball out of the park. I just don’t know who that person is (my guess is it is a committee). pivot in terms of their investment portfolio.

Petec, yes i am thinking Atlas can deliver growth of 20% per year the next couple of years. It really is amazing what this company has done over the past 5 quarters. Getting through the worst of the pandemic with minimal impact to financial results. And then the hard pivot to new builds on a simply massive scale. Wow! This is also Fairfax’s largest equity holding by far worth about $2 billion and close to 20% of their equity portfolio. If it compounds in value at anything close to 20% per year moving forward the impact on Fairfax results will be meaningful. And the fact that the #2 shareholder of Atlas just purchased $40 million in shares at about the current share price suggests the valuation is still cheap. I think the Washington family also have owned shares in Seaspan since the company was founded; they understand the shipping industry as well as anyone. And they are long term holders.

Glider, thanks for posting. It is nice to get a look at Fairfax’s financial position after Riverstone and Brit sales and Eurolife purchase. Pretty solid

KPO, a solid case can be made that shares are much ‘cheaper’ today than when Prem bought in June 2020. Fairfax stock price: Prem’s = US$308; today = $413; increase = +$105 Book value March 31 ‘20 = $422; Q2 ‘21 = $540; BV increase = +$118 So just looking at BV it kind of looks close (stock is just as undervalued today as it was when Prem bought). But BV does not capture what happens in the Investment in Associates bucket (this does not capture the undervaluation of Fairfax India). The fair value of this ‘bucket’ of stocks was minus $1.1 billion in Q1 ‘20 (to its carrying value). However, in Q2 ‘21 it was plus $900 million. The fair value of this bucket of stocks went up by $2 billion in the past 5 quarters or $77/share. Cha ching! So if you add $75/share to the increase in BV you get an improvement of $193/share. With the stock up only $105. This heavily tilts the argument that shares are cheaper today. And how have the insurance businesses performed over the past 5 quarters? Does that matter? Hell yes, it matters: - hard market in insurance has been confirmed over the past 5 quarters with net written premiums growing in the more than 20%. Investment float has grown by 15% year over year. And CR has come down to the 95% range which is an improvement from where it was pre-covid. Bottom line, Fairfax’s insurance businesses are more valuable today than they were when Prem bought his shares last year. Has Fairfax done anything else to improve the value of its business over the past 5 quarters? Yup: - taken advantage of crazy low rates: refinanced a large chunk of debt at lower rates which lowers interest costs in future years - deleveraged/paid off line of credit - using proceeds from $700 million Riverstone sale - Blackberry warrants were renewed with conversion price dropped from $10 to $6. Holy shit batman! - Fairfax Africa was merged into Helios; Farmers Edge and Boat Rocker completed large IPO’s; sale of Toy’s ‘R Us retail business. - Resolute, Stelco and Fairfax India all completed large share repurchases. As a result Fairfax now owns more of these three businesses than it did 5 quarters ago. - invested C$100 million in Foran Mining - ownership of Eurolife increased from 50 to 80% - sold chunk of Brit for $375 million (tied to Riverstone sale for $700 million) Fairfax has been very busy the past 5 quarters adding value for shareholders. And what about the management teams of the various equity holdings? Have they been hard at work adding value to their companies? Yes! - Atlas - 20% growth (top and bottom line) likely coming the next 3-4 years - Eurobank - continues to fix balance sheet; poised to do very well as Greek economy emerges from covid - most of Fairfax’s equity holdings are positioned very well right now. Almost forgot… Digit revaluation will add another $46 to BV likely in Q3! To sum it all up: increase in BV + increase in investment in associates + improvements in insurance business + Fairfax management actions + management teams of equity holdings + Digit revaluation = yes, in buying Fairfax today an investor is buying at a cheaper price than when Prem made his purchase back in June 2020.