Viking

I don’t follow Algonquin closely, but it looks like higher interest costs are lowing earnings. There is a pass through mechanism but it takes some time to play out. There are lots of high dividend yielding companies out there with a lot of short term debt. If interest rates stay high we likely will see more companies warn on earnings. Lots of REIT’s have significant amounts of short term debt that will need to get rolled over at much higher rates over the next couple of years.

Fairfax has certainly hit the ball out of the park with its commodity holdings. They currently total around $1.9 billion = 12.5% of total equity holdings of about $15 billion. The holdings are very diversified and certainly look well positioned to deliver significant value to Fairfax in the coming years (they stand a good chance of hitting Fairfax’s 15% return hurdle rate). - Resolute ($600 million): Selling Resolute for +$600 million (plus $180 million CVA) in a bear market was brilliant. It will be interesting to see where they redeploy the funds when the deal closes in 1H 2023. - Stelco ($384 million): this has also turned into a home run investment. Given all the share buybacks, Fairfax has increased its ownership the past 18 months from 14% to almost 24%. And Kestenbaum is still sitting on some crazy amount of cash ($800 or $900 million?). Another great asset to own. I expect steel to do well as we get to the other side of the economy in another year or so. Like Exco, with Fairfax now owning >20%, this is now an Equity Accounted holding. - Foran Mining ($140 million): Fairfax owns 23% of Foran, which is developing a copper mine in Canada that should begin production in a couple of years right when sales of EV’s should be taking off… and a shortage of copper develops. Most analysts are forecasting much higher prices for copper looking out a couple of years. This investment will be one to watch moving forward as it has the potential to be a another big winner for Fairfax. - Altius Minerals ($106 million): Fairfax owns 14% of this diversified royalty company with exposure to potash, iron, copper etc. Quality company… chug, chug, chug. Fairfax also has a pretty sizeable exposure to energy: - Exco ($195 million carrying value Dec 31). @nwoodman yes, it will be very interesting to see what EXCO resources can deliver as they work off their nat gas hedges. Fairfax’s share of profits for Exco was $44 million in Q3. Great asset to own in the current environment. - Limited partnerships/private equity funds - investment funds managed by third party fund managers:($252.1 - oil and gas extraction- at Dec 31, 2021). @glider3834 mentioned this investment in the past. - Ensign Energy Services ($59 million): Fairfax owns 13% of this oil and gas services company. Certainly looks well positioned. - Big Oil: OXY ($62 million) and CVX ($57 million): Fairfax was a big buyer in Q2. Will be interesting to see if they added more in Q3.

Once a year I find it is useful/interesting to rank Fairfax's equity holdings by size. Learnings? 1.) each year, for the past 5 years, the overall quality of the collection of holdings has been steadily improving. This is very subjective. Some, like Eurobank, keep getting better (management doing what its supposed to do). Others, like Resolute, got lucky and stumbled into a bull market in lumber (they did buy two lumber mills at the bottom of the cycle so it was not all luck). Most of the resource plays look very well positioned (this was a very different picture 5 years ago). Atlas continues to execute its aggressive growth business model. New add Grivalia Hospitality looks solid. Other new adds like BAC, OXY and CVX are solid. More money is going to private equity (ShawKwei and more recently JAB) where there is a proven, successful, long term track record. Fairfax continues to grow ownership in existing holdings (Fairfax India, Stelco, Recipe). I could go on. Bottom line, i like the progression we are seeing over the past 5 years to an overall higher quality group of holdings. This bodes well for future returns from the equity portfolio. 2.) there is concentration at the top: top 3 positions = 30% (top 10 positions = 55%) - but this is a little misleading as Fairfax India, BDT and ShawKwei are very diversified. 3.) after the top 10 positions you really have a lot of diversification. Well over 40 positions represent the remaining 45%. 4.) there is also a lot of diversification of the holdings by: - region: US/Canada, India, Greece, Asia - sector: financials, commodities, hospitality, etc - 13% managed by private equity funds (BDT, ShawKwei etc) and JAB will take this higher. 5.) Big changes year over year? - Resolute will be coming off the list; monetization of a top 5 holding at a premium price is a big deal. - Recipe take private roughly doubled its size. - Given how far out of the money they are I did not include the Blackberry debentures in the Blackberry total (my subconscious just wanted to get BB out of the top 10 . - BAC, OXY and CVX were sizable adds in Q2; has more been added in Q3? (In the 2008 bear market Fairfax loaded up with purchases like these… quality US big cap. Will they do the same thing over the next year?) ————— EA: equity accounted; MM: mark-to-market; CE: consolidated equity

@nwoodman and @glider3834 thanks for the links/comments on Eurobank. It looks to me like the turnaround at Eurobank was largely finished in 2021. We are now seeing the bank execute. The management team has done a great job, especially the last few years. I am still amazed at how opportunistic they were in getting non-performing loans significantly lower over the last 2 years (while the market was open to those type of transactions). Smart buggers. Prem has stated the expectation at Fairfax is that all equity holdings will deliver returns of 15% per year. This looks achievable for Eurobank. This is great news for Fairfax shareholders as Eurobank is Fairfax’s second largest equity holding with a value today of $1.3 billion (9% share of Fairfax’s total equity book). 15% return = @$200 million benefit to Fairfax = $9/Fairfax share (pretax). The expected slowdown in the economies of Europe over the next 6 months will likely be a headwind for Greece and Eurobank. But as we get to the other side (late 2023?) Eurobank certainly looks well positioned. ————— Morgan Stanley is estimating Eurobank will earn about €0.19/share in 2023 and €$.20/share in 2024. PE of 5.5? Wow.

Here is a mid quarter update on Fairfax's equity holdings. As a reminder, Fairfax has an investment portfolio of about $51 billion = about $36 billion in fixed income and $15 billion in 'equities' (loosely defined). So how is the $15 billion in equities performing so far in Q4? Pretty well. Total increase = $875 million. Of this, about $340 million is mark-to-market = $14.40/share. All numbers are pre-tax. If we get a continuation of the current rally into year end, we should see a nice rebound in the valuation of Fairfax's equity holdings. Movers: 1.) Eurobank +$313 million 2.) Atlas +$178 3.) FFH TRS +$158 PS: please let me know if you see any material errors in the Excel spreadsheet attached below. Fairfax Equity Holdings Nov 10 2022.xlsx

What a bloodbath in crypto. Billions $ are getting eviscerated. What is the next shoe to fall? Where are the skeletons? There is no transparency/oversight in this ‘industry’ which makes the path forward pretty much impossible to call. And so much of this industry is intertwined. ————- i wonder how much windfall gains in crypto was fuelling economic growth in 2021. How does this now work in reverse? Is the crypto crash now bigger than the .com crash? ————— Trust is gone. How does crypto work without trust?

Who is the big buyer of FFH shares right now? Share volume is very high in both Canadian and US markets. And this, of course, is spiking the stock price as Fairfax is usually pretty thinly traded. One buyer could be Fairfax. Perhaps we see them take out a material number of shares over the next 7 weeks via the NCIB. If so, the shares could keep running higher into year end. ————— Fairfax will be paying a US$10/share dividend in January. Something that is typically supportive of the share price. ————— One of Fairfax’s largest investments is the 1.95 million shares of Fairfax it holds via the TRS. FFH shares were US$457 on Sept 30. Today they are $550. That is a $180 million mark to market gain in 5 weeks (shares are up 20%). I like the TRS position… it definitely motivates FFH management to want a higher stock price and i like that (given FFH is my largest position).

Earlier today I provided an update on how underwriting profit was tracking at Fairfax. Let’s now take a look at interest and dividend income. Of all of the many positive developments at Fairfax in 2022, the increase in interest rates (and interest income) is one of the most exciting. ————— Summary: Fairfax earned $568 million ($24/share) in interest income in 2021. For 2022, my estimate is $830 million ($35/share). For 2023, my estimate is $1.37 billion ($58/share) = $800 million increase over 2 years (2021 to 2023). Dividends will come in at around $110 million per year (not included in the numbers above). ————— In 2021, Fairfax earned $568 million in interest income = 1.5% yield on $36.8 billion fixed income portfolio. In 2022, Fairfax is on track to earn $830 million in interest income = 2.3% yield on $36.3 billion fixed income portfolio. This will be a record amount of interest income for Fairfax; the previous record was $826 million achieved in 2019 = yield of 3.1% on a fixed income portfolio of $26.4 billion. When it reported Q2 results, Fairfax said the then run-rate for interest and dividend income was $950 million. When it reported Q3 results, Fairfax said the current run-rate for interest and dividend income is $1.2 billion. This is a significant increase of $250 million in just 3 months. Of the $1.2 billion total, about $100 million is dividends and $1.1 billion is interest income - after estimated expenses of about $35 million. The $1.1 billion in interest income = 3.0% yield on $36.3 billion fixed income portfolio. So at the end of Q3 Fairfax was tracking to a 3% yield on its fixed income portfolio which is double what it was in 2021. Of interest, Fairfax confirmed with Q3 results that they are starting to extend the duration of their fixed income portfolio. At the end of Q2 it was 1.2 years. At the end of Q3 it was 1.6 years. Fairfax said they were buying primarily 3 year US treasuries in Q3. For 2023 my current estimate is Fairfax will earn $1.37 billion in interest income = 3.7% yield on $37 billion fixed income portfolio. Current expectations are for the Fed Funds rate to get close to 5.25% in Q1, 2023. If this happens my 3.7% estimate for Fairfax for 2023 will be way low. ————— Interest & dividends = interest income + dividends - investment expenses.

At its core, Fairfax Financial is an insurance company. With Q3 results just reported we can update some estimates for Fairfax that capture actual Q3 results and the outlook for 2023. The size of Fairfax's insurance businesses have increased dramatically. Over the past 8 years net premiums earned have increased 224% from $5.98 billion in 2014 to $19.4 billion in 2022 (my estimate) for a compounded growth rate of 16% per year. On a per share basis Fairfax has grown net premiums earned by 194% = 14% per year compounded over the past 8 years. The share count is up 10.4% over this time. What has driven this significant growth? For the first 3 years acquisitions drove a large part of the growth: Brit (2015), International (2016) and Allied World (2017). For the past 5 years (2018-2022) the growth has been organic and driven by the hard market of the past 3 years. Looking back, Fairfax timed their large insurance acquisitions perfectly (right before the hard market set in). The hard market in insurance looks set to continue for a 4th year and is spreading to reinsurance (which is a big business for Fairfax). 2023 could see net premiums earned grow to $22.3 billion, up $3 billion, or 15%, from 2022. Why do we care what net premiums earned are? Because this is a key input in determining underwriting profit. And underwriting profit is one of the critical inputs in determining what an insurance company is worth. Fairfax is on pace to earn an underwriting profit of $970 million in 2022 ($41/share). A new record. My estimate for 2023 is for Fairfax to earn $1.1 billion in 2023 ($48/share). Another record. The previous record was $801 million in 2021 ($31/share). Bottom line, the significant growth in net premiums earned the past 8 years is resulting in Fairfax earning record underwriting profit. And the record underwriting profit party is just getting started. Now we all know financial markets are extremely efficient when pricing equities. Everything that is know about a company is already priced into its equity price. (Yes, I say this in jest So where was Fairfax stock trading at Dec 31 2014? About US$510. Where is Fairfax stock trading today? US$525. Wow! Really? So was Fairfax overvalued in 2014? Or is Fairfax undervalued Nov 7, 2022? Of course, we can’t just look at net premiums earned and underwriting profit to answer this question. Future posts will look into the trend of interest and dividend income and returns on the equity holdings. ---------- Note: my numbers above do NOT include runoff. My guess is the cost of runoff will come in at about $150 million per year.

@Parsad Historical information is useful only to the extent that it helps inform an investor what future results will be. If past results do not help an investor estimate what future earnings will be then they are worse than useless. Because they will give an investor an inaccurate view of future results. And this will lead to poor decisions regarding share ownership. My view is your analysis above does very little to actually inform an investor what Fairfax earnings or growth in BV are likely to be in the next 1, 2 and 3 years. And I say this with all due respect (I am not trying to be adversarial). There has been enormous changes at Fairfax the past 5-6 years. The company today does not remotely resemble the company that existed in 2015, let alone 2010. And, most importantly for an investor, its future earnings power is completely misunderstood. Because investors are still stuck in the past. Druckenmiller suggests an investor should look out 12-18 months and find situations where the narrative is completely wrong (leading to a stock being mis-priced today). I believe Fairfax is a great example today of where the narrative is completely wrong. Investors, largely looking through the rear view mirror, are way underestimating the earnings momentum at Fairfax that has been building for the past 5-6 years.

@Parsad i almost spit up my drink when i read that what do you think Fairfax will earn in a ‘normal’ year moving forward? My guess is more than US$100/share. With shares trading at $510 that puts the PE at about 5x. That is dirt cheap to me. We are still in a hard market which means top line growth will be solid in 2023. Interest rates are expected to continue increasing into 2023. Fairfax’s various equity holdings look well positioned. This suggests to me that $100/share in normalized earnings will likely increase nicely in the future. Yes, with stock markets selling off significantly in 2022, lots of stocks are much cheaper. However, despite the sell off, i don’t see many that are cheaper than Fairfax (or even close).

@This2ShallPass i fully agree that ‘trust’ issues are one of the primary reason for Fairfax’s current super cheap valuation. The ‘equity hedge’ bet was an epic fail. Fairfax’s communication over the years at times has been poor. And Prem has his own unique style. However, i have followed Fairfax pretty closely for 20 years. And the communication issues have been around all 20. They ebb and flow. Fairfax is not going to change in this regard. It is a fact of investing in Fairfax. And i am ok with that as an investor. It is something i have no control over. For me, today, the benefits far out-weight the risks. So i am happy to own a significant number of Fairfax shares. i view the share buyback topic differently than you. My view is Fairfax has delivered on this front over the past couple of years. They exceeded my expectations in Q3. I am pretty certain they will be buying back shares in Q4. Is it dutch auction or bust? No. Not for me. I will wait and see what they do. If they don’t repurchase a bunch of shares what do they do instead? They have so many good options available today. I like, taken as a whole, the decisions the company has made the past 5 or so years. I reaaly like how the company is positioned today. Given the performance i have seen in recent years, i am going to cut the company some slack.

Fairfax did re-purchase 0.9% of shares outstanding in Q3. That was a pretty good number given Q3 is the high catastrophe quarter. If they keep this pace up that would be close to 4% over 12 months… I think they will continue to buy back shares in Q4, perhaps something in the 1.5-2% range. I would love to see them keep on doing this every quarter = 6 to 8% over 12 months. Add in a 2% dividend and that is a pretty solid shareholder return of 8-10%… especially if they can continue it for a couple of years. ————— We all, including Fairfax, have learned more over the past 3 months (since the Q2 call). I am not sure anyone expected the re-insurance market to harden like it has. Or for the hard market in insurance to remain this hard. ————— Bottom line, Prem has been saying for years that capital allocation priorities are: 1.) maintain solid financial position 2.) grow insurance top line in hard market 3.) buy back stock We will see what they do with capital allocation in Q4. It is not a concern for me (although i will be paying attention).

My guess is FFH will significantly outperform both BAM and BRK over the next 3 years. Why? 1.) valuation. At US$510, Fairfax is crazy cheap. Much cheaper than either BAM or BRK. 2.) growth in profitability: Fairfax will grow profitability much faster than BAM or BRK. - rising interest rates IS spiking interest income - 20% top line growth/hard market IS spiking underwriting profit - realized and unrealized gains in the equity portfolio will continue to be significant - but lumpy. - bottom line, historical Fairfax profitability is understated. Its future profitability is way underestimated. Profitability at Fairfax is a coiled spring right now. 3.) Fairfax has needle moving investments: pet insurance sale great example. Digit is another. There will be more. 4.) FFH share count will continue to come down significantly; BRK might be close here, BAM will lag significantly 5.) size: Fairfax has a big advantage here, being much smaller; both BAM and especially BRK are elephants. If this was a 100 meter race, Fairfax would be starting on the 20 yard line. Fairfax would also be a much faster runner than the other 2 sprinters (BAM and BRK). As long as they do not trip and fall, i think Fairfax will easily win the race.

Below are some answers to the questions i asked before earnings were released. How did Fairfax do? In short, very well. The earnings power of this company keeps increasing every quarter. At US$510, the stock is wicked cheap. The outlook for Fairfax has rarely ever looked better. That last statement is not hyperbole. Insurance: 1.) does top line growth remain close to 20%? - Net premiums written increased 18.6%. Simply outstanding. And poised to continue into 2023. Odyssey Group = +32%. Crum and Forster = +34.5%. 2.) what is Q3 CR? How much over 100? - CR came in at 100.3. Catastrophe losses were $803 million = 15.0 CR points. CR, ex cat losses, was 85.3... the lowest such number in Fairfax's history? - Losses from Hurricane Ian were $560.6 million. - YTD CR = 96.0. Was 97.3 YTD 2021. My guess is full year 2022 CR comes in around 95 which will deliver record underwriting profit. - expense ratio came in 1.7 points lower than PY. 3.) hard market expected to run well into 2023? Expectations for hard market for reinsurance? - Yes. And the hard market in reinsurance should power outsized growth at Odyssey Group in 2023 (in 30% growth attainable?). Other developments: - We have a new CEO at Brit. Former CEO recently stepped down due to health reasons (he will remain with Fairfax in an advisory role) - we all hope he gets better! Brit, like lots of Lloyds insurers, has been having its challenges for the past couple of years. My guess is Andy Barnard will find a way to get Brit back on track. Interesting that net of Ki, growth at Brit was low single digit. Bond portfolio 4.) what kind of increase do we see in interest income? What is new run rate for interest and dividend income? (Was $950 million end of Q2.) - interest and dividends came in at $256.5 million (versus $167.2 million in Q3 2021). - The new run rate for interest and dividend income is $1.2 billion = 3.2% yield on $37 billion portfolio. WOW! 5.) what changes, if any, do we see in bond portfolio? Buying and muni’s? - Fairfax has started to move out a little in duration. Great news. Hopefully we see more of this in Q4. - "During the third quarter of 2022 the company used existing cash and the proceeds from sales and maturities of short dated investments to purchase $7.2 billion of U.S. treasuries and Canadian government bonds, and short dated high quality corporate bonds, benefiting interest and dividend income." 6.) what is average duration? (1.2 years at June 30) - average duration increased to 1.6 years on fixed income portfolio. 7.) what is amount of mark to market loss? Another US$400 million? - mark to market losses on bonds was only $242.4 million. Impressive given the significant increase in interest rates across the curve in Q3. - "Net losses on bonds of $242.4 million included net losses on U.S. treasuries of $193.8 million and net losses of $90.0 million on corporate and other bonds (principally U.S. and other corporate bonds), partially offset by net gains on U.S. treasury bond forward contracts of $59.7 million." Equity Portfolio 8.) what is amount of mark to market loss? (My estimate is around $300 million) - market to market losses on equities was $141.9 million. Much lower than I expected. The stocks I track were off $300 million. So Fairfax did something of significance to offset a much bigger loss. What? No idea. It will be interesting to see what the Q3 13F reveals. - "Net losses on equity exposures of $154.8 million was primarily comprised of unrealized depreciation of common stocks, equity warrants and convertible bonds and net losses on long equity total return swaps. At September 30, 2022 the company continued to hold equity total return swaps on 1,964,155 Fairfax subordinate voting shares with an original notional amount of $732.5 million (Cdn$935.0 million) or approximately $372.96 (Cdn$476.03) per share, on which the company recorded $82.3 million of net losses in the third quarter of 2022 and has recorded cumulative net unrealized gains of $233.7 million since inception." 9.) any commentary on completed Recipe take private? Funded how? - done. No commentary of how it was funded. 10.) any commentary on Atlas take private? - minimal commentary. Fairfax will not be putting new money in to Poseidon (other than converting about $100 million in existing debentures). Other 11.) share of profits of associates? $200 million? - came in at $241.5 million. Was $172.2 million in Q3 2021. 12.) Book value? (Was US$588/share at June 30.) - came in at $570. Outstanding. Add in proceeds from the pet insurance sale ($40) and BV = $610. With the shares trading at $510, P/BV = 0.84 is stupid low. - BV also reflects spike in bond yields AND bear market lows in mark to market equities. BV is not overstated. 13.) share buybacks during quarter? - Fairfax bought back 210,000 shares in Q3 = 0.9% - "There were 23.6 million and 25.9 million weighted average common shares effectively outstanding during the third quarters of 2022 and 2021 respectively. At September 30, 2022 there were 23,445,778 common shares effectively outstanding." - "At June 30, 2022 there were 23,654,827 common shares effectively outstanding." 14.) increase in debt in Q3 of $750 million. How much of minority interest in Allied is purchased? What is outstanding balance? - "On September 27, 2022 the company increased its ownership interest in Allied World to 82.9% from 70.9% for total consideration of $733.5 million, inclusive of the fair value of a call option exercised and an accrued dividend paid, and recorded a loss in retained earnings of $228.1 million." 15.) capital allocation priority moving forward? i.) financial stability of company ii.) fund growth of subs in hard market iii.) buy back Fairfax stock - Holding company finished Q3 with $900 million in cash which is below $1 billion minimum. Additional $900 million in proceeds from pet insurance sale are now at hold co = $1.8 billion in cash. - listening to Prem on the conference call I am not sure if we get another dutch auction. I think NCIB re-purchases might be what they do moving forward. Updates/Commentary: 16.) pet insurance sale closed Oct 31: proceeds to be used for? - See previous comment above. 17.) Resolute Forest Products sale: to close when? 2023? - 1H 2023. Valuation was updated in Q3 so no increase will be booked when sale closes. 18.) Stelco dutch auction: did Fairfax be tender any shares? (Likely not.) - no commentary. Likely no. 19.) update: regulatory approval to take control of Digit? Status of IPO? - regulatory approval will happen. Timing is uncertain as Fairfax needs to figure out a solution and get regulators to approve it. ————— Looking ahead, is Fairfax on glide path to earn $2 billion from underwriting income + interest and dividend income in 2023? - NO. Fairfax is not on a glide path to earn $2 billion. They are on a glide path to earn something closer to $2.4 billion from underwriting income + interest and dividend income in 2023 = $100/share.

Looks like very good results to me. My comments are going to be brief tonight. (I am sitting in an airport in Chicago on my way back to Vancouver - was in Annapolis for a wedding.) 1.) CR of 100 is ‘win’. Allied is the star right now. Brit the goat. - CR of 95’ish looks pretty doable for 2022. 2.) interest and dividend of +$250 million… 2023 estimate of $1.2 billion is likely way low 3.) Mark to market losses on both bonds and stocks were about 1/2 my estimates for Q3. Love it! - book value at Fairfax now reflects bear market low equity prices and +4% treasury yields. Lots of upside surprise potential in the years to come. 4.) Allied ownership is now over 80% (from 70%)… love it given how well they are performing right now. 5.) might find out on the call tomorrow what the plan is for the proceeds from pet insurance… but looking at the growth in business at Crum, we might have our answer

My pain level is zero. Portfolio is up a little over 15%. 1.) went big into oil in Dec; Jan + Feb gains represent most of my gains this year (exited all my positions in Feb). 2.) got very defensive earlier in the year when it became clear Fed was going hard QT 3.) have done a lot of trading the past 6 months for minimal gain 4.) have been in and out of oil (smaller positions) 3 times since my initial purchase in Dec for nice gains. sold my SU today for a tidy 8% gain. Bottom line, oil has powered most of my gains YTD. Getting defensive early in the year largely saved me from the downdraft in the stock market. Fairfax, from this point forward, will likely determine how i finish the year. Currently Fairfax is my largest position. If the stock sells off post earnings - and i like earnings - i will add more. I have started to build out a position in big tech (GOOG, AMZN, Facebook, MSFT) - adding again today. Cash is a little over 40%. My guess is i will get lots of great opportunities to deploy more cash in the next 3 months.

Canada has had a 20 year housing boom. In recent years housing has become a massive % of total GDP. Look at all the condo development in Toronto (i think it leads North America). Building has been robust (single and multi family). Where are all the housing units going? Yes, building will slow moving forward. But i wonder how much of current supply is under-utilized. I just have a hard time understanding how we have had a housing bubble of epic proportions for 2 decades and still have a shortage. And i readily admit - i am a real estate idiot.

@Castanza i do not understand this comment: “Non-interventionism is a core tenant of US history”. Since WWII, the US has been very involved in pretty much every part of the globe. Countries with open economies are very good for US business interests. China and Russia have just decided it is time for dictatorships to take their rightful place in the world. I am nor sure that this is a great time for the US and US businesses for the US to become isolationist (like pre WW1).

With the Fairfax Q3 report set to be released after markets close on Thursday here are a few of the things i will be watching. What am i missing? Insurance: 1.) does top line growth remain close to 20%? 2.) what is Q3 CR? How much over 100? Impact of Hurricane Ian will be a big deal. How big? 3.) hard market expected to run well into 2023? Expectations for hard market for reinsurance? Bond portfolio 4.) what kind of increase do we see in interest income? What is new run rate for interest and dividend income? (Was $950 million end of Q2.) 5.) what changes, if any, do we see in bond portfolio? Buying and muni’s? 6.) what is average duration? (1.2 years at June 30) 7.) what is amount of mark to market loss? Another US$400 million? Equity Portfolio 8.) what is amount of mark to market loss? (My estimate is around $300 million) 9.) any commentary on completed Recipe take private? Funded how? 10.) any commentary on Atlas take private? Other 11.) share of profits of associates? $200 million? 12.) Book value? (Was US$588/share at June 30.) 13.) share buybacks during quarter? (At June 30 there were 23.7 million common shares effectively outstanding.) 14.) increase in debt in Q3 of $750 million. How much of minority interest in Allied is purchased? What is outstanding balance? 15.) capital allocation priority moving forward? - level of debt is ok (although $750 million just added) - continue to fund growth at subs in hard market? - buy back stock? - continue to buy out minority shareholders in Allied World? Updates/Commentary: 16.) pet insurance sale closed Oct 31: proceeds to be used for? 17.) Resolute Forest Products sale: to close when? 2023? 18.) Stelco dutch auction: did Fairfax be tender any shares? (Likely not.) 19.) update: regulatory approval to take control of Digit? Status of IPO? ————— Looking ahead, is Fairfax on glide path to earn $2 billion from underwriting income + interest and dividend income in 2023?

@glider3834 GREAT NEWS! Let the speculation begin as to what they are going to do with the proceeds! 1.) another dutch auction at YE for Fairfax shares 2.) re-invest into insurance/re-insurance subs to grow in hard market 3.) buy out minority partners (Allied) 4.) invest in equities 5.) all of the above (so no big dutch auction, just NCIB for share repurchases 6.) none of the above… what else?

Just finished listening to the Chubb Q3 conference call. Some take aways: - re-investment rate is currently 5.8% - current portfolio yield is 3.4% - significant unrealized loss in fixed income portfolio will accrete back to BV over 2 year period - p&c market conditions continue to be quite favourable ————— If Fairfax is able to get anywhere near a 5.8% re-investment rate we should see interest income continue to increase in a meaningful way. A 4% yield of their fixed income portfolio is not a crazy number (if new funds can be invested at an average 5.8% yield). $35 billion x 4% = $1.4 billion = @$60/share.

Stocks are off 20-25%. Bonds are off 15-20%. The opportunity set for investors is much, much better today than it was in January. There are way more bargains today than 9 months ago. every month this year the stock market has found another asset class and beaten it silly. Last week it was big tech. i also continue to think the Fed is a big driver of all asset classes. The Fed needs to tighten financial conditions (still). That means a lower stock market and a higher US$. Inflation continues to run too hot. Employment continues to run hot. Bottom line, i expect the Fed to continue to be more hawkish than Mr Market expects. Because the day the Fed ‘pivots’ the stock market is going to scream higher. And that will drive spending (wealth effect), which will drive inflation (again). And i think the Fed is smart enough to know this. Bottom line, the Fed needs a recession. But they can’t actually say that (Bank of Canada kind of just did). What is an investor to do? Buy stuff they understand when it gets cheap. But don’t go all in. More/better bargains likely lie ahead… we are in likely the middle of a bear market. Because a recession is likely coming in 2023.

Well, we can put a pitchfork in that rumour. Kind of crazy to think what would motivate someone to speculate on something like that Maybe someone got tired of holding the shares and was hoping to get a pop. If so, didn’t work out.

@hobbit great point. A bunch of speculation right now. What is interesting is the share price has not really moved. Why? 1.) Fairfax India is not followed - so outside of a few on this board - no one knows what might be going on 2.) sale/value of BIAL for $1.5 billion is already baked into the share price of Fairfax India 3.) sale of BIAL is hoax - pure misinformation being spread by some unknown entity for unknown reasons Also, sales like BIAL are likely to take an enormous amount of time to close… so perhaps Mr Market is shrugging and saying “we’ll believe it only when something official is announced”. ————— it looks to me like we have a set up right now with Fairfax India shares that Stanley Druckenmiller would like like. Nice new upside catalyst being priced at zero right now by Mr Market. I added some shares today