Viking

In my post above I said: "My view is ‘legacy issues’ will be much less of a drag moving forward. Most of the sins of the past have been corrected (this would make a great post all on its own…)." OK, so what was the 'original sin' that Fairfax committed? The decision to short equity markets (in a major way) beginning about 10 years ago (I only went back to 2011). What was the cost? About $4.5 billion pre-tax over a 10 year period (the numbers below come from the Fairfax year end news releases from Feb of each year). Holy shit! So for the past 10 years Fairfax has started each and every year $450 million (on average) in the hole. (The average of the last 9 years is $550 million.) Is anyone surprised that growth in BV over the past decade has been so poor? Especially when you factor in a $10 dividend payment that has been made each and every year. The good news is Fairfax has confirmed that they will no longer be shorting individual stocks or indexes and as of Dec 31, 2020 all short positions had been closed out. So starting Jan 1, 2021 Fairfax was starting its first year in a decade without a $450 million hole to fill. WOW! So beginning in 2021 shareholders will start to see what Fairfax can actually earn without one hand tied behind its back. And 6 months into the year earnings have been stellar To expect results at Fairfax to improve in the coming years investors have to ask the key question: What, if anything, has changed? No longer shorting is a massive change. short 2020 -$529 2019 -$58 2018 -$38 2017 -$418 2016 -$1,192 2015 $502 2014 -$195 2013 -$1,982 2012 -$1,006 2011 $414 Total -$4,501 avg -$450 Fairfax called these positions: 'equity hedges', then 'equity hedges and short positions' and then more recently just 'short exposure'.

2021 has been a very active and very good year for Fairfax owned media companies. Boat Rocker and Blue Ant look to be very well positioned to continue to benefit from the explosion in content creation. Boat Rocker will be using the proceeds from its recent IPO to drive significant growth. Blue Ant has significant resources to fund future growth (recently realized $100 million from reducing its stake in Enthusiast Gaming). Fairfax sold its small investment in Rouge Media in Q1. 1.) Boat Rocker - https://boatrocker.com/home/default.aspx - presentation: https://www.boatrocker.com/investor-relations/events-and-presentations/default.aspx Fairfax 2020AR: Fairfax acquired a controlling stake in Boat Rocker Media in 2015 and to date has invested Cdn$110 million. Under the leadership of co-founders David Fortier and Ivan Schneeberg and CEO John Young, the business has grown revenue from Cdn$70 million in 2015 to an expected Cdn$700 million in 2021. Once a Canadian-focused production company with notable hits such as Orphan Black and Being Erica, Boat Rocker is now global with 85% of revenue from outside Canada. Several well executed acquisitions over the past three years yielded a growing Talent Management business, one of the largest animation studios in North America and a blossoming Hollywood-based production studio. The demand for quality content continues to grow at unprecedented levels. Boat Rocker is in the process of doing an IPO, which will provide the business with capital to grow organically and by acquisition. Fairfax will not be selling any of its shares in the IPO. 2.) Blue Ant Media - https://blueantmedia.com - old article (2 years old): https://playbackonline.ca/2019/12/09/media-company-of-the-year-blue-ant-media-2/ Fairfax 2020AR: There were many business winners and losers created from the disruption caused by the pandemic. One interesting ‘‘win’’ happened at our investee Blue Ant Media led by Michael McMillan, the former CEO of Alliance Atlantis, which was looking for opportunities in the fast evolving media landscape. Blue Ant purchased a Los Angeles-based gaming company called Omnia Media, and in 2020 merged Omnia with Enthusiast Gaming, a TSX-listed gaming company, receiving as consideration mainly shares of Enthusiast priced at Cdn$1.65. Enthusiast shares have recently been trading above Cdn$8, a win-win for Blue Ant and Enthusiast. 3.) Rouge Media -sold in Q1, 2021 - https://rougemediagroup.com Fairfax 2020AR: the company sold substantially all of its interest in Rouge Media for consideration of approximately $10 and expects to record a nominal gain in the first quarter of 2021. Rouge Media sale is another (small) example of Fairfax: 1.) selling an underperforming business with tough prospects 2.) reducing the number of privately held investments

Here is the post from @wondering that covers how Blue Ant got its significant stake in Enthusiast Gaming 14 short months ago.

Along with WRB, i like to use Chubb to get a read of what is currently going on in the insurance industry. The million $ question today is when is the hard market going to end? After Q2 results were reported i think there was a general consensus (among analysts) that the hard market had peaked in Q1 (in terms of rate increases) and there was concern rates would come down quickly beginning in Q3. And you saw this reflected in stock prices of insurers (weakness). So what are we actually seeing from insurers in Q3? While rate increases have moderated a little from the Q1 peak, the increases continue to run well in excess of expected loss costs trends. The hard market is continuing with no end in sight. This is GREAT news for Fairfax. Every additional quarter from here they are able to grow their top line at +20% will be a significant driver of higher profitability in future years. Here is my key take away from the Chubb call: Elyse Greenspan -- Wells Fargo -- Analyst Hi, thanks. Good morning. Evan, you talked about robust price increases that we've seen for a while across the industry. As you think out over the course of the next year, do you think the industry can broadly maintain rate in excess of loss trend just as you think about the underlying dynamics out there? Evan G. Greenberg -- Chairman and Chief Executive Officer Elyse, I do. I think, look, I don't have a crystal ball, but from everything I see right now about rates and the shape and pattern of how, when I look over a number of quarters, what I would call is simply a moderation in the rate of increase, when I look at that and I look at the loss cost environment, and then I look at our retention rates against the kinds of rates we're achieving, so we achieved certain rate increases, but through a retention rate on business, which then tells me about the tone of the marketplace. All of that tells me that the industry should continue to achieve rate in excess of loss cost for some time to come.

@glider3834 I expect the CR will be high 90's for Q3 but I still expect full year to be solid (i.e. 97 ish) given they finished 1H at 95.1 And yes, the fixed income portfolio (I lump cash, mortgages etc in here) is really interesting. If there is one area where the Fairfax team has pretty consistently outperformed over the years it is with the fixed income portfolio. They have been very opportunistic. Given how the portfolio is constructed this is one area where Fairfax is making a decent sized macro call. As you describe they have positioned the bond portfolio (including the cash holdings) with exceptionally low duration. So if interest rates move a lot higher the next year or two Fairfax will be a big winner. As you mention the hit to their BV will be small (compared to other P&C insurers who have longer duration). And they will be able to redeploy the significant cash they hold at higher rates. However, their current positioning does come at a cost: lower interest income today. I am ok with how they are positioned. But this is something each investor will need to decide for themselves. Now of course an investor should also not look at the fixed income portfolio in isolation. After all 35% of their investment portfolio is in higher risk/much more volatile/much higher return equity/partnership/real estate type investments (much more than other P&C insurers). My guess is Fairfax has constructed the totality of their investment portfolio in a way that makes sense for Fairfax.

Xerxes, your post really gets to the heart of why an investor might want to back up the truck and buy shares of Fairfax. Or not. But first, a point of clarification. The transition/upgrading to “collection of very good asset allocators” has been going on at Fairfax for the past 4 years. It is largely done. (Of course this objective is never really done as It is an ongoing process.) Also, investors do not need to wait for the benefits to start to flow through to earnings. It is already happening and has been happening for a few years. The issue is the benefit to earnings has been masked by the continuing and significant drag of legacy issues. Fairfax has been paying for years to clean up the sins of its past. These legacy issues were significant and cost the company hundreds of millions most years to clean up. In just 2020 it cost the company something like $700 million to close out its final short position. Covid hit in March 2020 and rippled through Fairfax’s insurance business and investments causing yet more losses in 2020. This further muddied the waters making it more difficult for investors to see the improvements Fairfax has been making. What ‘legacy issue(s)’ remain outstanding? That are going to cost Fairfax $200 or $300 million in 2021 or 2022 to clean up? Remaining runoff? Brit? Bryte? International insurance? Perhaps. Farmers Edge write down? Small potatoes (in the big scheme of things). Moving forward the size and frequency of issues should be more manageable by Fairfax as a normal part of doing business. My view is ‘legacy issues’ will be much less of a drag moving forward. Most of the sins of the past have been corrected (this would make a great post all on its own…). As a result Fairfax’s reported results for years have understated the real earnings power of the underlying business. But this only matters when the constant drag from paying for past mistakes ends. And i think that is where we are at. At the same time, i expect insurance earnings to pop nicely the next couple of years due to the hard market. And investment earnings will also increase nicely as we exit covid and the various “asset allocators” Fairfax has partnered with continue to execute well. I view Fairfax as a turnaround story. And i think the turnaround is largely done. And in plain sight for investors to see. Earnings in Q1 and Q2 were phenomenal. And largely ignored (with the stock trading at US$410). Crazy what happens to earnings when the drag from legacy issues slows significantly. As earnings grow the stock price will eventually respond and as investor sentiment improves we should see the PE multiple expand (with the stock trading closer to BV). This will likely play out over a couple of years and should provide investors will very satisfactory returns. The next step i am hoping Fairfax takes in its journey is to start generating much higher free cash flow on a consistent basis. And start buying back stock in volume while the share price is crazy cheap. Aggressive share buybacks by Fairfax would accelerate the timing of the stock price trading closer to BV.

Is the current insurance hard market a big deal for Fairfax and Fairfax shareholders? Yes. Why? Because it results in significant growth in premiums (top line) and a lower combined ratio (bottom line). You get a double benefit. So underwriting profitability spikes. But there is a lag (depending on the type of business written). It takes time for net written premiums to become earned premiums. (For the insurance experts on the board, please correct any errors in my comments). In the example below 48% growth in net premiums earned (over 4 years) results in an increase in underwriting profit of 120%. Easy to understand why Fairfax is prioritizing supporting growth in its insurance subs during the current hard market (over stock buybacks). It is not unreasonable to estimate that Fairfax will earn $700 million in underwriting profit in 2022 = $27/ share. And the longer the hard market continues to run the higher future earnings from underwriting will be for Fairfax. Net premiums. YOY earned growth. CR. Underwriting profits 2018 $11.91 - 97.3 $318 $12/share 2019 $12.54 5%. 96.9 $395 $15 2020. $13.86 11%. 97.8 $308 $12 2021 est $16.01 16% Est 97 $480 $18 2022 est $17.70 10%. Est 96 $700 $27 Why does a hard market result in a lower combined ratio? Price increases on the same unit of exposure are the big driver. A second benefit is a lower expense ratio (as top line grows faster than expenses). There is also a lag. It takes time for net written premiums to become net earned premiums. And in hard markets loss pick tend to be conservative resulting in reserve releases in future years which is good for future profits. And a hard market also provides significant benefits to the investment side of the business… by significantly increasing this magical thing called float… ————- Please note, my numbers above do not include what is left of the runoff business after the Riverstone sale.

I was listening to an economist talking about inflation continuing at high levels well into 2022 and then saying he thought it would be transitory. It made me laugh… 2021+2022+? it appears the definition for transitory is ‘not long term’. The inflation data in Canada came out last week very high. It was in all the various news media. High inflation is becoming embedded into expectations. what i really do not understand is the bond market. With inflation running at +4% annual clip and likely to stay high into 2022 and perhaps longer who in their right mind owns fixed income today? They are losing a bunch of money. For years. Guaranteed. Lots of very old retired people are super risk averse (like my 89 year old mother-in-law). Only ever invested in GIC type investments. The current government/central bank policy is effectively a huge tax on people who have savings and are very risk averse (lots of older people). They are paying $2,000 or $3,000 in purchasing power each and every year for every $100,000 they have in the bank. Small example. But at some point high inflation is going to start to really piss people off. Especially if interest rates stay where they are.

@Thrifty3000 was re-reading some older posts (you were providing context for the Mosaic Capital take private deal) and i really like your big picture assessment that Fairfax has been building out for years a diversified “collection” of very good asset allocators to manage their large investment portfolio. This demonstrates very good strategic thinking / long term planning and execution. And it provides clarity around succession planning at Hamblin Watsa as the old guard ages out. And yes, interesting to compare Fairfax’s approach to Berkshire’s; VERY different. Some examples: - Burton/Chin in-house team at Fairfax: managing $1.5 billion of equities and increasing to $3 billion - various limited partnerships managing $2.1 billion: BDT Capital Partners is one example (a $630 million position Dec 2020). - India team managing $1.7 billion (Fairfax India, Quess, Thomas Cook, IIFL triplets): this group has been delivering stellar results for years - Kennedy Wilson/real estate managing billions in real estate and fixed income investments: very successful decade long partnership - Atlas/Sokol is $1.8 billion position: great start to relationship. New build growth is locked and loaded. Much smaller examples include: - Helios/Africa: early days here; New team looks promising but we will see - Mosaic Capital taken private in June: focus on small to mid-cap Canadian companies And then you have all the individual equity holdings: - Stelco: very good capital allocation decisions post bankruptcy - RFP: very good capital allocation decisions last 3 years For the individual equity holdings good ‘capital allocation’ is a key input in assessing the overall quality of a management team. Grading each of the management teams of Fairfax’s various equity holdings would be an interesting exercise

Agreed. WRB provides great insight into what is happening in the insurance market. Here are a couple of things that stood out to me (in addition to your notes): 1.) on rate increases: ‘don’t see the trend changing’. We are now in year 3. Hello hard market! 2.) on increases: 40% is rate and 60% is exposure 3.) on expense ratio: as higher written premiums from a year ago are now becoming higher earned premiums the expense ratio is falling (28%). 4.) on investments: 69% is in fixed income. Duration is 2.3 years. -AA quality. Yield has been declining. Ok with lower interest income in the near term. Positioned well should inflation/interest rates move higher in future. 5.) in addition to social inflation, now starting to talk about financial inflation as a risk. Final comment: ‘the stars have aligned’. Wow! My key takeaway is the hard market is continuing. We are already 3 weeks into Q4 so 2021 is looking like it will be a stellar year. 2022? We will see…

@StubbleJumper it is crazy to me how easy it is to get anchored in ones views; including when they are wrong. And once anchored, how persistent those views become. My spreadsheets help me to understand what Fairfax currently actually owns (versus what i think they own). But the real value of the spreadsheets is to be able to compare to the past. i like to compare Fairfax’s holdings today to its holdings 4 or 5 years ago. Has anything meaningful changed? If so, is it a good change for the company and shareholders? If so, how good? i view Fairfax today as a turnaround. But if nothing has changed at the company why should shareholders expect a different future? My next write up is going to dive into this topic: how does the Fairfax of today compare to the Fairfax that existed 4 short years ago? Here is a teaser of the Fairfax of 4 short years ago: No hard market in insurance. Still shorting stocks. No Atlas. Eurobank was broken. Blackberry debs had a $10 strike. No TRS of FFH. No Stelco. Digit was just a dream… And that is just with the big holdings

@petec, i made the mistake of adjusting all my spreadsheets to reflect what Fairfax reported in the 2020AR. The issue is their stated ownership stakes in their equity holdings excluded the Riverstone positions. So i am slowly reverting back to ownership numbers that include Riverstone positions (for all holdings). So for Atlas i am using share count from the most recent 13F. The 37% is from the 2020AR (and is understated); i think Fairfax ownership of Atlas is the low 40% range. I will update Atlas after both companies report Q3 results when we should get updated information. Some of the debentures may have been converted to stock as well. Bottom line, given its size, i will be updating the Atlas numbers (% ownership and shares owned).

@nwoodman thanks for all the info. Learned lots (hate that when it happens ). The Greek economy looks like it is turning the corner with 8% growth in 2021 and 4% predicted for 2022. Lots of tailwinds for Eurobank.

Glider, thanks for posting. I noticed the stock was up to Euro0.90 yesterday and was wondering why . I think the rise in property prices in Greece (that is happening everywhere in the world) is really helping Eurobank in two big unexpected ways: - tailwind to NPE estimates - tailwind to their profitable and large property business unit (former Grivalia). Hopefully Eurobank is able to get the dividend re-instated in 2022. That will confirm to investors that they are indeed through the Great Greek Financial Crisis and starting to write the next chapter in their history. A big deal. And should be very profitable for investors for many years to come.

I thought it would be interesting to look at the investment portfolio of Fairfax at a very high level. And specifically everything except the bond/cash holdings. So equities, partnerships, derivatives (like the TRS) and real estate. So I am treating the TRS on FFH shares as a stock position of $827 million. Fairfax India is calculated as a $678 million position (shares owned x stock price). All stock prices are based on Oct 19 closing price. Needless to say this is not an exact science with some estimates coming from different sources (2020YE and Q2 reports). Yes, there are errors as I have not spend a great deal of time of digging through what is included in the ‘other’ buckets (like Digit preferred shares?). The goal is to put something together that is generally accurate to help us understand the size and composition of Fairfax’s equity holdings (and I say equity in the broadest of definitions - see below). Please let me know if you see any big mistakes. Estimate of Fairfax’s total investment portfolio = $45 billion ‘Equity Holdings’ defined: equity holdings + partnerships + TRS + real estate = $14.8 billion = 33% of total investments Some Key Take Aways (file is attached below): 1.) Fairfax has a VERY large number of holdings. I actually track 50 different holdings. That does not include the more than 25% of the portfolio that is included in the various ‘other’ and ‘partnerships’ and real estate buckets. 2.) Atlas is the largest single holding at $1.83 billion or 12.4% (of what I broadly define as the ‘equity holdings' bucket) 3.) Total limited partnerships was $2.1 billion (June 30, 2021) or 14.2%. Yes, a much larger position than Atlas. 4.) Emerging market positions = 16% of portfolio. This is large. India is about 2/3 of this total. This is not including Digit preferred shares. 5.) Eurobank is the #2 holding at $1.18 billion = 8.0%. Is Greece considered EM? If so, this would increase Fairfax’s EM weighting to 24%. 6.) Resource positions = 10% of portfolio. Also large. 7.) Blackberry is the #3 holding at $1.17 billion = 7.9% ($11.52 stock price was used; this number moves lots) 8.) FFH Total Return Swaps is the #4 position at $827 million = 5.6% 9.) Fairfax India rounds out the top 5 (#5 position) at $678 million = 4.6% ($13 stock price vs $20 BV 10.) Top 3 individual positions = 28% of total. 72% is invested in something other than Atlas, Eurobank and Blackberry. Not as concentrated as I thought. 11.) 4 of the 5 largest holdings look cheap to crazy cheap to me: Atlas at $14.66; Eurobank at Euro0.90; Fairfax at US$421; Fairfax India at $13. Despite the massive increase in the value of this bucket the past 3 quarters there is lots of upside left. Fairfax Equity Holdings Oct 19 2021.xlsx

@maxthetrade and @StubbleJumper thanks for chiming in… Bottom line, Q3 will be another very interesting quarter for Fairfax: 1.) size of catastrophe losses? 2.) top line insurance growth - still double digits? Rate vs exposure? 3.) how much longer will hard market continue for? 4.) annual update on reserving (i think this happens in Q3)? 5.) share of profit of associates: growing? 6.) Brit/CEO update? 7.) Riverstone / sale of 14% of Brit close: impact on financials (lower debt etc)? 8.) Eurolife - increase in ownership from 50 to 80% - impact on financials? 9.) Digit: is $46 gain in BV pushed out to Q4? 10.) GIG purchase of AXA closed in Sept 7; any impact on Fairfax’s financials? 11.) how do equity holdings perform inQ3? Any sales? Any new purchases? 12.) update on capital allocation moving forward? Do insurance subs have enough $ to grow on their own? Done repaying debt (i noticed another $85 million due in 2024 was repaid in Oct)? Are they ready to buy back stock in volume?

@maxthetrade has anything been published (news article?) on Brit’s exposure to German flooding?

I have said before that Brit is a watch-out for me. I do not understand the Lloyds platform (what its long term competitive advantages are). And Brit has underperformed most years since being acquired. The original CEO is long gone (he was also the guy who talked Fairfax into buying Bryte which has also been a chronic under-performer post acquisition). And CEO #2 just stepped down (leave) due to health reasons. This also makes me cautious when it comes to executing well something like Kai; just caution on my part. So we will see how Brit performed in Q3 The good news is Fairfax has owned the company for long enough that i would expect they understand what the issues are. And my guess is they will take any needed corrective actions. Allied is also on my watch list. Not because i expect issues. Just want to see a longer track record of solid performance to put it in the same category as Odyssey, Northbridge and Zenith.

Last year one of the earnings release announcements came out as late as the 24th (with earnings out a week later). My guess is the announcement will come in the next few days… But hey, feel free to speculate away

I do not understand what the problem is with the dividend as it is currently constructed. - Fairfax pays a US$10/share dividend. And they have paid it consistently since it was implemented (please correct me if i am wrong). - Yield is about 2.4%. Pretty good for today. - It is paid all in one shot (January). That is a little different but does it matter? - It has not been increased since being initiated. Given Fairfax’s earnings performance (minimal growth of BV) has been poor for years this is likely a good thing. Now as business performance improves in the coming years perhaps there will be demands from shareholders to start increasing the dividend in a more consistent way each year. (But my guess is most shareholders would probably favour share buybacks over a higher dividend right now). Does Prem benefit from the dividend payment? Yes. He is the largest shareholder, by far.

Thanks for posting. What i like about calculatedrisk is he is rational, fact based, open minded and balanced. “In conclusion, I agree with some of Zelman’s comments, but I’m skeptical of the “overbuilding” argument, and the “halt the market” is a clear exaggeration. Also I disagree with her apparent reference to prices falling (“top of the market”) . But I pay attention when Ivy Zelman speaks (and reconsider my views)!”

@Dean thanks for posting. The Tidefall write up is a very good concise summary of the opportunity Fairfax offers investors today. The transition of the equity portfolio to higher quality companies is further along than the letter suggests. This has been accomplished in many different ways: - Fairfax buying better: Atlas, Stelco are two recent examples - Fairfax selling poor performing holdings: APR - Fairfax fixing poor performing holdings: Fairfax Africa merger with Helios - Fairfax improving position of holdings: Grivalia merger with Eurobank, Dexterra reverse takeover of Horizon, Boat Rocker IPO - pandemic improving position of holdings: Atlas new build execution last 12 months has been breathtaking; windfall profits at RFP have allowed company to fix balance sheet issues; EXCO/nat gas spike? Fairfax has yet to reap its reward (in the form of higher earnings) for all the hard work done over the past 4-5 years of re-positioning and fixing its equity portfolio of companies. Many pot holes had to be filled in (often coming with a $50 or $100 million dollar cost each time). The pandemic then created a short term delay (given the type of equities Fairfax holds). The past 9 months has seen blowout earnings for Fairfax. It will be fun to see what earnings do over the next 12-18 months. Especially as we get more insight into what ‘normalized’ earnings actually looks like from insurance operations and investments. ———————- It would be an interesting exercise to grade each of the equity holdings (A, B, C, D, F) and then to give the overall equity portfolio at Fairfax a grade. Weight the company grades by size (% of overall equity holdings). And do this for each of the last 5 or 6 years. My guess is we would see a slow and steady improvement each year with 2021 receiving the highest grade. Grade: how has the management team performed the past 2 or 3 years? Is there a plan? Is profitability/free cash flow growing? How has free cash flow been deployed? Most importantly, how is company poised to perform the next 12-24 months? When i say ‘equity’ i would include everything except cash and bond holdings - so include shorts, deflation hedges and recent TRS position on FFH.

Fairfax’s most recent brand new equity investment was Foran Mining in August. Fairfax invested C$100 million and received 55.6 million shares (cost of C$1.80) and 16 million warrants (exercisable at C$2.09). Shares popped two days ago and closed today at $2.52. So Fairfax’s position has increased in price by C$45 million. Why? Positive drill results. Yes, early days. But a positive development with hopefully more to come. Chug, chug, chug… Foran Announces 70% Increase in Indicated Resources at McIlvenna Bay - https://finance.yahoo.com/news/foran-announces-70-increase-indicated-110000525.html VANCOUVER, BC, Oct. 14, 2021 /CNW/ - Foran Mining Corporation (TSXV: FOM) ("Foran" or the "Company") is pleased to announce an updated mineral resource estimate (the "2021 Resource Estimate") for the Company's 100%-owned McIlvenna Bay Deposit ("McIlvenna Bay" or the "Deposit") located in east-central Saskatchewan. The 2021 Resource Estimate outlines significant changes to the resource at McIlvenna Bay compared to the previous resource estimate published in 2019, with over 25,000m of infill and expansion drilling in 36 holes were completed since the prior estimate. To date, the Deposit has been defined by approximately 152,000m of drilling within 285 holes. ———————- Fairfax’s investment: - https://www.newswire.ca/news-releases/foran-mining-announces-completion-of-strategic-c-100-million-private-placement-by-fairfax-893112199.html “The net proceeds of the Financing will be used to rapidly advance the development of the McIlvenna Bay Project and centralized mill for the Hanson Lake District as well as further exploration on the Company's substantial land holdings, enable further investment in key technological and operational research and equipment, and for general corporate purposes.”

Xerxes, the investment advisor talking in the video explained pretty clearly why Fairfax stock is trading so low today: - Fairfax’s stock price has been a dog forever so it will continue to be a dog forever. - Analysis? ‘Black box’ and ‘Prem is a market timer’. - With the stock trading at US$400, investors should SELL this dog. Everybody listening should say ‘woof’. Who can argue with logic like that? And it was delivered with such conviction. I loved it. I think we are at the capitulation stage Not a word about - Fairfax’s actual business today - what it will likely earn this year and in 2022 - how its insurance business is positioned - how its investments are positioned - mention of Digit might even be warranted ALL that matters is the past. So why learn/discuss stuff that happened in the recent past? And certainly don’t discuss today - because it doesn’t matter! So we are at that really interesting stage with Fairfax. Issues driving poor past performance have largely been fixed. Business results are smoking. BV is spiking. Future prospects are very good (with both insurance and investments). Stock trading at US$400 (cheapest valuation, or close to cheapest, it has ever traded)

Greece has been an interesting geography for Fairfax for the last decade. And given the size of Fairfax’s two Greek investments (Eurobank and Eurolife) I thought it would be interesting to dust off a few old annual reports and learn a little more about how Fairfax got to where it is today. Fairfax’s 10 year history in Greece has had a couple of triumphs (Grivalia, Eurolife), one catastrophe (initial investment in Eurobank), continuing adversity and perseverance, heroes, villains, a depression, a pestilence, loyalty, creativity (merger of Praktiker with Eurolife) and years of hard work - it all reads like one of the books of the Iliad by Homer. So what does Fairfax have in Greece today? Eurolife: 80% ownership of a well managed and profitable insurance company; has about 10% marketshare in Greece. Eurobank: 32.4% ownership of a well managed bank that includes a very large and profitable property company (former Grivalia); its balance sheet fixed and profitability poised to jump as the Greek economy improves and real estate prices continue their multi-year move higher. Praktiker: 100% ownership - a Home Depot type business? Much smaller than the other two listed above. ———————— Eurobank Dec 31 2019 - Fair Value $1,164.4 million; Carrying Value (associates) $1,164.4; share of profit n/a Dec 31 2020 - Fair Value $799.9 million; Carrying Value (associates) $1,166.3; share of profit (-11.9) Eurolife Dec 31 2019 50% ownership - Fair Value 403.1 million; share of profit $154.8 Dec 31 2020 50% ownership - Fair Value 457.9 million; Carrying Value (associates) 336.2; share of profit 6.1 ————————— Below is a short summary of the odyssey of how Fairfax got to where it is today with its 3 large Greek investments. 3 investments? Read on… All good stories always start at the beginning. So… Why did Fairfax invest in Greece? Answer: Ireland. What? Fairfax had outstanding success investing in a distressed Irish bank (Bank of Ireland) in late 2011 after the Great Financial Crisis (I think they made +$800 million on this investment - tripled their money in a little over 5 years). And business partner, Kennedy Wilson, had great success investing in real estate in Dublin. So as the cash register was ringing on their Irish investment Fairfax saw similar opportunities in Greece. What was the timeline of the Greek purchases? 2011: purchased 3.8% position in Grivalia (Europroperties) run by George Chryssiko who is one of the heroes of this story the Greek journey begins Aug 2012: Grivalia (Eurobank Properties REIT) - Fairfax increased ownership from 3.8 to 18% for $50 million 2013: Grivalia (Eurobank Properties REIT) - Fairfax increased ownership to 41% for $20 million (plus?) Dec 2014: Eurobank: Fairfax makes initial investment of 400 million Euro with group of investors (including Brookfield, Wilbur Ross, Fidelity, Mackenzie, Capital Research and Management) unemployment rate in Greece in 2014 is 28%! Nov 2015: Eurobank recapitalization (forced by ECB, definitely one of the villains of our story Fairfax invests an additional 350 million Euro; ownership increases from 12.5% to 17%. 1 for 100 reverse share split; sold new shares for 1 euro. Aug 2016: Eurolife: Fairfax purchases 80% ownership; 40% to Fairfax for $181 million and 40% to OMERS for $181 million. purchased from Eurobank. Fairfax was aided in its bid by its ownership in Eurobank (viewed as being good partner); important to Eurobank because the bank was retaining 20% ownership and much of Eurolife’s business was transacted through Eurobank distribution channels. referendum in Greece in 2015; Tsipras/Syriza elected; Syria refugees 2017: Grivalia - Fairfax Increased ownership to 52.7% for $100 million 2018: Eurolife - Fairfax increased ownership to 50%; bought 10% from OMERS (whose ownership decreased to 30%) Nov 2018 (closed May 2019): Eurobank - Fairfax increases stake to 32.4% via merger with Grivalia Properties. all stock transaction valued at US$866 million Fairfax owned 18% Eurobank and 54% of Grivalia; on close Fairfax owned 32.4% of new Eurobank Grivalia paid 40.5 million Euro special dividend Eurobank launched property management business run by Grivalia CEO July 2021 Eurolife: increased ownership to 80% (purchased OMERS 30% stake for $142.6); Eurobank owns remaining 20% ————————- Other Greek investments: 2013 Mytilineos - 5% for 30 million Euro ($41 million) - sold in 2018? 2014 Praktiker Hellas AE - bought 100% for 21 million Euro - still owns? ————————- Why is Eurolife considered a gem? 2019AR: Through the crisis in Greece, we acquired a gem in Eurolife, a Greek property and casualty and life insurance company that operates predominantly in Greece but also in Romania. Alex Sarrigeorgiou has run Eurolife since 2004, following Eurobank’s decision to grow its insurance business, and we acquired it with OMERS as our partner in 2016. Since our initial 40% purchase of Eurolife in 2016 for Euro163 million, Eurolife has earned Euro347 million and paid dividends of Euro298 million and shareholders’ equity has increased from Euro400 million to Euro720 million at the end of 2019 after the payment of dividends. This phenomenal performance was predominantly because Eurolife had a significant holding of Greek government bonds whose rates went from 8% to 1% during that time period while its non-life business had an average combined ratio of 72%. We currently own 50% and equity account for Eurolife but plan to buy the rest of OMERS’ shares in 2020. 2020AR: Finally, in Greece, Eurolife has been an extraordinary investment for Fairfax. Writing both Life and Property/Casualty lines, the company in 2020 generated over $500 million of gross premiums written and produced net income of $130 million. Led by Alex Sarrigeorgiou, Eurolife has a track record second to none in the Greek market. ————————— Here is a little more information on Grivalia which is now part of Eurobank. With property prices on a multi-year move higher Grivalia is an important profit engine for Eurobank. 2017AR: In 2017, we raised our equity interest in Grivalia to 52.7% by buying 10.3% for $100 million when Eurobank decided to divest its interest in Grivalia. It has been six years since we first met George Chryssikos, the outstanding CEO of Grivalia. Through Wade Burton, we took our first position in Grivalia in 2011 at Euro5.77 per share. George has navigated the Greek economic crisis superbly by buying only the highest quality commercial buildings and shopping centres at huge discounts to replacement cost and unlevered returns of 8% to 10%, not using excessive leverage and always focusing on the long term. We are very excited to be partners with George and his team as they build a fantastic real estate company. Like Bill McMorrow at Kennedy Wilson, George has a unique nose for value in real estate! And like all our Fairfax companies, he is building a fine company, focused on its customers, looking after its employees, making a return for shareholders and gratefully reinvesting in the communities where it operates. Business is a good thing!! ————————— 2019AR: Merger of Grivalia Properties REIC and Eurobank Ergasias S.A. Early in 2019, Fokion Karavias (CEO of Eurobank) and George Chryssikos (CEO of Grivalia) came up with the idea of merging Grivalia into Eurobank, to strengthen the capital position of Eurobank, and accelerating its non-performing loan stock reduction through spinning out Euro7.5 billion of non-performing loans from the bank to its shareholders. We thought it was a brilliant idea but the process took time as it was subject to shareholder approval at Eurobank and Grivalia and regulatory approval from the ECB. As part of the same plan, Eurobank sold its non-performing loans management unit, FPS, to doValue S.p.A. (a public company listed in Italy) for Euro360 million. We expect all these transactions to close by March 31, 2020 and Eurobank to be well capitalized and on its way to earning 10% on its shareholders’ equity in 2020. Last year, Greece had an election in which the business friendly party of Kyriakos Mitsotakis won a majority in the parliament. As the new Prime Minister, Kyriakos has the opportunity to transform Greece by encouraging foreign investment into the country and by being business friendly. Ten-year Greek government bonds, which peaked at a yield of 37% in 2012, came down to 10% in 2016 and are now trading below 1%. Recently, Greece did a 15-year bond issue at 1.9% and a 30-year issue at 2.5%. The animal spirits are coming back to Greece and we think the Greek economy and Greek companies will thrive. Eurobank should benefit!! Our cost of 1.2 billion shares of Eurobank after the Grivalia transaction is now 94¢ versus a book value of approximately 135¢ per share post the transaction. At year end, Eurobank was selling at 68% of book value and 6.5x normalized earnings. We still believe it will be a good investment for us. On May 17, 2019 Grivalia Properties REIC (‘‘Grivalia Properties’’) merged into Eurobank Ergasias S.A. (‘‘Eurobank’’), as a result of which shareholders of Grivalia Properties, including the company, received 15.8 newly issued Eurobank shares in exchange for each share of Grivalia Properties. Accordingly, the company deconsolidated Grivalia Properties from the Non-insurance companies reporting segment, recognized a non-cash gain of $171.3 and reduced non-controlling interests by $466.2. In connection with the merger, Grivalia Properties had paid a pre-merger capital dividend of Euro0.42 per share on February 5, 2019. The company owned approximately 53% of Grivalia Properties and 18% of Eurobank prior to the merger, and owned 32.4% of Eurobank upon completion of the merger.