Viking

The investment thesis for Fairfax today is actually pretty simply: has Fairfax management learned from their mistakes of the past 7 or 8 years? 1.) shorting individual stocks and indices cost them billions (was it as much as $3 or $4 billion?). Today: Fairfax has closed out all short positions. And they have stated repeatedly and written it into their investment policy that they will not short individual stocks and indices moving forward. 2.) large insurance acquisitions - Brit and Allied - also cost billions at the time. These purchases were funded largely through equity raises which diluted existing shareholders. In addition Allied had one terrible year of underwriting (largely out of its control but it happened). And Brit has had multiple poor years of underwriting. Today: Fairfax has repeatedly stated that they are done with large insurance acquisitions. They have a global platform they are happy with. Growth in insurance moving forward will be primarily organic with smaller bold on acquisitions. Allied World is performing very well (fixed). Brit is a work in progress. I think Fairfax has also learned some other important lessons when it comes to how they invest. They are partnering more with what look to be strong management teams that have good long term track records. We see this with recent investments they have made and also with some of the fixes they are executing. My view is i think Fairfax HAS learned some valuable lessons. I come to this view from listening to what the management team has to say and reading what they write (the past couple of years). Fairfax has been under-earning for 7-8 years. Once they stop making the big mistakes (and a few of the smaller ones as well) i expect earnings to improve and perhaps dramatically. And if this happens, sentiment will also improve and the PE multiple will improve (likely 1xBV). We will see. Now if investors think nothing has changed at Fairfax (over the past 7-8 years) and think Fairfax will continue to have $1 billion blunders every year or two then, yes, it would be pretty dumb to put any money in the stock. Fairfax stock today is priced for this outcome today (more billion $ losses continuing into the future). Fairfax made billions with their CDS bet back in 2007-09. Was it repeatable? No. Fairfax lost billions with their short bet in 2003-2020. Is it repeatable? No. The past is useful only in how it informs you about what may happen in future. ———————————- Another important part of the investing decision is fit. Between investor and company. Fairfax has its own unique style when it comes to how it choses its equity investments. With some positions it likes to swing for the fence so volatility will be extreme. And there will be very visible strike outs (with the pitches apparently way out of the strike zone.) Fairfax also has a controlling shareholder and CEO who is not the best communicator. Prepare yourself accordingly

The Mosaic Capital take private transaction closed Aug 6. Fairfax is partnering with Mark Yusishen. Here is a little more information on the new jockey pulled from the Endeavours Group web site. Bottom line, Fairfax is making yet another move to better position an underperforming holding by taking it private and partnering with what looks to be external management. Encouraging. ---------------------------------------- Endeavours Group is a family-held private equity firm directed by Mark Yusishen. Since 1996 Endeavours Group has been engaged in acquisitions, now with operations across most of Canada and in parts of the USA. Our deep knowledge across markets, with decades of combined experience, along with our diversified portfolio, provides for superior results. We enable growth through strategic initiatives focused on efficiency and optimization enhancing our performance. Mark Yusishen - Managing partner | P.Eng | MBA Mark Yusishen is the Managing Partner of Endeavours Group. Beginning in 1996, Mark has purchased several operating companies, many directly managed by him. He demonstrates a proven track record, moving companies toward higher achievements and growth potential. He has extensive experience in managing multiple plant companies with cross border operations. Mark is responsible for leading the group’s acquisition focus, while maintaining strategic growth initiatives for the existing Endeavours Group entities. Mark has a wealth of knowledge in operations, including metal fabrication, woodworking and distribution, retail, commercial and industrial. By appointing a General Manager and Controller, typically from the original company, Mark maintains existing company relations while providing new opportunities for growth. His extensive operating knowledge provides a sound basis in assisting each General Manager to move the company forward. Mark is highly experienced with a reputation for conducting business with integrity and efficiency. He holds an Engineering degree and a Masters of Business Administration. https://www.endeavoursgroup.ca ------------------------------------ CPE News (6/28/2021) – Mosaic Capital Corporation (TSX–V: M) has entered into an arrangement agreement with 2356340 Alberta Inc. pursuant to which the 2356340 Alberta has agreed to acquire all of the outstanding common shares of Mosaic for $5.50 per share in cash for a consolidated enterprise value (inclusive of debt) of approximately $277.3 million. 2356340 Alberta is a newly formed private company owned by an entity controlled by Fairfax Financial Holdings Limited (TSX: FFH and FFH.U) and MCC Holdings Ltd., a company controlled by Mark Yusishen.

Xerxes, i actually followed Fairfax into Blackberry (RIM) when they made their initial purchase. By the third RIM conference call i could tell the two people running RIM were in over their heads. I sold my position at a loss (about 15% if i remember correctly). RIM turned out to be one of my best investment decisions ever i mean this seriously). Because it taught me about the cell phone industry. I think it was 12 months later that Apple got dirt cheap and i backed up the truck. Apple became by biggest winner ever with currency tailwinds also helping (Can was mid to low $0.90’s when i bought). From Apple (in terms of concentrated position) i toggled to the big US banks, initially JPM and then BAC. If you read the old BAC threads (2016/17?) i was beating the drum back then for BAC just like i am now for Fairfax today. To answer your question directly, yes, i would have been much better off holding my Apple position and pulling a Rip Van Winkle However, i do not look at things that way. When i make investment decisions i try and learn and flush. And move on. I don’t spend much time thinking about what could have been. When i sell out of positions i tend to move on (can’t remember the last time i posted on BAC). My portfolio has done very well over the years (average return has been about 15%) so my returns after selling my Apple position has still been solid. That is all i care about. The big move in Apple shares the past 2 years is primarily multiple explosion. So when i hear people talk about Fairfax and how its crazy low multiple today is permanent i am not so sure Definitely one of a few learnings taken from my experience with Apple shares.

A crazy part of the Blackberry purchase was through it Fairfax must have learned about the cell phone industry. And where the puck was going. And then Apple got wicked cheap in 2013 (Apple was almost hated as much by investors back then as Fairfax is now - Steve Jobs/innovation was dead; Tim Cook was a logistics guy not a CEO; hardware only company; Samsung was going to eat its lunch). Instead of pivoting into Apple, which had become a great value investment, Fairfax kept doubling down on BB. How did they miss that? Talk about opportunity cost.

Resolute Forest Products jumps out to me as a serious candidate. However, management at Resolute has done a very good job the past 2 or so years. The pivot to lumber was brilliant. And if new home construction in the US hits +1.6 million starts earnings could surprise to the upside. Bottom line, i actually like this holding at US$12. Fairfax has an interesting and diverse stable of commodity based holdings: Stelco (steel), Resolute (lumber, pulp, paper, tissue), Altius Minerals (fertilizer, mining royalties), AGT (grains), Astarta (Ukraine sugar, grains), and most recently Foran Mining (exploration, venture). ———————————————- 2018 AR: Resolute. We have invested $791 million in Resolute and received a special dividend of $46 million, for a net investment cost of $745 million. Our initial investment was a convertible bond purchased in 2008 for $347 million. We invested an additional $131 million prior to Resolute entering into creditor protection and most of the remainder during the period from December 2010 to 2013. Subsequent to write-downs and our share of profits and losses over time, at December 31, 2018 we held our 30.4 million Resolute shares in our books at $300 million ($9.87 per share). The current fair market value of these shares is $244 million ($8.03 per share). You can see that Resolute has been a very poor investment to date! 2019 AR: Last year I stated that Resolute has been a poor investment to date. I should have said, very poor!! Brad Martin chairs the Board at Resolute and he continues to work with management to find a path to increase shareholder value in a very tough environment for paper, pulp and lumber. Our net investment in Resolute is $745 million while the carrying value of our shares is approximately $200 million. 2020 AR: carrying value reduced to $134 million after non cash impairment charge taken of $56 million. Resolute Forest Products purchased three sawmills in the southeastern United States in early 2020, which turned out to be very good timing. During the pandemic demand for lumber has been strong, causing the price to spike to historic highs. Resolute’s share price rose from a low of $1.15 in March to recently trading above $9.50. In 2020 Resolute allocated capital to shareholders by repurchasing 6.9 million shares, or 8% of outstanding, at an average price of $4.28 per share. 2021 looks like a promising year for Resolute as lumber prices remain high, pulp prices show signs of strengthening and Resolute’s tissue business continues to develop.

I agree. I don’t think you can put together a list of ‘losing investments’ and not at lease mention the losses from the massive short positions from the past 7-8 years. All other losses are dwarfed by this slow motion train wreck. The loss was $2 billion net of gains in common stocks (at Dec 31, 2018) with more losses to come as recently as 2020. The good news for current shareholders is they will not be repeating this mistake as all short positions have been removed and will not be used in the future. And the damage done to the investor community over the past 7-8 years has created a wonderful buying opportunity today in the stock for new investors. Here is what Prem had to say in the 2018 AR letter: “In the past, to protect our equity exposures in uncertain times, we shorted indices (mainly the S&P500 and Russell 2000) and a few common stocks. After much thought and discussion, it became clear to me that shorting is dangerous, very short term in nature and anathema to long term value investing. As I mentioned to you in last year’s annual report, shorting has cost us, cumulatively, net of our gains on common stock, approximately $2 billion! This will not be repeated! In the future, we may use options with a potential finite loss to hedge our equity exposure, but we will never again indulge anew in shorting with uncapped exposure. Your Chairman continues to learn – slowly!!”

Is cybersecurity a big deal? Are we in the late innings? Blackberry is in the sweet spot with a few of its core businesses. And it looks to me like we are still in the early innings with lots of runway ahead. And as been mentioned already, Fairfax likely has a pretty good view of the company / industry and where the business is going over the next 12 to 24 months. So i do understand why Fairfax is not in a panic to unload. However, i also understand why shareholders are banging the table for a sale (especially those who have owned shares for years). There is simply too much emotional baggage with this holding… SELL and make the pain go away Emotionally, investors simply want to move on. personally, i hope Blackberry gets bought out

It looks like Fairfax’s next big swing could be infrastructure in India. This swing will include partners like OMERS. What is the conversion of 15,000 crore? US $2 billion?

The other aspect of the sale of Riverstone UK that deserves mention is fit. Riverstone UK is looking to grow dramatically and this would have been difficult for Fairfax one two fronts: 1.) funding the growth 2.) optics imagine the outcry from investors (and downgrades from analysts) if Fairfax put hundreds of millions in new money and brought significant new runoff liabilities onto its balance sheet? Clearly a bridge too far. So instead Fairfax found its runoff operation a home where it can realize its potential. This is no different than what Fairfax has been doing with its vast number of equity holdings (re-positioning them or finding them a new home where they can be more successful). Probably provides a little insight into why lots of people who know and work for Prem like him so much.

Now that the Riverstone UK sale has closed it is informative to look back. In 2008 the business had shrunk to 53 employees and $100 million in assets. Instead of winding the business down (the prudent thing for an insurer to do), Fairfax decided to go the other way and aggressively grow the runoff business. 12/13 years later Fairfax is selling the business for $1.3 billion (with the opportunity to earn another +$200 million). Bizarre (only an idiot would grow their runoff business!). Audacious. Very impressive. Riverstone UK is also a great example of hidden value; who at the end of 2019 valued Riverstone UK at $1.3 billion in their build of what FFH was worth at the time? No one i am aware of. Further, having a large runoff operation is usually a big negative when valuing an insurance company (it is not normal). So Fairfax was able to find considerable value in a hidden asset on its balance sheet that was never going to be appreciated by insurance analysts and most investors. There are parallels with the First Capital sale a couple of years ago (another under appreciated and grossly undervalued asset). Makes one wonder what other assets on Fairfax’s balance sheet are currently being undervalued by investors? ——————————- Here are the mentions Riverstone gets in the 2020 AR. They provide a great summary; sorry for the length. Page 6: Late in 2020 we announced the sale of RiverStone Europe (owned 60% by us and 40% by OMERS) to CVC Capital Partners. RiverStone Europe is an industry leader in run-off insurance services, and CVC’s scale and vision will give RiverStone Europe, under the continued leadership of Luke Tanzer and his management team, the opportunity to further grow the business. Nick Bentley and Luke are also very supportive of this transaction, based on their strong belief that it is the best way for RiverStone Europe to continue to grow and pursue run-off transactions. RiverStone Europe was born out of the acquisition of Sphere Drake Insurance Company. Due to performance issues, in 1999 it was put under the management of RiverStone. For the first ten years RiverStone Europe was kept busy with many of our own run-off portfolios including Sphere Drake Bermuda, Skandia UK, CTR and the Kingsmead Agency at Lloyd’s. By 2008 they drove down the reserves and were down to only 53 staff and $100 million in capital. Instead of closing the operations we pivoted from internal run-off to third party acquisitions. They did their first deal in 2010 and have never looked back. They have completed over 20 transactions bringing in over $5 billion of assets and producing a great return on capital, which allowed us to sell the company at $1.35 billion. RiverStone Europe is a great story of success, first directly under the leadership of Nick Bentley and then for the last twelve years Luke Tanzer. We wish Luke and all employees at RiverStone Europe much success in the future. Page 11: We began equity accounting RiverStone Barbados in 2020, so its investment portfolio is no longer consolidated. Within its investment portfolio are positions of many of the common stocks listed in the common stock holdings table above. For example, RiverStone Barbados owns 9.7 million shares of Fairfax India that are not included in the 41.9 million shares of Fairfax India we show in the common stock holdings table (combining both would give us 51.6 million shares or 34.5% ownership). The same can be said for a number of other holdings such as Atlas, BlackBerry, Commercial International Bank and Recipe. As part of the sale of RiverStone Barbados to CVC, we have the opportunity to purchase these securities over the next two years, at December 31, 2019 prices. Page 22: At our RiverStone run-off operations, led by Nick Bentley, while not recently active in U.S. run-off acquisitions (other than some small very successful captive insurance deals), the team has been very busy focusing on our U.S. legacy reserves, especially asbestos claims. Although we needed to strengthen reserves again in 2020 (about half of the previous year), the team continues to deliver significant value and savings from its dedicated focus and best in class experience – I can assure you these reserves are in good hands. As mentioned previously, late in 2020 we announced the sale of our remaining interest in RiverStone’s European business to CVC Capital Partners. Luke Tanzer and his entire team at RiverStone Europe had a very busy year, closing five run-off deals. They are excited to continue to expand in the very active UK run-off market, and again, we wish them all the best going forward. Page 107: Sale of RiverStone Barbados to CVC Capital Partners On December 2, 2020 the company entered into an agreement with CVC Capital Partners (‘‘CVC’’) whereby CVC will acquire 100% of RiverStone (Barbados) Ltd. (‘‘RiverStone Barbados’’). OMERS, the pension plan for Ontario’s municipal employees, will sell its 40.0% joint venture interest in RiverStone Barbados as part of the transaction. On closing the company expects to receive proceeds of approximately $730 for its 60.0% joint venture interest in RiverStone Barbados and a contingent value instrument for potential future proceeds of up to $235.7. Closing of the transaction is subject to various regulatory approvals and is expected to occur in the first quarter of 2021. Pursuant to the agreement with CVC, prior to closing the company entered into an arrangement with RiverStone Barbados to purchase (unless sold earlier) certain investments owned by RiverStone Barbados at a fixed price of approximately $1.2 billion prior to the end of 2022. Page 108: Contribution of European Run-off to a joint venture On March 31, 2020 the company contributed its wholly owned European run-off group (‘‘European Run-off’’) to RiverStone (Barbados) Ltd. (‘‘RiverStone Barbados’’), a newly created joint venture entity, for cash proceeds of $599.5 and a 60.0% equity interest in RiverStone Barbados with a fair value of $605.0. OMERS, the pension plan for municipal employees in the province of Ontario, contemporaneously subscribed for a 40.0% equity interest for cash consideration of $599.5, based on the fair value of European Run-off at December 31, 2019 pursuant to a subscription agreement on December 20, 2019, and entered into a shareholders’ agreement with the company to jointly direct the relevant activities of RiverStone Barbados. At closing on March 31, 2020, the company deconsolidated the assets and liabilities of European Run-off from assets held for sale and liabilities associated with assets held for sale on the consolidated balance sheet respectively, which included European Run-off’s unrestricted cash and cash equivalents of $377.8, and commenced applying the equity method of accounting to its joint venture interest in RiverStone Barbados. The company recorded a pre-tax gain on deconsolidation of insurance subsidiary of $117.1 in the consolidated statement of earnings, comprised of a gain of $243.4 on the disposal of 40.0% of European Run-off and a gain of $35.6 on remeasurement to fair value at the closing date of the 60.0% of European Run-off retained, partially offset by foreign currency translation losses of $161.9 that were reclassified from accumulated other comprehensive income (loss) to the consolidated statement of earnings. The deconsolidation of European Run-off increased the company’s non-controlling interests by $340.4 at March 31, 2020 as RiverStone Barbados holds investments in certain of the company’s subsidiaries as described in note 16.

Having said the above, i do think a change to Fed policy is likely coming in the next 6 months with timing uncertain (driven by strong economic growth, job gains etc). And if the Fed does nothing in the next 6 months it likely means growth is stalling out. Looks to me like the tail risks are growing so perhaps time to pay a little more attention to macro stuff.

I continue to think the key is central bank policy and fiscal policy from governments. And when it changes. And how markets reacts to the change (s). i do not see anything today that would warrant a change today (from their perspective). Markets will be hyper sensitive to any new news so the Fed speaking at Jackson Hole will be must watch TV. My guess is there will be no new news. Why? The Fed does not want financial markets to crater. And the US economy is facing headwinds from Delta/vaccine hesitancy (paranoia?) and this is slowing growth in the near term; in other words, a growth scare. Sept/Oct can be ugly months for shareholders… my guess is the Fed also understands the seasonal workings of financial markets. Things are starting to get quite interesting

Agreed. My point is significant excess cash is building on the balance sheet that is not needed (they are already flush with cash and marketable securities at $1,480 at end of Q2). With more coming. Looking forward to what they do with the excess cash Stock buybacks look like an easy decision. However, they could do other things.

US$700 Riverstone UK + $375 Brit = $1,075 million Repay revolver = $500 million Balance = $575 million Cash on hand at Fairfax at end of Q2 was close to $1.5 billion. We should see solid earnings in Q3. We could also see more monetization of assets. 30% of Eurolife was purchased in July for $142.6 million. Bottom line, Fairfax looks to be entering a phase where cash is building on the balance sheet. The question becomes what will it be used for? Stock buybacks are a very easy decision. For years Prem has talked a out buying back significant stock; i don’t think this is hyperbole. The top priority for excess cash for the past 24 months has been supporting the subs to take maximum advantage of current hard market. With the hard market looking like it is in the later innings perhaps stock buybacks will move up the capital allocation ladder. However, with hurricane season just getting started perhaps Fairfax holds off for a few months (or starts modestly). Stock buybacks look to me to be the most likely near term catalyst for FFH shares. There is not a lot of volume in Fairfax shares. So any buyback will likely push the price higher and perhaps materially. Perhaps we are at the beginning of the next phase of Fairfax’s rebirth: meaningful stock buybacks. ——————- The sizable total return swap giving exposure to 1.95 million FFH shares also will increase Fairfax EPS should FFH shares move higher. This holding creates kind of an interesting incentive for Fairfax management i.e. stock pops $50 = $100 million increase in pre-tax earnings… We also know Fairfax feels their shares are trading a crazy cheap valuation. Lots of very good reasons to start meaningful stock buybacks. And now they have the cash. And the insurance subs don’t need it (their equity holdings have all increased materially over the past 9 months).

Xerxes, thanks for posting. Yes, i did enjoy the lumber/Paul Rivette discussion i had never heard of GreenFirst before; sounds like a pretty crazy (high cost assets)/somewhat messed up transaction (shades of old Fairfax?). Big bet on higher lumber prices.

Here is a little more detail on EXCO. With oil prices trading +$60 they must be making good money these days. Free cash flow was $36 million in 2020; it must be materially higher in 2021. I hope EXCO becomes a good example of some of the purchases made by the old Fairfax: buy chunk of struggling business for cheap price, sink more money in it when things get worse, restructure and/or bankruptcy converting debt to equity, make a return on investment 5 or more years later ————————- Fairfax owns 44% of EXCO; private holding Valued at US$238 million at Dec 31, 2020 EXCO Bankruptcy Illustrates Power of Chapter 11 Restructuring Nov 2019 https://www.kirkland.com/-/media/publications/article/2019/11/new-york-law-journal-exco-bankruptcy-restructuring.pdf 2020 AR Page 28: Fairfax owns 44% of Exco, a U.S. oil and gas producer. Despite weak energy prices in 2020, Exco generated $128 million in EBITDA and $36 million in free cash flow. Net debt fell to $145 million (1.1 times EBITDA). Led by Chairman John Wilder and CEO Hal Hickey, Exco achieved these results through high field level productivity and company-wide cost control. In December, Exco recorded its 73rd month without a lost time incident. Exco’s Chairman, John Wilder, is a great partner. We are well served by his leadership. Page 70: On June 28, 2019 EXCO Resources Inc. (‘‘EXCO’’) emerged from bankruptcy protection and settled the company’s holdings of EXCO bonds with common shares, resulting in the company recording a net loss on investment of $179.3 (realized losses of $296.3, of which $117.0 was recorded as unrealized losses in prior years).

Makes sense. What i hope is that this deal removes the liability of the Toys ‘R Us retail business from Fairfax’s balance sheet. It would be interesting to know what the real estate is and what it is worth today

This sale is more good news. A few years ago Fairfax HO seems to have realized that they are not turn around experts. The problem, at that time, was they had a whole bunch of businesses, purchased over the previous 5 years, that needed help of some kind from Fairfax HO (gobs of money, strategy, management); some desperately. Solution? Step 1 was to stop buying these types of businesses. Recent Fairfax purchases, like Atlas and Stelco, have come with strong management teams. Lesson learned. Step 2 was to get each of the struggling businesses into a position where they were able to succeed with minimal financial / management support from Fairfax HO. Sometimes this meant partnering with strong external management teams like Helios (Fairfax Africa) and Atlas (APR). Sometimes it was a complete restructuring of the company, like EXCO Resources. Sometimes it was to bring the company in house, like with AGT. Sometimes it was a merger of Fairfax controlled companies, like Eurobank and Grivalia. Sometimes it was a sale, like Easton baseball (and new ownership stake in Rawlings, the leader in the category). Sometimes it was a reverse takeover, like Dexterra’s takeover of Horizon North. Sometimes it was an IPO, like Farmers Edge and Boat Rocker. My guess is the recent Mosaic transaction is driven by a desire to get that company into a position where it can better succeed moving forward; we will see. For the past 2 to 3 years Fairfax has been on a steady path of getting all the companies in its equity portfolio fixed and positioned to be successful moving forward with solid management teams and business strategies in place and strong financial positions. It is rather impressive when you look at all that has been accomplished and how much better positioned each of these companies are today. Toy’s R Us is just the latest example. Carve out the retail operations, which clearly are not core to Fairfax, and sell to Putnam Investments, a company much better positioned to manage the retail asset moving forward. Any future royalty streams is just a bonus. And what does Fairfax keep? The real estate assets. Smart. Clean. Positions Fairfax very well moving forward. Chug, chug, chug…

Petec, i like to follow what Fairfax is spending new $ on. Here are two purchases in Q1 and one from Q2 and one from Q3. The Mosaic transaction is also interesting; no new money involved here (I have no opinion). I really like the investments in Singapore Re and Eurolife; no brainers with high probability of working out for Fairfax shareholders in the future. Singapore Re will likely allow Fairfax to scale up Its business in Asia. And Eurolife looks like a cash machine and fits with Eurobank (who owns the remaining 20%). I know very little about Helios so have no opinion on that investment. Thomas Cook India is currently a distressed asset (and will be until India gets to the other side of covid). Bottom line, i see no red flags with how the cash is being spent at Fairfax. 1.) Thomas Cook India preferred shares During the first quarter of 2021 the company invested $60.0 in Thomas Cook India preferred shares through a private placement. This intercompany shareholding is eliminated in the company's consolidated financial reporting. 2.) HFP unsecured debentures and warrants On March 31, 2021 the company invested $100.0 in HFP unsecured debentures and warrants as described in note 6. In Q2: 3.) Additional investment in Singapore Reinsurance Corporation Limited On June 17, 2021 the company increased its ownership interest in Singapore Reinsurance Corporation Limited ("Singapore Re") from 28.2% to 94.0% for $102.9 (SGD 138.0) through the completion of a public cash offer and commenced consolidating the assets, liabilities and results of operations of Singapore Re in the Fairfax Asia reporting segment. Singapore Re is a general property and casualty reinsurer that underwrites business primarily in southeast Asia. In Q3 4.) Acquisition of Eurolife FFH Insurance Group Holdings S.A. On July 14, 2021 the company increased its interest in Eurolife FFH Insurance Group Holdings S.A. ("Eurolife") to 80.0% from 50.0% by acquiring the joint venture interest of OMERS, the pension plan for Ontario’s municipal employees, for cash consideration of $142.6 (€120.7). The remaining 20.0% equity interest in Eurolife continues to be owned by the company's associate Eurobank. The company will commence consolidating the assets, liabilities and results of operations of Eurolife in its consolidated financial reporting in the third quarter of 2021. Eurolife is a Greek insurer which distributes its life and non-life insurance products and services through Eurobank’s network. ————————- The Mosaic transaction is material, although does not involve spending new cash: Proposed privatization of Mosaic Capital Corporation On June 25, 2021 Mosaic Capital entered into a privatization arrangement with a third party purchaser pursuant to which the company will exchange its current holdings of Mosaic Capital debentures and warrants, and cash of approximately $11 (Cdn$13.3), for approximately $132 (Cdn$163.3) of newly issued Mosaic Capital 25-year debentures. The company will also acquire a 20.0% interest in the purchaser for approximately $4 (Cdn$5.0). Closing of the transaction is subject to regulatory and shareholder approvals and is expected to occur in the third quarter of 2021. The company anticipates that upon closing it will deconsolidate Mosaic Capital and commence applying the equity method of accounting to its interest in the purchaser in its consolidated financial reporting. Accordingly, at June 30, 2021 Mosaic Capital's assets of $185.5 and liabilities of $109.4, comprised principally of accounts receivable, intangibles, borrowings and accounts payable and accrued liabilities, were presented on the company's consolidated balance sheet in assets held for sale and liabilities associated with assets held for sale respectively.

Glider, not to worry. Getting answers to specific questions can take some time and as better sources are found more accurate answers emerge. Thanks again for figuring this one out One of the things i am very happy with is Fairfax appears to want its various equity holdings to stand on their own two feet (financially speaking) moving forward. If the equity holdings need cash, get it from somewhere other than Fairfax - the debt markets or via iPO (Farmers Edge and Boat Rocker) not Fairfax. So the equity holdings need to be profitable (generate needed cash internally); this is, of course, the best way to get needed cash . I might be off base, but it appears to me Fairfax has been weaning its equity holdings off of the Fairfax teat for a few years now. I think this was also part of the rational for fixing / merging problem children like Farifax Africa with Helios and APR with Atlas - find a good solution to a problem that also turns off the cash tap running back to Fairfax. Of course Fairfax will need to sink $ into some of the equity holdings; Thomas Cook being a recent example (although the $ came with a benefit for Fairfax). i think we are getting closer to the point where the equity holdings collectively will become solid sources of cash for Fairfax versus significant users of cash (as was often the case in past years). PS: another small example of this is Recipe’s recent sale of Milestone’s restaurants. And their closing of 100 poorly performing locations (various banners). There appears to be a heightened focus on ‘optimization’ and profitability. Recipe wants to grow certain banners and it now needs internally generated profits/money to do so… Not getting bigger via acquisitions to realize nonexistent synergies. It is a common theme listening to the quarterly calls of the various equity holdings. Optimization/profitability/free cash flow generation. And it is music to my ears

Glider, thanks for the details on Farmers Edge. Hopefully Farmers Edge figures things out. Early days. And Fairfax is not going to hit on every investment they make. Was it Peter Lynch who said hitting on 6 out of 10 investments should do the trick? We will see…

Until i see hospitalizations rates spike for vaccinated people i will remain optimistic. The key all along has been to implement measures to ensure the virus does not overwhelm your health care system (and cause a spike in deaths). Vaccination appears to be the most effective tool. Here in Canada my guess is we will see vaccination rates hit 75% of total population in the next month or so. i am now in the ‘how to live with covid and have a quality life’ camp. Let’s go! What would it take to get me concerned? A variant that current vaccine’s are not effective against. From an investment perspective, i wonder if all the current hand wringing about Delta is not a big head fake (nothing burger). If so, once the market figures it out in another month or so, perhaps the value/reflation trade gets turned back on and we are off to the races again. The other thing i wonder about is where economic growth in the globe goes from here. You almost have a bifurcation: countries who vaccinate and countries who do not. Lots of countries appear slow out of the gate regarding vaccinations; my guess is as more time progresses they will see the value of vaccinations and get with the program. This should lead to a slow staggered increase in global economic growth well into 2022.

bearprowler, yes, the size of the decline in Farmers Edge has been pretty crazy (share price % and market cap). I just listened to the Q2 conference call. It appears they missed expectations in Q1 and followed that up with another miss in Q2. Sounds to me like they are still in their infancy / trying to figure things out. Like a start up. And selling to farmers, who tend to be a pretty conservative, slow moving group (good luck forecasting technology adoption / carbon capture innovations with that group). And the business is very seasonal and tied to the weather. And if you miss a season (like with a delayed or late new product launch), it can be another 12 months before you get another shot. And it sounds like the competition is heating up. Bottom line, it will likely be another year before we have an idea what kind of a business Farmers Edge is (product lines, sales, profitability). Bottom line, they might connect on one or more of their products and hit a home run. They certainly have a lot of irons in the fire. Makes sense to me that consolidation will also come in to play at some point. ——————————- Does anyone know what Farmers Edge is carried at by Fairfax? I looked in the Q2 report and it is captured in ‘Other’ with a few other companies like Boat Rocker; the ‘Other’ bucket has a total value of US$375 million.

Yes, i saw the steep sell off today. CFO resigning after 1 year with company? (Former CFO is returning out of retirement). They also made a smallish US acquisition? Strategy issues? Growth issues? Of all of Fairfax’s current equity investments this is the one that i have the least visibility on; to be fair i have also spent very little time on it. I’ll give the Q2 call a listen this weekend As a reminder, here is what Fairfax had to say about the Farmers Edge IPO in the Q2 report: “During March 2021, Farmers Edge completed an initial public offering for Cdn$143.8 ($113.8). Prior to the initial public offering the company exercised its warrants and converted its convertible debentures for common shares of Farmers Edge and another third party converted its convertible debentures for common shares of Farmers Edge, resulting in the company's controlling equity interest in Farmers Edge increasing to 59.9% on completion of the initial public offering and capital transactions.

Thanks for posting Fairfax owns 47.6 million shares of Quess. At sale price of 900 rupee i think this would put total position in Quess worth about US $575 million (before sale). This is a very large position for Fairfax. 3 million shares were sold by Fairfax = 6.3% of total position for proceeds of about US $36 million. It will be interesting to see if this transaction is a one off or if it is the start of Fairfax perhaps getting more aggressive in monetizing the significant increases we have seen the past 10 months in most of their equity holdings. And equally interesting to see is what they do with any proceeds. PS: Quess shares were trading at 400 rupee in Nov of 2020; most of the Indian investments are up +100% as well. Pretty amazing rebound. What is especially encouraging is the business results being delivered by the various Indian investments; Quess had 25% growth in top and bottom lines this past quarter.