Viking

Further evidence that the insurance industry is in the midst of a hard market. Looks like reinsurance is starting to participate. January Renewals Saw Some of Sharpest Price Hikes in Recent Years: Howden - https://www.insurancejournal.com/news/international/2021/01/06/596323.htm Lower investment yields, adverse catastrophe loss development, higher loss cost trends, concerns over climate change, and, of course, the pandemic coalesced to bring some of the sharpest price increases in recent memory during the Jan. 1 reinsurance renewals, according to Howden, the London-based insurance broker. “The result is not only significantly higher pricing, but also more restrictive terms and conditions,” said Howden in a report titled “Hard Times. How a pandemic, record low yields, and climate-driven cat losses have changed the (re)insurance market.” The report’s key findings on reinsurance renewals include: - Howden’s Global Risk-Adjusted Property-Catastrophe Rate-on-Line Index rose by 6% at Jan. 1, 2021. This was higher than the flat outcome of 2020, and the biggest year-over-year increase in over a decade. COVID-19 loss experience, along with yet another hyperactive natural catastrophe year, were key inflating drivers. - Programs in North America led the charge at Jan. 1, 2021, with an average rate-on-line increase of 8.5%. Pricing pressure was more subdued outside the United States. - A significant turning point was reached in Europe where with rate rises in the low-to-mid-single digit range were seen. - Another year of constrained capacity in the retrocession market saw Howden’s Risk-Adjusted Non-marine Retrocession Catastrophe Rate-on-Line Index rise by 13%. Four consecutive years of price increases have seen the cost of retrocession protection return to levels last recorded in 2012/13. - Casualty reinsurance rates-on-line, including adjustments for exposure changes and ceding commissions, rose by 6% on average at Jan. 1, 2021. - Rising rates on underlying business, especially in the U.S., mitigated pressure on ceding commissions somewhat, although outcomes varied depending on book performance. Reinsurers were resolute in pursuing higher pricing for excess-of-loss programmes, although there was again some degree of differentiation to account for portfolio characteristics and profitability.

If backed up by science, this could be another game changer :-) Moderna CEO says COVID-19 vaccine protection may last years - https://www.cbsnews.com/news/covid-vaccine-last-years-moderna-ceo/ Moderna's CEO said the company's new COVID-19 vaccine may prevent infection for years. While speaking at a virtual event by Oddo BHF, a financial service group, Moderna CEO Stephane Bancel said the once-believed "nightmare scenario" that the vaccine won't work is now out the window. "We believe there will be protection potentially for a couple of years He explained that the "antibody decay generated by the vaccine in humans goes down very slowly," Reuters reports.

John, as others have posted, it was very sad to hear of the passing of your brother. I have two and can’t imagine what you are going through. Our thoughts are with you :-)

January and February should see lots of new news regarding the vaccines. Hopefully we get good news from J&J and their trial. For those vaccines who are approved the question is how much can be produced and how fast. We should see lots of upwards revisions to supply numbers as highly motivated governments move to support incremental production. The latest example is Europe and BioNTech. Very encouraging. —————————— BioNTech founders warn of COVID-19 vaccine supply gaps - https://www.theglobeandmail.com/business/international-business/article-biontech-founders-warn-of-covid-19-vaccine-supply-gaps/ The United States ordered 600 million doses of the BioNTech/Pfizer shot in July, while the EU waited until November to place an order half that size. After publication of the interview, BioNTech said it was in talks with Brussels on boosting output “We are in productive discussions with the European Commission on how to make more of our vaccine in Europe, for Europe,” a spokeswoman said. NEW PRODUCTION BioNTech hopes to launch a new production line in Marburg, Germany, ahead of schedule in February, with the potential to produce 250 million doses in the first half of 2021, said Sahin.

With a minority government the Liberals will not be taxing capital gains on principal residence sale. If it happens it will be VERY unpopular. So if it happens it will be years down the road when the government is broke and is desperate. Canada, at the Federal level, is not in terrible shape (yet) from a total debt outstanding perspective. Now if we get a few more $350-$400 billion fiscal deficits per year moving forward this will change.

That comment made my day :-) I am actually thinking of doing the opposite. Gotta love how smart people can look at the exact same situation and see two completely different solutions / ways forward. No right or wrong. The key is fit. Finding a solution that works for you. Best of luck! you are thinking of exiting real estate (in Vancouver?) and entering the stock market? i’m definitely not smart financially. thx to this board (all the contributors and educators and the administrator Sanjeev of course) — i have had some fun while keeping my capital and some :)) Gary, I posted my reply to the real estate thread (Garth Turner :-)

That comment made my day :-) I am actually thinking of doing the opposite. Gotta love how smart people can look at the exact same situation and see two completely different solutions / ways forward. No right or wrong. The key is fit. Finding a solution that works for you. Best of luck! you are thinking of exiting real estate (in Vancouver?) and entering the stock market? i’m definitely not smart financially. thx to this board (all the contributors and educators and the administrator Sanjeev of course) — i have had some fun while keeping my capital and some :)) gary, I have learned over the years that I am smart as a stump when it comes to real estate. Dumb luck explains my current situation. When I bought my current residence in Langley (2010) I paid about $600,000 and thought the market might be in a bubble. My mortgage was a little under $400,000 so my starting equity was $200,000. This spring my house might sell for $1,300,000 (perhaps more). My mortgage is under $330,000. With closing costs, costs to break my mortgage and moving costs if I sold this spring I think i might net about $900,000. I started with $200,000 so this would be a $700,000 tax free gain in 11 years (no taxes on principal residence in Canada). Locking in $700,000 real estate gain (tax free) appeals to me. Adding $900,000 to our existing investment portfolio my wife and I will be set up very well financially. If I can earn 6-8% on the total portfolio (my long term average is a shade under 15%) we will be set financially. Another smaller factor is our current house will need some improvements in the coming years. If we stay my guess is we will spend about $70,000 in improvements in the next 5 years (new windows, garage door and motor, plumbing upgrades, new powder room, new kids bathroom, new kitchen etc). We have a nice house... but it will need some work :-) The second part of the equation is lifestyle. Where we live today is a great area to bring up kids: quiet street, great schools (all walking distance), parks, bike trails, newer rec center, shopping close, great sports programs and sports facilities. Great suburban living (50 minutes from downtown Vancouver). Except our 3 kids will all likely be in same University (UBC, on the other side of town) in Sept. My wife and i will be entering the next phase of life (no kids at home; no kids sports activities to keep us busy in the evenings etc). We are thinking it might be great to live in the fun part of Vancouver (close to UBC) for the next couple of years: rent a house ($4,500/month, perhaps more). And be closer to the kids (at school) and spend the next couple of years exploring and getting know the fun parts of urban Vancouver (beautiful city). Actually, this is more what I am thinking; I just broached the idea with my wife and she needs some time to wrap her head around it :-) We have talked about it for the past 6 months or so but I decided it was time to kick it up a notch when I saw what recent sales were going for in my area. We are in no hurry. Historically we have moved every 5 years or so; 11 years in one place is a record for us. The goal is two fold: 1.) improve our lifestyle 2.) lock in / perhaps improve our financial situation No firm decision :-) When we have made moves like this in the past, it normally takes us about 12-18 months for the decision to come into focus. Every move we have made has been a great decision (looked at with hindsight). If we stay I will be happy.

My return for the year came in at 15.6% (a shade better than my long term average). VERY happy. I started the year heavy Fairfax so it could have easily been a tough year. At the time the pandemic hit capital preservation was my key objective: so mission accomplished. I was also heavy cash for large chunks of the year. I did more trading in 2021 than ever before. My gains were made in mostly two time periods each time with a basket of stocks: late March/April (tech, dis, nike, sbuck etc - which I sold way too early) and then Nov (more cyclical stuff). Shifting most of my portfolio back to CAN$ during the year also helped (CAN$ strengthened by a couple of % vs the US$).

That comment made my day :-) I am actually thinking of doing the opposite. Gotta love how smart people can look at the exact same situation and see two completely different solutions / ways forward. No right or wrong. The key is fit. Finding a solution that works for you. Best of luck!

Here is an update on Fairfax equity positions to Dec 31, 2020 (see Excel spreadsheet below for details). My math says the holdings have increased in price by about $1.4 billion (+36%) during Q4. Very good increase for a quarter. Of this total about $350 million should flow through to earnings (pre-tax) or around $10/share after tax. Does this look about right? Top Holdings 1.) Seaspan $976 (not including warrants) 2.) Eurobank $796 3.) Fairfax India $495 4.) Quess $366 5.) Recipe $357 6.) Blackberry $310 (not including debentures) 7.) Commerce International Bank $289 8.) Kennedy Wilson $239 9.) Stelco $232 10.) Dexterra $162 11.) Thomas Cook India $160 12.) Resolute $159 13.) Helios Fairfax $145 (if Fairfax owns same number of shares) 14.) IIFL Triplets $125 BDT Capital Partners - do they still own this? Other investments: AGT, Toy 'R Us, Peak Performance, Farmers Edge and many more Other insurance investments (equity accounted): Gulf Insurance Group, Digit, Eurolife, Pet Health, Riverstone UK (sold 60% position for $750 million - will close in Q1 2021) - what are the value of each of these businesses? Worth looking into :-) Fairfax_Equity_Holdings_Dec_31_2020.xlsx

From 2021 Stock Pick Thread Viking, arent we already past recovery in stocks? I thought many markets were at all time highs (some names in the hospitality, air travel industries that I follow are now higher than before the February/March crash!). MSCI India closed the year 15% up. And if I heard correctly, value had performed well at last. Anyway, good luck with the pick! ————————— My response: Yes, the stock averages are trading at new record highs. However, looking under the hood, it looks to me like there is a bifurcated market. Some stocks trading at very high multiples and another group of stocks trading at much lower multiples (lots of cyclicals in this bucket). Assuming the vaccine roll out is successful over the next 6-12 months my guess is we should see economic activity improve. As the recovery takes hold, earnings for cyclicals should pick up and this should result in higher stock prices. Looking at Fairfax’s stock portfolio: 1.) Atlas, trading at $10.84 looks cheap. It was trading at $14.21 a year ago. The company stronger today than a year ago. My guess is 12 months from now sales and profit will continue to grow. This company is over 20% of Fairfax’s equity portfolio. 2.) Eurobank, trading at € 0.58 looks cheap. A year ago it was trading at €0.92. Over the past year they have been able to hive off a large chunk of underperforming loans. Company is positioned well should we see an economic recovery in Greece. This stock is around 13% of Fairfax’s equity portfolio. 3.) the basket of Indian holdings also look cheap to not expensive: Fairfax India (cheap), Quess and the three IIFL triplets (not expensive). Especially if we see US$ weakness/emerging market strength over the next year. 4.) CIB (Egypt), Kennedy Wilson both look cheap at current prices. 5.) Stelco has been on fire. My guess is the stock will continue to march higher if steel prices remain high. 6.) Blackberry is starting to look like it might be getting some traction. They are in a lot of very sexy spaces. Stock is not expensive and if they actually execute well the stock currently at $6.63 could be crazy cheap. 7.) Recipe: i am even warming to Recipe. Lots of mom and pop restaurants have been put out of business because of the pandemic. My guess is Recipe has, during covid, culled the weak franchisees from their system. When we get to recovery in 2H 2020 i expect full service restaurants to perform exceptionally well (first thing people will do post covid is eat our more... easy, cheap way to reward yourself. ) This is Recipe’s sweet spot. The surviving restaurant chains should do exceptionally well. And they all now have a new revenue stream moving forward - takeout. I expect system sales to do very well at Recipe and this should materially increase royalty payments flowing to Recipe. Fairfax also has a number of other holdings that should do better/well moving forward. And we may see further monetizations in 2021. 1.) AGT: this business may be performing very well. This is a company to watch given its size and potential value to Fairfax in a sale. 2.) Farmers Edge, Performance Sports (Bauer Hockey), Toys R Us (real estate) and a bunch more. If we get a broad based economic recovery in 2021 there are many businesses under the Fairfax umbrella that will benefit. This will result in improving earnings for Fairfax: 1.) mark to market investment gains (on stock holdings) 2.) higher dividend payments to Fairfax 3.) higher earnings from associates (potentially much higher) 4.) higher realized gains on asset monetizations

Viking, arent we already past recovery in stocks? I thought many markets were at all time highs (some names in the hospitality, air travel industries that I follow are now higher than before the February/March crash!). MSCI India closed the year 15% up. And if I heard correctly, value had performed well at last. Anyway, good luck with the pick! Eliott, i am going to post my reply in the Fairfax equity holdings thread :-)

Arch had an investor day in Dec. They said much of the new capital coming in to the industry was from PE firms. They called this ‘informed/thoughtful’ capital. If an acceptable return is not possible the capital will not be deployed. ——————- Regarding the hard market, they said there is currently a lot of ‘momentum’. - industry ‘understands’ they need rate increases. 1.) investments are going to continue to be a headwind with bond rates so low 2.) social inflation cost trends continue to ge a headwind 3.) pandemic is a headwind (globally) Rate increases are a tailwind; however it will take time for rate increases to be earned and for margins to improve. Investors will need to be patient.

Same pick as a year ago - high conviction as the stock is down 30% and underlying business is not worse. Below is what i wrote a year ago with edits to make it current. ————————————- Fairfax; reasonable risk/return bet. Growing BV should also lead to higher multiple. I am looking for a 10-15% return in 2021. 1.) Trading at about < 0.80 x BV (not expensive) when compared to other insurers. BV should increase nicely in Q4 (underwriting and good equity markets) and recently announced UK Riverstone divestiture will add $750 million in cash in Q1 2021. 2.) Insurance pricing is officially in hard market: should continue to grow written premiums at double digit levels in 2021 3.) Bond portfolio is positioned at short end of curve; will benefit if rates in US continue to rise 4.) Equity portfolio looks cheap; will benefit if we get a recovery trade/risk-on in equity markets in 2021 (especially Indian holdings and Eurobank). 5.) Sentiment in company is likely at all time low. 6.) Near term catalyst: will pay US$10/share dividend in January This article sums FFH as an investment pretty well (hat tip Wisowis): https://www.woodlockhousefamilycapital.com/post/the-horse-story "(FFH can reach 10% by following a number of roads. For example, one road requires a ~95% combined ratio and ~5% return on its portfolio. That seems do-able.) Anyway, a consistent 10% would grow book value at a decent clip and then you’d likely get an additional lift from the valuation even if the stock moved just to 1.2x book. As RayJay reports, a comparable set of North American insurers with an 11% ROE trades for 1.7x book value per share."

From my perspective, the great lesson from 2020 is to follow the facts.... and when the facts change update your portfolio accordingly. Fairfax was my top pick at the start of 2020. Once the pandemic hit and it was clear a severe recession was coming, i sold 100% of my position. Recently, i am once again back in Faifax in a big way... but at prices +30% lower than where i sold in late Feb. Capital preservation is a second very important lesson. Very hard to recover from very large losses.

Agreed! Thanks again to Sanjeev for running this board for many, many years - often a thankless task! The investment returns i have been able to achieve over the years have been life changing. And without this board my guess is my returns would have been much lower. So i am VERY thankful to everyone who takes the time to post their thoughts :-) And a ‘shout out’ to members from the past like bsilly... who have provided words of wisdom to help us through the dark days when Fairfax was under attack from short sellers. To all have a great New Years celebration tonight and best wishes for a prosperous 2021 :-)

News on the vaccine front continues to get better. Every month moving forward the news should get better... more companies with approved options. Leading to more good news as bottle necks are removed and ‘estimated production capacity’ gets revised upwards. Amazing what can happen when government/business/people interests get aligned and money is readily available :-) We have two ‘stars’ already approved; they just can’t produce enough doses for the globe: 1.) Pfizer-BioNTech 2.) Moderna Looks like we will (March?) be able to add one more to the approved list (North America/Europe): 3.) Oxford/AstraZeneca - https://www.nytimes.com/2020/12/30/world/europe/uk-covid-19-vaccine-oxford-astrazeneca.html?action=click&module=Top%20Stories&pgtype=Homepage ...Britain on Wednesday became the first country to give emergency authorization to the coronavirus vaccine developed by AstraZeneca and the University of Oxford, clearing the path for a cheap and easy-to-store shot that much of the world will rely on to help end the pandemic. ....Britain’s two moves on Wednesday — authorizing an easy-to-make, easy-to-deliver vaccine, and delaying second vaccine doses — offered one blueprint for how to ramp up inoculation campaigns that have so far been entangled in logistical and manufacturing problems there and in much of the West. The Oxford-AstraZeneca shot is poised to become the world’s dominant form of inoculation. At $3 to $4 a dose, it is a fraction of the cost of some other vaccines. And it can be shipped and stored in normal refrigerators for six months, rather than in the ultracold freezers required by its rivals, making it easier to administer to people in poorer and harder-to-reach areas. ....Instead of administering the two vaccine shots within a month as was originally planned, clinicians in Britain will wait as long as 12 weeks to give people second doses, the government said. Clinical trials of the Oxford-AstraZeneca vaccine had already subjected participants to delayed second doses, with most participants in the British trial being given the two doses at least nine weeks apart. British regulators said on Wednesday that the first dose of the vaccine had 70 percent efficacy in protecting against Covid-19 in the period between that shot taking effect and a second shot being administered, though those figures held for a limited subset of trial participants and have not been published. ...And Argentina quickly followed Britain in authorizing the Oxford-AstraZeneca shot, with India expected to do the same soon. ————————————- Two other vaccine’s are also at the ‘in arm’ stage. The more options available the better. 4.) China 5.) Russia ...China said clinical trial results showed high efficacy for one of its vaccine candidates, an announcement that hastened the global rollout of hundreds of millions of doses of Chinese vaccines but was short on crucial details. Russia’s Sputnik V vaccine, long criticized for being introduced prematurely, also began use this week in Argentina, Belarus, Hungary and Serbia, the first other countries to begin injecting it en masse.

In terms of demand for housing pre-covid Greater Vancouver was seeing population growth of something like 60,000 per year (immigration + people moving from other parts of Canada and the province). This number will be larger if Trudeau increases the number of immigrants coming to Canada the next few years. There are also likely 30,000 - 40,000 international students (my guess) most of whom have left but will return. Post covid, yes, there will be solid incremental demand for both rentals and purchases. ———————————— Yes, many people in Vancouver have rental units in their single family homes. This has been the case in Vancouver for decades (not a new development). On my street alone at least 10 houses that have basements rented out (separate entrance, kitchen, 1 or 2 bedrooms). These are called ‘mortgage helpers’. It is interesting how the market continues to morph; people are very creative in adjusting to higher prices.

My comments are directed at the single family home segment 1.) very low supply - few people want to move out of their house during covid 2.) very high demand - people (especially those with kids) want to move out of their smaller place and into something larger 3.) historically low interest rates - variable rates available under 1% and 5 year fixed rates under 2%. 4.) governments (federal and provincial) highly motivated to keep housing as engine of economic growth especially while pandemic is here My guess is the spring selling season will see prices setting new record highs; forecast is 8% increase in pricing in 2021 and my guess is this will be low. Monopoly money :-) Real estate is increasing in value pretty much non-stop since 2000 in Vancouver and Toronto. Price increases of $100,000 - $150,000 per year is now normal. Cash flow? Who cares. Price appreciation makes any purchase look like a no brainer investment. I know lots of people who own multiple residences. Owning real estate is as close as an average person can come to printing money legally. —————————— - a recent example: my neighbour (Langley) listed his house 2 weeks ago. 2,550 sq ft; great condition; cul-de-sac; close to very good schools. It was listed for $1,350,000. He immediately had three offers and it sold for $1,390,000. He is moving to new brand new larger house on a larger lot in south Langley.

Two wonderful contrary indicators that Fairfax's stock price will do well in 2021 and 2022! Mark my words. Cheers! Fairfax’s future earnings power is higher today than it was 12 months ago. Yet its shares are trading down 28% from a year ago. Fairfax has numerous tailwinds as we enter 2021. 1.) insurance businesses are in a hard market. Currently we are seeing solid net premiums written and top line growth. This should soon start feeding into stronger earnings. 2.) shares trading at US$336 are undervaluing equity investments. Q4 has seen a significant increase in value of equity investments. This should result in strong earnings in Q4. As the economic recovery takes hold Fairfax’s equity investments have lots more upside. With shares trading at US$336 the risk/reward looks pretty compelling to me :-) - when will Mr Market start buying shares? Not sure. But my guess is we should start to see improving earnings and growth in BV when Q4 results come out and that should help. - has Fairfax been a terrible buy and hold investment for the past 10 years? Absolutely. Over the years Fairfax has made a few posters a crazy amount of money (Fairfax was the reason i was able to quit my day job more than a decade ago :-) Viking....thanks for preparing the excellent summary of the business activity during the last year or so at Fairfax. Point 5 of your summary notes the debt issue of $650 million at 4.625% which took place in April 2020. I think you should also include the remaining amount outstanding on the line of credit which at the end of the third quarter was $700 million under this point as the company will also need to generate free cash flow to repay this amount. Bearprowler6, that was a big miss on my part so thank you for comment. The amount of debt Fairfax was forced to take on during 2020 is a big red flag. During 2020 they were simply unable to generate much in the way of cash which of course is a concern. I am hopeful that starting in Q4 we see operating earnings start to improve (underwriting + interest and dividend income). In the 2H 2021 in a recovery scenario, we should see improvement in earnings from associates. In Q1 they will be getting $750 million from the Riverstone UK sale. And in a recovery scenario my guess is we will see more asset sales (where Fairfax is able to get an acceptable price). So i think 2021 will be better than 2020 for cash generation - and it could be much better.

Isn't this a good thing? Share price down significantly and business is performing well? Are you confusing share price with business performance? Seems like an opportunity more than anything if you're a real investor and not a trader. Note: No position and don't know the business in detail, just making an observation. Not directed at you personally, but this is the type of Buffett/value investor rhetoric that leads otherwise rational investors into the abyss. The market is and has been on fire for a decade. If your investment is working, you are making money. The only * would perhaps be some kind of smaller cap, special situation type of investment. Fairfax is not "under the radar" and its certainly not buried under a rock somewhere that most investors dont know of....Its like looking at WFC and being like "oh price is what you pay and value is what you get", when realistically I just look at JPM or BAC and go "makes sense"... I understand the concept of a ‘value trap’ (stock looks cheap and stays cheap for a decade or more). I don’t see Fairfax as a ‘value trap’ today. I see a number of near term (2021) catalysts that will increase earnings and BV growth in 2021. These rarely happen at the same time. With a historically low share price. 1.) likely $10 dividend (paid in one instalment) in January 2.) Q4 results will be strong, and could be very strong (solid underwriting combined with large gains on investment portfolio) - my guess is $10 to $20/share 3.) insurance hard market is happening 4.) global recovery will lift valuation of investment portfolio further (Q4 is a start) 5.) US$ weakness will result in currency gains on substantial international holdings 6.) global recovery will support continued monetization of equity holdings 7.) management is highly motivated to buy back stock 8.) sentiment in stock is at all time low As Fairfax executes 2021 should see improving earnings and solid BV growth. As this happens i expect the stock will increase in price. This should also help improve sentiment in the stock. Of course, as with any investment, there are risks. My bullishness with Fairfax is built on 3 key pillars. If my assessment of these three pillars changes then i will likely change my view of Fairfax as an investment :-) 1.) we are in early innings of hard market in insurance 2.) vaccines will enable global economic activity to normalize in 2H 2021 - so i am expecting a strong economic rebound in 2H 2021 3.) Fairfax corporate does not do anything stupid and management of large Fairfax investments (like Atlas) do not do anything stupid

Two wonderful contrary indicators that Fairfax's stock price will do well in 2021 and 2022! Mark my words. Cheers! Fairfax’s future earnings power is higher today than it was 12 months ago. Yet its shares are trading down 28% from a year ago. Fairfax has numerous tailwinds as we enter 2021. 1.) insurance businesses are in a hard market. Currently we are seeing solid net premiums written and top line growth. This should soon start feeding into stronger earnings. 2.) shares trading at US$336 are undervaluing equity investments. Q4 has seen a significant increase in value of equity investments. This should result in strong earnings in Q4. As the economic recovery takes hold Fairfax’s equity investments have lots more upside. With shares trading at US$336 the risk/reward looks pretty compelling to me :-) - when will Mr Market start buying shares? Not sure. But my guess is we should start to see improving earnings and growth in BV when Q4 results come out and that should help. - has Fairfax been a terrible buy and hold investment for the past 10 years? Absolutely. Over the years Fairfax has made a few posters a crazy amount of money (Fairfax was the reason i was able to quit my day job more than a decade ago :-)

Fairfax has had a very eventful 2020. Below is a Top 15 list of events driving value for shareholders this year. What is missing? Some events were driven by Fairfax (corporate/subs) and some were driven by management teams in the stock/equities held. I would characterize 2020 as a ‘holding pattern’ kind of year given all the disruption caused by covid and its impact on Fairfax, insurance subs and equity investments. Looking at both 2019 and 2020 there is lots going on under the hood at Fairfax. I continue to believe the Fairfax 'super tanker' is slowly turning to the benefit of shareholders. __________________________ For additional perspective: Top 10 Events Driving Shareholder Value in 2019 - https://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/fairfax2019/msg391471/#msg391471 ———————————— FFH stock price: Dec 31, 2019 US $469; Dec 28, 2020 = $336; -28% BV: Dec 31, 2019 = US $486; Sept 30, 2020 = $442 Dividend = $10 (Jan 2020). 1.) Covid - hit to BV of $54/share in Q1 - primarily due to unrealized losses in investment portfolio (lots of cyclical companies) - resulted in losses at insurance subs, lead by Brit, of $535.6 million through Q3 2.) Insurance - hard market confirmed - net premiums written up 12.7% in Q3, 2020 - expected to continue strong growth in 2021 3.) Sale of Riverstone UK - sale providing much needed cash in 2 transactions - 40% sold - closed March 31; proceeds of US$599.5 - remaining 60% - to CVC Strategic Opportunities Fund II (will close early 2021) for approximately US$750 million at closing + up to US$235.7 million post-closing under a contingent value instrument. - https://www.globenewswire.com/news-release/2020/12/02/2138249/0/en/Fairfax-Announces-Sale-of-RiverStone-Europe-to-CVC.html 4.) Common Stock and Equity Index Short Positions - Q3 net realized loss = $168 million - First 9 months realized loss = $391 million - Biggest negative for the year (under Fairfax control) 5.) Increase in total debt - April 24: additional $650 million at 4.625% 6.) Fixing Mistakes - APR sale to Atlas closed Feb 2020 - Atlas issued approximately 29.9 million ATCO shares to APR sellers as equity consideration, at a deemed value of $11.10 per share. - Fairfax Africa / Helios - Helios will acquire a 45.9% voting and equity interest in Fairfax Africa in exchange for contributing its entitlement to cash flows from certain fee streams and being appointed sole investment advisor to Fairfax Africa. Fairfax recorded a non-cash net loss on investments of $164 million in consolidated statement of earnings. 7.) opportunistic Bond Purchases during pandemic - from Q1 report: US corporate bonds - $2.9 billion; avg maturity of 4 years; int rate of 4.25%; avg maturity of 4 years; interest income of $123 million/yr 8.) Blackberry - new convertible debentures - September - Fairfax redeemed $500 million 3.75% - Fairfax subscribed $330 million 1.75%; $6 conversion (55 million shares) 9.) Digit (India) continues strong growth (30% versus flat for overall insurance market) and expects to reach break even by end of year - https://m.dailyhunt.in/news/india/english/money+control+english-epaper-mconten/insurance+startup+digit+set+to+break+even+by+the+end+of+this+year-newsid-n231552142 10.) Buying out minority partners - Brit - 9.4% - Aug for $220 million - now owned 100% by Fairfax 11.) Positioning Non Insurance Companies to Succeed - Dexterra - reverse acquisition of Horizon North Logistics - closed in March https://www.newswire.ca/news-releases/horizon-north-and-dexterra-sign-definitive-agreement-to-create-leading-canadian-support-services-company-898386935.html - Easton Baseball sold to Rawlings (Seidler Equity Partners) - Existing shareholders of Peak Achievement Athletics Inc., the parent of Easton, will continue to participate as minority owners in the combined organization. https://www.prnewswire.com/news-releases/rawlings-enters-into-definitive-agreement-to-acquire-easton-diamond-sports-301156058.html 12.) Monetizations - Davos Brands - Sept 30 - for cash proceeds of $58.6 and recorded a net realized gain of $19.3 - Vault insurance - announced Nov - close Q1, 2021 - Allied World sells controlling position; retains 10% ownership https://www.insurancejournal.com/news/national/2020/11/18/591092.htm 13.) Seeding New Insurance Ventures - Ki Insurance (Brit) - announced in May 2020; open for business Jan 1, 2021. Ki will aim to significantly reduce the amount of time taken for brokers to place their follow capacity. Ki’s algorithm, developed with support from University College London, will evaluate Lloyd’s policies and automatically quote for business through an always available digital platform, built by Google Cloud and accessed directly by brokers. Ki has raised US$500m of committed capital from two backers: Blackstone and Fairfax. https://www.britinsurance.com/news/ki-platform-goes-live-with-partner-brokers 14.) Insider Stock Purchases - Prem: $149 million in June at $310/share. https://www.fairfax.ca/news/press-releases/press-release-details/2020/Prem-Watsa-Acquires-Additional-Shares-of-Fairfax/default.aspx - Others at Fairfax: https://www.canadianinsider.com/company?ticker=ffh 15.) Stelco (Fairfax owns 13 million shares; cost CAN$20.27) - Amazing year; stock price: jan 1 was CAN$10.91. In March the stock went to $3.24 per share. Dec 28 the stock closed at $22.11 per share. - Most importantly the company is positioned very well looking ahead to 2021 and what looks like a bull market for steel pricing; investment phase in the business is ending and Stelco is focussed on maximizing free cash flow generation and rewarding shareholders. Personnel Changes - Feb: Paul Rivett (President of Fairfax) retires - Nov: Scott Carmilani (former CEO of Allied) resigns to run Vault - Q2 former CEO of APR left (under Atlas umbrella). June Brian Rich appointed as new President and COO.

Yes, merry Christmas to all members of Corner of Berkshire and Fairfax. Lots to celebrate. What an eventful and interesting year! Have a great day :-) cheers!

Sounds like the internet has replaced the bucket shops from the early days of stock trading. One on my favourite reads is ‘Reminiscences of a Stock Operator’ by Lefevre (i love historical stuff).