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StubbleJumper

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  1. Interesting timing. As I recall, FFH is scheduled to be paid a performance fee on December 31, 2023 if Fairfax India's book value grows sufficiently. So, is this IPO conveniently timed in a way that will enable a re-marking of Fairfax India's entire Bangalore Airport holding a few months before that performance fee calculation is made? SJ
  2. If it actually does get implemented (lots of dumb ideas are conveniently forgotten), it won't be in effect until 2024. It is quite likely that the current government will be turfed in the next general election scheduled in 2025. In that context, it's probably not a big issue. SJ
  3. Bial has been a fabulous investment, but in some respects I don't mind seeing it sold. There is possibly a large upside that has been left on the table, but in the back of my mind, I have always entertained the risk that a future government in India could nationalize it at a disadvantageous valuation using the rationale that a bunch of foreigners have been extracting fat profits at the expense of the Indian Population. That concern might be a holdover from the decades of government interference in the Indian business sector and maybe the country has moved forward from that. But, I don't entirely mind selling an asset that could be subject to expropriation. SJ
  4. My recollection is that ORH has plenty of underwriting capacity due to high capital levels, as the premiums to surplus ratio. Was lower than 1 at the beginning of the year. They could write piles more reinsurance without hitting a capital constraint (and in fact this is what they've done in previous super hard markets). If there's a sub that's been tight on capital, it's Crum, and reinsurance isn't really their business. I'd say you need to break it down between capital that FFH needs for its insurance operations and that which it doesn't need. The insurance subs can invest their float in those kinds of opportunities. There would be no trouble at all to shift $3b or $5b out of treasuries and into convertible corporate bonds if the opportunity arises. There's no requirement for the Holdco to do this when 95+% of the investment funds are in the subs. But the holdco occasionally does hold a modest amount of capital that it doesn't really need for its insurance operations. It's possible that a billion or so might flow up to the holdco this fall and next spring as a result of the asset sales (pet ins and resolute). If this ends up being the case, it would be hard to imagine that they'd find a better investment than their own shares if current prices persist. SJ
  5. I'd say you need to break it down a little. First consider the CPI components and then consider the indemnity components. So for CPI we know the headline number is like 8 percent and the leading elements are energy, food and motor vehicles, followed by a bunch of etcetera. For indemnities, the inflation is composed of replacement cost for goods and social inflation for civil liability. How do those square? Food and fuel aren't likely to be short term drivers of indemnities. Motor vehicles definitely are drivers of indemnities for the companies that insure them or reinsure them. So which elements of FFHs indemnities are you most worried? Prem has expressed concern about social inflation for 4 or 5 years now, so much of that is likely priced in. Otherwise, costs for rebuilding and other goods are probably not wildly out of control. But, fuel and food is pretty irrelevant in the short term. SJ
  6. The large discount to BV provides plenty of incentive for some sort of action to be taken, either by Fairfax India or FFH. My take is that a SIB is a better vehicle if Fairfax India actually wants to buy back a meaningful volume of shares (a SIB with a Dutch Auction price bracket of US$10-12 would probably do the job this year). But, if the discount persists for a prolonged period, at some point it will end up near the top of FFH's capital allocation hierarchy. FFH's own shares are probably near the top at this stage and then possibly leaving capital in the insurance subs might be the second tier...but, if the discount to book doesn't change eventually Fairfax India will become one of the most attractive options... SJ
  7. Did you note the "in most years" part of the comment? SJ
  8. True if you are thinking about it in terms of our existing trucking system with its 40-ton trucks. The heavy trucks currently beat the hell out of the highway system. But, if you enter the imaginary world of self-driven trucks, you no longer need to have 40 tons of freight in an attempt to push down the cost of labour per ton-mile. For heavy freight, you could just as easily have twice as many trucks at 20 tons each, which would considerably reduce the wear and tear on the road. What is more, by imposing a congestion charge on trucks in the heavily congested areas of the country, the states could effectively push most of the truck traffic into the 8pm to 4am time frame when there's nobody on the road. But, all of this is decades in the future if it ever happens... SJ
  9. Atlas Corp. The share price has hit $15 today, which leaves a potential upside of about $0.50 plus dividends if you believe that shareholders will ultimately accept the existing $15.50 buyout. So, the upside at this point is likely the 3.3% buyout premium plus another 3.3% annualized divvy. If it takes 3 months to complete the buyout, that's not a bad return, but if it takes 6 months it's crap. And if the deal falls through, the downside from here is probably -10% to -20%. SJ
  10. Agreed on both. I would add that the *really* interesting thing will be to see what they've done with duration. SJ
  11. @Viking Thanks for the update on the equities. It provides a more precise view of what we knew was going on -- there will be a mark-to-market loss reported when Q3 gets published in November, and then the benefit of the takeovers won't likely show up until Q1 2023. So, the headline EPS number will have a M2M loss on equities of $310m, and then looking at the fixed income sensitivity table published on page 20 of the Q2, a 100 bps parallel shift in the yield curve would be a mark-to-market hit to the bond portfolio of $263.2m. Call it a M2M loss on investments of $500-600m when the numbers are released. The headline numbers won't be pretty, but maybe it'll set up FFH to initiate a buyback at favourable prices. SJ
  12. They probably have no intention to buy back that many shares. The NCIB filing is just an annual formality, and at the end of most years, it bears no resemblance to reality (last year's filing gave them the ability to buy back 3.5 million shares). It's a little like the annual shelf prospectus that FFH files. It gives the company the flexibility to rapidly respond to changing market conditions, but we shouldn't really expect those filings to be used to their maximum potential. But yes, if FIH does actually want to undertake meaningful repurchases, a SIB will have to be the tool. As you've quite rightly pointed out, the limit of 7k shares per day from the NCIB would mean it would take an eternity to spend US$20m. SJ
  13. Shareholders of FFH will recall that Paul Rivett collaborated with a group to buy Toronto Star a couple of years ago. Some eyebrows were raised about the price paid and the circumstances of the transaction. In particular, @bearprowler6 noted that the price may have been inadequate and subsequent competing bids for the company were spurned by TS's board of directors while FFH's board of directors didn't seem to push for a higher bidder. Well, now there seems to be trouble in paradise with Paul Rivett seemingly in a scrap with his principal partner: https://nationalpost.com/news/canada/court-asked-to-force-sale-of-toronto-star-as-two-owners-irrevocably-impaired-over-future-of-media-giant No immediate relevance to FFH. But, for fuck's sake, how can't they make a buck at the price they paid? SJ
  14. Resolute Forest Products. The price has dipped to US$20 today and it is virtually certain to be bought out at US$20.50 + CVR, likely in late-March or early-April. So, the 50-cent cash spread basically covers the carry for 6 months, and the CVR are a "free" lottery ticket. SJ
  15. Yeah, the NCIB is an annual thing. It's good that they've filed it because it enables FFH to scoop up a few shares at prices well below what they paid through the SIB from Christmas last year. Given what's happened with interest rates and equity prices, we should fully expect to see some significant mark-to-market losses on the fixed income portfolio during Q3 and considerable mark-to-market losses on the equity portfolio. Add to this a 9-digit loss from Hurricane Ian which should be booked to Q3 (through IBNR). Headline EPS numbers could once again be pretty gruesome for Q3, even though FFH's core business is strengthening and the operating environment for its equity portfolio has become more favourable! The stock price has already been flirting with the US$450s over the past week, so perhaps there will be a truly excellent re-purchase opportunity during November after the superficially gruesome Q3 EPS numbers are released. The NCIB might enable FFH to pick up 100k or 200k shares during November, which would be great if the share price drops down to the low-$400s. Does anyone have any insight on whether the Pethealth transaction is likely to be booked to Q3? Here we are with two days remaining, and I don't recall seeing a press release indicating that the deal has been consummated. Maybe that one will be booked to Q4 and Resolute to Q1 2023. If those gains happen to coincide with a slowing of the M2M losses, we could see some really nice Q4 and Q1 numbers. Time to start digging in the chesterfield cushions to scrape together a few bucks. SJ
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