nwoodman

Thanks @glider3834

Fairfax Financial Holdings Ltd., the Canadian investment firm run by Prem Watsa, is exploring the sale of its stake in Indian financial firm IIFL Wealth Management Ltd., according to people familiar with the matter. The Toronto-based firm is in early-stage talks with potential bidders for the stakes, said the people, who asked not to be identified as the information is private. Other major shareholders including General Atlantic could also consider joining Fairfax in selling their own stakes, the people said. IIFL Wealth shares fell 1.2% on Monday, giving the company a market value of around $1.7 billion. A vehicle controlled by Fairfax holds about 13.6% of the firm’s shares, while General Atlantic has a 21% stake, according to data compiled by Bloomberg. https://wap.business-standard.com/article-amp/companies/fairfax-financial-holdings-weighs-selling-stake-in-iifl-wealth-management-122030701546_1.html

An amazingly clear and coherent letter. The presentation of data and metrics is certainly a big improvement IMHO Fairfax is in the best position I have seen in following the company for 10 years or so. They will cop it on the chin this quarter with declines in Eurobank but the general mix of investments means they will do well in other areas. Not exactly fortress Berkshire but moving in the right direction. Underwriting will be key, if they can sustain those CRs then it should be game on. It’s been said before but the insurance business turn around is truly remarkable, an amazing job. It was interesting to see that Blackberry only got three lines…

Perhaps you are right. However, I think this sort of set up with the Fed unlikely to step in and the potential for unintended consequences from the Russia sanctions suits his playbook better than a global pandemic. Don’t disagree with your view on the current valuation though, I am not a buyer at these levels. However I do live in hope that he gets a crack at a decent sized opportunity or two.

But what value do you place on Buffett being on the end of the phone when it inevitably starts to ring. No crystal ball but this could morph into a liquidity event in a heart beat. https://www.zerohedge.com/markets/traders-brace-chaotic-fx-market-open-ruble-set-collapse

Float growth has been quite spectacular. I am expecting a few words to be spilled about in Prem's letter later this week. I am eager to learn more about where the growth is coming from=> pricing power, market share, combination of both?. If its market share is it becasue other insurers are stepping back. I have no reason to believe that they are walking head long into a climate change mispricing catastrophe but it does temper my optimism which is probably not a bad thing.

There were a few questions from analysts on the recent Kennedy Wilson conference call regarding the investment by Fairfax. Always interesting to see the deal from the investees perspective. Operator The next question comes from Jamie Feldman with Bank of America. Please go ahead. Jamie Feldman Great. Thank you. I just want to go back to Matt's comment that, the Fairfax warrant and preferred deal was one of several investments you considered. Can you talk more about what else you did -- if I am assuming, I heard you right, can you talk more about what else you did consider, why you felt like you even needed to do a deal like this right now? And then, how should we think about the pricing on the warrant versus your view of NAV? Matt Windisch Yeah. So we -- like I said, we did look at a number of options. So perpetual preferred would have come in 300 basis points or more higher above the dividend rate that we're paying. So that was an option we looked at a straight equity, transaction comes in obviously the discounts to the stock price anywhere from 4% to 6%, 7% discount to the stock price where in this case the warrants were struck at a premium to the current stock price and a 23% premium to where we've been buying back the stock. So for us, I mean, we're really looking at this over the long run, how do we, grow the NAV per share. And by having this accretive capital we can deploy it into our various platforms where we're earning 15% to 20% returns on capital. And at the rate we've been growing the business we just feel this is prudent to be putting more permanent capital into the company to allow us to grow the business in a prudent way. Mary Ricks In addition to the $3 billion of fresh powder for the debt platform … Jamie Feldman Yeah. Mary Ricks … which we obviously will earn fees on.

Agree (1) It is more yield than duration, but potentially the beginning of the move out of “cash” . (2) I was thinking about your observation today too. High probability that FFH keeps chipping away and ends up, at the very least, with a position size that leads to equity accounting. If KW keeps buying back shares FFH might get their without any additional purchases after converting the warrants. A possibility that is seven years out but consider it another placeholder.

It is a sizeable jump in the debt platform too. They must be liking what they are seeing. Looks like the move from short duration is starting. Gotta put all that new float somewhere “Along with the equity investment, Fairfax has increased its first mortgage target within Kennedy Wilson’s debt investment platform by $3 billion to $5 billion. Kennedy Wilson expects to have an approximate 5% interest in future debt investments within the platform while earning customary fees in its role as asset manager. In addition to the $2 billion already invested across Kennedy Wilson’s global debt platform, there is now approximately $4 billion in additional investment capacity with a strong pipeline of future opportunities.”

At first pass seems pretty sweet. Paid to wait and option on the upside https://ir.kennedywilson.com/news-events-and-presentations/press-releases/2022/02-23-2022-211613501

Cheers, thanks for the reminder. Going back through the notes that was one of their claims to fame last year when they did the initial raise. "The digital-only insurer had sold the first policy in October 2017 and has since then sold to over 20 million customers. It achieved break-even in the third year and entered the unicorn club in less than four years and is now valued at over USD 3.5 billion." Edit: Covid took its toll so here's hoping Prem is referring to them getting back to profitability again.

One other thing that has been rattling around in my head after the CC was this: Please note, that’s with half the portfolio, earning nothing because it had been cash and short-term securities. Of course, this includes $1.5 billion from Digit where they have completed a significant portion of the announced $200 million capital raise at a valuation of $3.5 billion. Kamesh Goyal have done an outstanding job at Digit and Digit is growing at 30% to 40% per year and it’s profitable. I recall that the aim was to get Digit to break even around about this time which I think is pretty amazing for a startup. However, does this comment imply that the goal has been reached and then some? Perhaps I am reading too much into it

Looking forward to the annual report this year. Prem gave the impression that there would be even more new and improved metrics. This was an interesting observation and response Unidentified Analyst How are you? Warren Buffett has written extensively about the importance of float. He said that even though float is a liability, if the combined ratio is below 100%, it is actually an asset. Berkshire has $130 billion in float against $700 billion in market cap. Our Fairfax has $26 billion in float against $13 billion in market cap. We are running at a 95% combined ratio. Can you tell us how you think about the value of float to Fairfax? It’s remarkable. Prem Watsa You are exactly right, Charles, you understand it. $26 billion of float like it’s just a significant number and combined ratio of 95%, our reserving is very strong. It just shows you how undervalued our company is. And that’s why, I have said, we bought back our stock of 2 million shares. We will continue to buy back stock. I mean, we can’t control the price of our stock. I said it’s ridiculously cheap, two years ago, I said it again, and then we bought 2 million shares. We will not do -- we are not looking at expanding again, I said. We are not going to issue any shares to buy anything. Our first consideration is going to buy back shares, not at the expense of our financial position, not at the expense of taking advantage of the property casualty hot market, like we have grown by 25%. Charles, you know, you follow these insurance companies, you compare our growth to anyone else, all internal and you will find that 25% is a very high number. And we have got companies like Allied at $6 billion, ROC at pretty well $6 billion, come at $4 billion, like we have got pretty significant companies, but it’s a decentralized structure and we can take advantage of the opportunity as we see it always looking after our customers, because the price we are getting for our product is a fair price now, we are getting paid to take the risk. So, yeah, Charles, you are exactly right, $26 billion in float, the market will see it over time. Thank you, Charles. Next question, please, Britney

Great summary. Nothing to add although I did add to my position. Visibility/Prospects/Discount are just to appealing. The CC was about the most coherent and un-flustered Prem has sounded in a while. Giving out his personal email address at Fairfax was quite surprising though, no doubt it is vetted by assistants etc

1. A decent increase in book value per share over the quarter $US561.88 ->$US630.60 +12%. Repurchasing shares 0.8x's BV certainly helps 2. Interesting to see that Digit appprovals are still a work in progress. Imagine when it gets done it would be worthy of a press release 3. Hard to beleive that we are still sitting at around 0.8x's BV and possibly even less now with the gains in ATCO and Eurobank

Starter position in DIS on the open. Hardly crazy cheap but it was an itch that needed to be scratched. At <$120 it becomes more interesting

Merry Christmas All. Enjoy the downtime and thanks to all for so many thoughtful contributions throughout the year. Nothing gets the neurons firing like a daily dose of CoBF

Another possible catalyst is they show their hand on the energy side of the business. That should rev up the story tellers. Don’t disagree with your comments on potential short term downside, that will be quite the opportunity if it eventuates.

1. FWIW, MS India snapshot attached. Air traffic continues to pick up. “We expect recovery to gather further strength from 1Q22 as we expect vaccination rates to reach a critical mass by early next year, which will help in broadening the recovery, and external demand conditions remain supportive. As such we expect growth at 10.3% in F2022 and 7.8% in F2023. Risks to growth outlook are balanced and stem from Covid-19 management / pace of reaching full vaccination, continued supply side disruptions which weigh on both growth and inflation negatively. 2. A short article on Akasa, India’s new low cost carrier based at Fairfax’s Bangalore Airport. They just pulled the trigger on 72 Boeing 737 Max at the Dubai Airshow. https://www.businessinsider.com.au/ultra-low-cost-airline-akasa-air-entire-aviation-segment-2021-11?r=US&IR=T india_20211121_0000.pdf

More ATCO and BRK.B. Berkshire is not thump the table cheap, but in the 270’s is right on the entry point for “buy and hold for a high probability low double digit compounder.” Refreshingly boring.

Added to ATCO

This from ATCO https://ir.atlascorporation.com/2021-11-17-Atlas-Clarifies-Incorrect-Recent-Media-Coverage-Concerning-its-Common-Shareholders

OK I am gong to call it, does anyone honestly believe that Odyssey is worth 9B? I am happy that they are buying back shares but again the cash is via the Omers pawn shop and we don't know what the interest rate is. I will be horrified if they take the mark, it is as good as a related third party. Just saying....

Me too and then you get this https://www.fairfax.ca/news/press-releases/press-release-details/2021/Fairfax-Announces-US1.0-Billion-Substantial-Issuer-Bid-and-Sale-of-9.99-Minority-Stake-in-Odyssey-Group/default.aspx

Excellent summary. More than a little interested to see how this goes. Have followed Terrapower from a distance and always thought the concept of small scale NE was a good way to go.