naboo
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Posts posted by naboo
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does anybody have the final share count after Allied World deal is done?
About half of the $54 per Allied World share is being paid for with cash. The original offer was:
$10 in cash, of which $5 is a cash dividend from Allied just prior to closing
$14 in FFH shares, at a fixed exchange ratio
$30 in FFH shares, with Fairfax retaining the option to replace this part on a dollar-for-dollar basis with cash from debt or from other partners.
Subsequently, OMERS, AIMCo and others agreed to cough up $18 per Allied share, so per Allied share it is now $28 cash, $26 in FFH shares; the company has said that that the $18 per share cash infusion means that 3.5 million FFH shares will not need to be issued. So a rough calculation would be that FFH will be issuing 3.5*(28/18)=5.44 million shares. Actually, it will be a bit more than that, since the 3.5 million share calculation was based on the March 9 closing price, which was $464.99; shares are now $432.46. If FFH is still trading at or below $435.65 at closing, that would mean approx. 5.44*(464.99/435.65)=5.81 million new shares, which would give us a share count of 23.86+5.81=29.67 million shares, a bit less if the FFH share price ends up above the US$435.65 lower collar.
I recalculated the FFH total shares.
$10 in cash
$14 in shares at fixed rate of 0.030392 Fairfax/ 1 Allied
$30 in shares at variable rate based on price (currently at 0.068862 Fairfax/ 1 Allied)
Amended deal terms:
$28 in cash
$14 in shares at fixed rate of 0.030392 Fairfax/ 1 Allied
$12 in shares at variable rate based on price (currently at 0.068862 Fairfax/ 1 Allied)
.068862 * (30-18)/30 = 0.0275448 + 0.030392= 0.0579368 (convert rate FFH/AWH)
AWH shares outstanding 87,484,665.
87,484,665 * 0.0579368 = 5,068,582 shares FFH.
23,079,000 + 5,068,582 = 28,147,582 FFH outstanding shares after merge.
Can we expect $20/share book value increase this quarter?
Was trying to determine we might get a better deal buying Allied to get Fairfax given the variable rate or share conversion and the decline in Fairfax stock since announced. Turns out, Allied trades rich relative to Fairfax and not cheap (hasn't been dropping like the currency of its acquirer has devalued).
Original deal terms:
$10 in cash
$14 in shares at fixed rate of 0.030392 Fairfax/ 1 Allied
$30 in shares at variable rate based on price (currently at 0.068862 Fairfax/ 1 Allied)
Amended deal terms:
$28 in cash
$14 in shares at fixed rate of 0.030392 Fairfax/ 1 Allied
$12 in shares at variable rate based on price (currently at 0.068862 Fairfax/ 1 Allied)
28 + (14/26)*(0.030392)(Fairfax Share Price)+(12/26)*(0.068862)(Fairfax Share Price) = 1 Allied Share
Doing the math with Fairfax shares at $420 USD = $48 per Allied share. Allied currently trades ~ $52.00. Allied shareholders who were planning on holding on through the deal anyways should be dumping the position now and buying shares of Fairfax direct to capitalize on the dislocation between the two and capture 8% more Fairfax shares.
If you use my ratio above: 0.0579368
28 + 420 * .057968 = $52.35, AWH is still fair valued.
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does anybody have the final share count after Allied World deal is done?
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Not sure that FFH trading cheaply at this point. From looking at the Y2016 annual report, Shareholders equity is 8,484 Canadian $, which at 23M shares leads to roughly $370 Can book value. now, I understand we have to adjust for fair value ofaffiliates - those were (3,267-2,633 or another 634 Can $($28/share). Even if this increased to $57 CAN/share, the book value is now $427 Can $ and at $570 Can $ (where it is trading now) we look at 1.33 book value.
I don't understand how OP can look at the consolidated balance sheet and get to US$7.048 in book value for the insurance component. There are minority interests here that need to be deducted, so starting from the common stockholders equity as stated in their filing seems more appropriate.
I have to say, for a value investment and compounder, I find FFH's annual report very hard to read and it is quite difficult to understand the financial results as they relate to prior years. The disclosure seems to be all there, but it is much harder than for most other companies to put them together and get and deal how the company is doing.
Spekulatius, you scare the shit out of me.
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Oh my,
Prem is still making these macro forecasts? No lesson learned from these huge losses? He's bearish when the market is low and bullish when the market is high?
For the first time in 13 years, I will seriously consider reducing or eliminating my position in FFH. I can handle a lot, but this is difficult.
+10
Even you feel that way, don't say it.
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I just wonder whether PW learned his lesson and is back to real business.
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Pure speculation: Volume is high which suggests to me that some large shareholders are getting out. Why? If their thesis for owning FFH was that doing so was an effective hedge for their overall portfolio, that these is no longer valid once the equity hedges are liquidated to the extent that they were. Some posters on this board seem to fit that profile.
What's left is a good sized insurance company which has been underwriting effectively (bordering on very effectively) for the past several quarters, has been making opportunistic (but not stupid) acquisitions at a steady pace and, the past few years not withstanding, has shown to have a better-than-average investing acumen. Is that worth less than 1.1x BV?
To each his or her own.
-Crip
"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful". It takes guts to buy FFH when it is going down 1 to 3% everyday. ;D ;D ;D
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FFH should start thinking to buyback their shares.
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"We hedged our equity investments to protect our shareholders' capital from exposure to the impact of deteriorating economic fundamentals," said Prem Watsa, Chairman and CEO of Fairfax. "We constantly monitor these hedge positions relative to economic fundamentals. We believe the U.S. election may result in fundamental changes that may bolster economic growth and business development. As a result, there is the potential for a longer term rally in U.S equity markets that reduces the need for the capital preservation protection of equity hedging."
My understanding is the hedge is equity hedge, but it was also for overall market/fundamentals. Since FFH changed their view, bond selling and hedge reduction is reflected to the change.
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I agree with Sanj said. FFH sold the bond at not perfect, but very good time (around 1.75), now they have tons of cash in hands. If they didn't sell the hedge, that won't be the hedge any more, that's shorting the market.
Let's see how market reacts in long term. FFH now is only 1.1x times book with strong underwriting and $10B cash.
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The one question mark I have on the reflation theme is that US government debt has been rising $1.4tn a year which is a 7.5% deficit. That's far bigger than the reported deficit, and I don't fully understand the reasons why. But, I question how much scope Trump will have to expand the deficit. That said, if lower taxes stimulates the economy and ends up with a classic Laffer-style increase in the tax take, it won't be an issue. If.
We might see a temporary strong dollar but QE4 seems inevitable.
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Certainly I think the odds of reflation have risen. I'll continue holding my FFH - I always saw it as a stock for all seasons, with an insurance business that will benefit from rising economic activity, inflation, and interest rates. But I agree, I also saw it as a great hedge and I am sure there are sellers out there as a result.
Agreed. I consider the FFH is balanced company and can live in any market condition. The insurance part is much better than years ago, the investment gets a little bumpy but is still too early to call. Overall FFH is a safe play and I am buying more.
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Does anybody have an estimate of Fort McMurray loss?
I know "there are people who try to use models (to estimate insured losses) and the models have proven to be inaccurate", but I still did a rough estimate by comparing to other insurance companies and the Slave Lake fire 2011. In 2011 Slave lake, NorthBridge lost USD$17.6M with a higher quarterly written premium. Today, IFC reported loss estimate about CAD$ 130M to CAD$ 160M, they have 15% in Alberta market. I had no data of Northbridge's percentage, then I checked their written premium, they were about 1/9 of IFC. so Northbridge might have around CAD$ 14M to 20M (USD$ 11M to 16M) loss in this event.
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I bought some today.
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In the current situation, the market could go deep south at any time. I am with Prem, the hedge may bring us good returns in near future. The only thing I am not satisfied with is FFH's equity holdings. Why Prem bought them was the question for the past, but why Prem still holds them, that is the question for now.
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Anyone have a valid reason why shares fell 4.5% yesterday! ?
My thought was the interest rate hike will hurt FFH bond portfolio. FED implies there will be a "GO" this time.
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To me it shows poor capital allocation skills on the part of management to on one hand issue a tax disadvantaged dividend to shareholders (who are forced to pay tax on it) and then turn around and raise new equity diluting the same shareholders. If they need cash for acquisitions, why bother paying a dividend?
I have the exact same question.
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"Fairfax: the multiple expansion is probably over."
Well, nobody know for sure, but if the price to book reach 1.7 or so, I'll probably sell some shares that I kept since the last 12 years.
so you are talking about USD$700/share now. Way to go!
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so can we start to speculate on when FFH will hit $1,000? Imagine what happens if the deflation hedges ever pay off!!
;D
cheers
Zorro
Is FFH moving up toooooo fast? :-\ :-\ :-\
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approx. 40%
Now it should be the time to sell some FFH. 1.3 times book.
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I wonder after the past couple of tough years, is there anybody who still has over 40% in FFH like me?
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First time in 15 years, we might see FFH.to at C$500
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Corner of berkshire & fairfax becomes corner of Berkshire & Altius. :)
Fairfax 2018
in Fairfax Financial
Posted
It will make me nervous to see FFH use most of its cash to buy at this level. FFH should have opportunity to purchase back below book value.