newtovalue

hey Viking - great analysis as always! one thing to ask you - i think we could assume the value of the investments would grow from $57.5BB. Did you keep it flat to be conservative?

@ValueMaven - thanks for posting the Everest Call. Reading through the transcript and it seems they are very bullish on pricing. They did a capital raise in May 2023 of $1.5BB and were asked about it on the call. They are confident at exceeding 21.8% ROE on the new capital they raised and looking to have the majority deployed by year end. So FFH is obviously not raising more capital - but any views if they are able to ramp up premiums into this harder market. Mark Kociancic Group Chief Financial Officer at Everest Re Group Thank you, Juan, and good morning, everyone. Everest had a very strong quarter, rounding out a solid start to the first half of 2023. The company reported record operating income of $627 million or $15.21 per diluted share in the quarter, equating to an operating income ROE of 21.8%. Mark Kociancic Group Chief Financial Officer at Everest Re Group And again, the ROE on that incremental $1.5 billion of capital is something we feel confident in exceeding our Q1 operating ROE going forwards.

thank you for detailed analysis Viking! Does anyone on the board have insight into FFH's hurricane exposure? a few articles bubbling up about this year being active for hurricanes

Ty as always! I unfortunately have no understanding about IFRS 17 - but look forward to what the other brilliant members of this board are able to add

@Viking - any estimate where you see Q2 2023 Book value standing when FFH reports later this month?

Look at Eurobank GO! Almost close to taking out the May 22 high. Almost $100 per share CAD in EUROBANK exposure here (if it was MTM). Wonder what the long term play is here for Fairfax?

yea fair point. Stock is cheap - doing a lot of buyback and have a engaged long term CEO

followed Buffett and bought some COF

Brilliant - buy when there is blood in the streets. 8.6% yield. 51% loan to value. 1.7 years to maturity - $2.1BB notional. I LOVE this deal. FFH can get in on the cheap bank assets through KW. Winners keep winning. https://www.fairfax.ca/news/press-releases/press-release-details/2023/Fairfax-Financial-Partners-With-Kennedy-Wilson-to-Acquire-Loan-Portfolio-From-Pacific-Western-Bank-Makes-Additional-Equity-Investment-in-Kennedy-Wilson/default.aspx

Fairfax now has a larger position in ORLA ($70MM position) - junior gold producer in Nevada, Mexico and Panama. I've never heard of the company - wondering if anyone on the board has?

I don’t know enough about Gulf insurance- is this a good purchase? Although I have to give prem credit - he is executing at a very high level right now

Looks like Christmas in April ? now I don’t fully rely on book value - but still nice to see a material uptick on one measure of value.

I was like Viking yesterday and further made FFH my largest position. It’s getting grouped in with other financials and banks - and Mr market is giving us a chance to add at a great price. Viking thank you as always for your great analysis!

cool thx! hoping it was this weekend. have to be patient for one more week i guess

Anyone know when Prem's letter comes out?

That was a great call - Prem laid out the case very clearly. I also appreciated their conservative approach to IFRS 17 - they’re not changing the reserve process as a result.

This looks like another home run! Am I understanding this correctly - in 2021 Ambridge generated $420.8MM of premium and they sold it for $400MM. Assuming premium stayed flat in 2022 - they sold it for 1x premium. Is that correct?

-16% in CAD terms. This was a result of a few really some really bad picks (Quarte, ATTO) and my largest position being GOOG. Going into 2023 goal is not to get caught into these names and have significantly high graded my portfolio. Thank you all for the great community here and all the best for 2023!

great points Viking - and thank you for all your knowledge sharing on this site! FFH is already my largest position - but this board is making a lot of great points tempted to add more here. Normally don't like to forecast a stock doubling - but with FFH its not out of the realm of possibilities if they earn $150 CAD a share and trade at 10x.

very good point glider (re: AAPL on BRK balance sheet). learn something new everyday!

MMM fair points - the accounting on FFH is definitely not easy. from an economic basis and how much profit per share FFH can/will generate - agree the stock is still grossly undervalued here. tempted to add more - but i'm anchored to my previous purchase prices in the $600s

One concern I have with using book value to look at FFH is the goodwill on the balance sheet. currently goodwill is $5.8 billion or $249 usd per share. If you back this out - Fairfax is trading at price to book of around 1.5x. now I still think it’s super cheap based on earnings power and float - but using book value as a measure doesn’t align with BRK or MKL because they have much more tangible book values. thoughts ?

I dont know if I've seen a SIB this big. This is around 43% of the company being bough back. Holy guacamole

Great ! Thank you for the info

Question - now that BRK owns more than 20% of AXP - does it change the reporting to Equity Method? If that is the case - should we see a boost in operating earnings as BRK can now recognize 20% of AXPs earnings. I understand this doesn't change anything economically - more just curious about the mechanics. ty!