kilroy04

Just for clarification. The Chair is at the Hospital for Sick Children (affectionately and officially alternatively known as Sickkids) in Toronto. Sickkids is part of the Univeristy of Toronto. Prem has been a previous board member of the hospital and now serves on the Sickkids Foundation board. His guidance on the finance committee helped them lose only about 6% of the endowment in the recent financial collapse. That was followed up with a 40% 1 year gain!

See the announcement below. This is likely a 2 million endowment where the spinoff is used for research in inflammatory bowel disease. Perhaps in remembrance of JoAnn Butler? The Northbridge Financial Corporation Chair in Inflammatory Bowel Disease Come celebrate the generosity of Northbridge Financial Corporation and the appointment of Dr. Anne Griffiths as the inaugural Northbridge Financial Corporation Chair in Inflammatory Bowel Disease on Tuesday, September 13 at 5 p.m. in the John & Myrna Daniels Hollywood Theatre.

Ericopoly - Agreed. It has to be the right circumstances and now that doesn't seem to be the situation. Additionally, they needed to buy in ORH and NB before it would be reasonable to decrease the share count appreciably. I'd be satisfied with a serious buy in over 10 years i.e. whenever the FFH capital, FFH leverage and market value allowed for purchase of a high quality insurer (FFH) at something close to book value or less. Prem has mentioned that they are opportunistic. He has also mentioned that this is on their radar. In the early 90's they purchased a bloc of close to 25%!

A few things stand out for a long standing shareholder. (my initial acquisition of the stock was in the late 1990's when the multiple approached book value subsequent to that stratospheric rise) 1. Underwriting: Slide 11. Despite some concerning quarterly and annually reported combined ratios, fully developed combined ratios were all less than 100% for the years 2002-2010. Of particular note, underwriting combined ratio was 91.2% for ORH - its premium contribution was larger than all others combined. These guys know how to underwrite - and that hasn't been their reputation even on this board. 2. Fairfax outside of North America: Fairfax Asia was nothing - or nearly nothing when I started holding and building my holding. It is now nearly 700 million in equity. Looks like the same growth strategy will be playing out in the Fairfax 'Other' category i.e. Kuwait, Dubai, Brazil and China. (slide 16). Fairfax is a 'within the company' segmental growth strategy and story. 3. Individual companies and organization: Slide 17 is the best visual description of the company and how it is organized that I've seen. Good to see the very clear organization and description of businesses. 4. Pent up Financial Power: Slides 13 and 18 show Fairfax's potential. Premiums/statutory surplus is 0.4-0.8. They have room to double and triple premiums in a hard market - exactly what happen in the last hard market. (And there is actually more room than that in terms of legal statutory requirements) It was dramatic to witness the top line growth real time in the last hard market. It will be dramatic to see it again - as will be the effect on book value and stock price. Barring another crazy capital gain (like from their consumer price index play) this is likely what will drive the stock price to double or go over 1,000. Who knows when the next hard market will happen. Events like the Japan tragedy or another shake up in the Dow could be a trigger. When it happens - it will probably be a wrenching event to all. Assuming it is not so catastrophic an event as to destroy the company, it will powerfully strengthen it. Fairfax's risk management by track record has been very good. 5. Optionality: The CPI derivative contracts are powerful for safety and potential capital gains - Slide 34. 6. A question for Fairfax: This has partially been done, but a slide or summary table in the annual report showing the total cost of acquiring C&F and TIG as well as the associated costs related to the unforeseen (i.e. under reserving, runoff, floating part of ORH and NB as well as re-acquiring the same) vs the net financial benefit (capital gains from the float, business written, float growth, the CDS gains) to date of having acquired those two companies. There is a sense that the balance is now positive and actually will explode to the positive in a hard market. Can someone at Fairfax please provide a discussion of this on a running basis for a few years? The question of whether acquiring those two companies was a mistake could be clearly answered and put to rest. 7. A wish: I'm still hoping for the conditions (and level of commitment) that makes decreasing the share count a reality - either by long term open market acquisitions, or en bloc from large shareholders. The total capital size is not yet limiting for growth, but will become that at some point. A lower share count (under the right conditions) disproportionately enhances value for the long term shareholder. It would be good to see the share count back down in the low teens or even 10-12 million range. It looks like there is a good chance that the cost of float will go below zero in the not too distant future due to the fact that the last 8 years have been excellent and the current capital will substantially outweigh the earlier smaller amounts where there was some cost to float. To Prem Watsa and the Fairfax team - thank you for being exceptional stewards! The long term trends, even including a half dozen difficult years, have been remarkable.

http://www.cnbc.com/id/41198789 "Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer. Guess the federal reserve can't go bankrupt....... I'm not a gold bug - partly because I don't think production correlates 1:1 with economic expansion and therefore there is a pure supply demand component to gold's assigned value. But this is pretty interesting in terms of a slippery slope.

Good to see everybody again.....and to meet more of you. Sanjeev - as always, thank you for organizing the dinner and speakers. The following came up at our table. Not sure if people want names associated so will leave it anonymous. Natural gas - Pengrowth. 2.9B in tax credits. MCap of 3.3b. To convert to a dividend paying corp. Presently pays about 7% Medical devices - Boston Scientific. Struggled with overpaying for Guidant several years ago. Legal settlements in the billions. Presently some FDA issues. Generates close to 1b cash/yr on a Mcap of about 10-11B. Balance sheet that is improving (debt 5-6B). New CEO with a good track record at Zimmer. Seems to be making good moves. A case of poor management and the company still spins off cash. Yellow pages: 16% margins and high dividend (12 ish%) on a declining but still real business.

http://www.nytimes.com//2010/03/21/opinion/21rich.html Frank Rich on a novel published the day of Lehman's collapse: "The Girl with the Dragon Tattoo" “A bank director who blows millions on foolhardy speculations should not keep his job,” writes Larsson in one typical passage. “A managing director who plays shell company games should do time.” Larsson is no less lacerating about influential journalists who treat “mediocre financial whelps like rock stars” and who docilely “regurgitate the statements issued by C.E.O.’s and stock-market speculators.” He pleads for some “tough reporter” to “identify and expose as traitors” the financial players who have “systematically and perhaps deliberately” damaged their country’s economy “to satisfy the profit interests of their clients.” He goes on to talk about the recent Lehman report, the SEC, Mad Money, and other topics long noted on this forum. Prescient novel and insightful commentary. Hopefully the upcoming financial reform legislation will have vigorous exposure, debate, and result in significant reform.