Thrifty3000

Prem said something important on the conference call that I hadn’t heard before… He told us Fairfax is willing to buy back shares while the price is below $1375 CAD. ($1029 USD) He said that number would preserve the historical relationship between price to book value per share that has compounded at over 18% long term.

FWIW I believe the $33 per share is pre tax.

It sounds to me like you work for one of the agencies trying to keep aliens under wraps, further validating their existence.

Exactly. It’s pure entertainment

I’m the type who will be skeptical of UFOs until I’m personally beamed into a flying saucer and probed by aliens. With that said, in the words of our ol’ buddy Chuck Munger, it feels like there’s a bit of simple pain avoiding denial going on in this thread. Even though none of us have seen credible evidence of aliens, I do think there is credible evidence that: - there has been a strong stigma against reporting UAP in the United States. - there appears to be a concerning amount of tax money being spent outside the reach of congress - presumably under the guise of top secret alien-related initiatives. Two of our congressmen strongly expressed concerns with this during last week’s hearing, and one went so far as to threaten the Holman rule if he continues to get run around from defense officials. (This is actually where I think the recent crackdown could provide the best drama. I put low odds on proving aliens exist, and very high odds on learning that some crooked government insiders/contractors found a clever way to pocket billions of dollars of defense department budget with practically no accountability.) - despite what several posters claim there does appear to be a number of reasonably credible sources with loads of reasonably credible evidence worthy of further investigation. Examples: 1) If you haven’t watched the recent congressional testimony of three reasonably credible witnesses check it out. I think they presented their cases well. 2) South American cultures do not have the same alien stigma that North Americans have. Their governments have been open about having military groups dedicated to UFO investigation/intelligence for years. They have made cases public and released videos, etc. 3) Following the US’s opening up about UAP in 2017 other governments that had long vehemently denied UFOs started changing their stories. Japan was probably the most notable. 3) While we are all fanatical about analyzing investments, there are a large number of fanatics that enjoy spending their time searching for aliens. One such person I’ve recently learned about is a retired ER doctor that claims to have encountered a UAP over 3 decades ago outside Boon North Carolina. He started a foundation and devoted the last 33 years to building a network of over 700 whistleblowers and witnesses, and a trove of over 7 terabytes of documentation/evidence. He has been consulting congress and intelligence agencies and has recently turned over all of his data. He is currently trying to make it public. (Don’t get me wrong, plenty of the stuff this guy says sounds completely crackpot to me, but a couple of his most crackpot theories were echoed by others in last week’s congressional hearing.) Long story short, congress needs to figure out if some crooks in the defense department should face the firing squad, and also, it’s probably too early to write off hundreds of witnesses and whistleblowers that have risked their lives, careers and reputations to call attention to concerns the world is just now starting to take seriously.

High: $799.99 Up 35% YTD

Buffett does write out relevant information of interest on the cover and in the margins of annual reports. He doesn’t do formal DCF because he already knows the hurdles he needs to hit, so he just has to predict the odds of hitting a given hurdle. For example, to earn a 15% compound return Buffett knows the value of an asset has to double in 5 years and quadruple in 10 years. Buffett just has to decide whether he can reasonably predict the value in 5 or 10 years and then he pulls the trigger if he can buy the asset for half to a fourth of that future value today. He also has a number of tricks up his sleeve that allow him to juice returns. For example: - he knows a 1% price increase can increase profit by 10% (why he likes sticky products). He pushes companies to raise prices after he buys. - he knows Berkshire gets a much better interest rate than the company could get on its own. Recap that debt, reduce the interest expense, and increase profit margin. He also knows he doesn’t need to hit grand slams every time because the insurance float provides a lot of leverage which helps juice the ROE, even when an investment earns sub-par returns.

Awesome! Thanks. Will definitely check it out.

Circling back to forecasting what Fairfax will likely do with those $9.5 billion of profits rolling in over the next 3 years, here are some more specifics in order of predictability. Purchasing GIG: $860 million Common share dividends: $660 million Options to purchase minority stakes and Riverstone portfolio: $2.675 billion (see summary below) Total: $4.195 billion For reference: summary of options to purchase: - Allied: FFH Can buy 17.1% by 9/24. They bought 12% for $733.5 in 2022. I assume the 17.1% will cost around $1.1 billion. - Odyssey Re: FFH can buy 10% for $900 mil beginning 1/25. - Brit: FFH can buy 13.9% for $375 mil beginning 10/23. - Riverstone: FFH can buy/sell certain securities in the Riverstone portfolio. I’m not clear on all the puts and takes on this one so I’m just earmarking $300 mil for it.

Sounds like insurers are taking a beating. I couldn’t believe how much Travelers jacked up my rate this year. 40% increase on a homeowner policy (only increased coverage by 20%). I started to shop it but got distracted with vacation.

@Viking Amazing analysis. You’re a saint for doing this. You mentioned your “big ‘miss’ is related to capital allocation”. If we assume they will net $9.5 billion over the next 3 years, then it looks to me like at least half of that is already earmarked for things like: - buying out the minority stakes of some of their existing portfolio companies. - retention/reinvestment by associates. - paying common share dividends. - buying GIG. After paying for the fairly easily predictable items like those above, what do we have left, maybe $3 or $4 billion? If they buy back another 1.5 million shares at an average price of $900 per share, then we’re looking at another $1.35 billion spend. I don’t think there is too much to be concerned about with the uses listed so far. So, I assume that leaves them with maybe a couple billion dollars to play with over the next 3 years for which we can’t easily predict the use. That’s where the fun stuff happens.

I agree it’s likely trivial and under control. Here are the annual payments since 2015: 2015: $130 2016: $197 2017: $174 2018: $170 2019: $138 2020: $141 2021: $152 2022: $132 > $1.2 billion paid over 8 years. Would be easy enough to benchmark their numbers against a few other insurers.

Yes! The asset price will correlate with intrinsic value long term. Multiple expansion is not guaranteed, but it’s a nice bonus that’s likely to happen.

I’m not suggesting this is a deal breaker concern. And, I don’t know whether FFH is handling it differently than other insurers. But, back in 2015 FFH had reserved $896 million for asbestos. In my mind that suggests FFH expected to eventually pay $896 million. However, since 2015 they’ve actually paid something like $1.2 BILLION and they are still showing reserves of over $800 million. If FFH has historically not discounted their reserves then it seems pretty clear to me they are intentionally under-reserving. Let’s say in 2020 they had reported more realistic asbestos reserves - of maybe $1.5 or $2 billion - wouldn’t this have put even more pressure on their credit line covenants? I’m trusting how they are handling asbestos reserves is above board with regulators, but there appears to be a strong incentive to under-reserve here, so I’ve flagged this as an area that I need to look into more.

Ha, what happens when the population of potential buyers of an asset consists only of value investors that will never pay full price?

Something concerning related to this that I flagged in the annual report… Asbestos provisions and amount paid: 2021 provision: $840 million 2021 paid: $150 million 2022 provision: $839 million (really?) 2022 paid: $132 million 2023 provision: $820 million!! Anyone else see a problematic pattern there?!

Great news. My understanding is if a reinsurer fails to pay claims then the primary insurer is still on the hook for the liabilities. (That’s why insurers disclose gross premiums and net premiums.) Therefore the reinsured premiums involve a certain amount of credit/counterparty risk (which should correlate with the reinsurer’s credit ratings). That’s why higher credit ratings are an important competitive advantage for reinsurers. I’m sure the A+ rating increase will drive additional pricing power.

When Buffett has been asked in the past why he didn’t foresee some market top or bottom he has responded that if he had any such crystal ball he wouldn’t be investing in equities, because he would be able to make a whole lot more money trading derivatives.

For something like 90% of the last quarter century rates were lower than what they locked in. In that context I think what they did is pretty extraordinary. Knowing they don’t have an interest rate crystal ball it feels like it would be irresponsible and overly conservative to wait for rates to hit the 99th percentile before making a move.

Looking at the interest rate sensitivity table from the Q1 report it looks to me like bonds will take a roughly $500 million hit. A 100 basis point interest rate increase would be a $700 million hit. I’m assuming rates increased roughly 70 basis points during the quarter. Also, last year FFH had interest rate hedges that would have reduced the impact of rising rates. It appears they did not hold anymore of these hedges as of the end of Q1.

FWIW here is how FFH models/considers aggregate catastrophe risk (from the annual report): "Currently the company’s objective is to limit its company-wide catastrophe loss exposure such that one year’s aggregate pre-tax net catastrophe losses would not exceed one year’s normalized net earnings before income taxes. The company takes a long term view and generally considers a 15% return on common shareholders’ equity, adjusted to a pre-tax basis, to be representative of one year’s normalized net earnings. The modeled probability of aggregate catastrophe losses in any one year exceeding this amount is generally more than once in every 250 years."

Here is a list of the top University Hospitals. Of course you have Hopkins and Mayo, which have been mentioned several times, but don't overlook the world-renowned healthcare providers in places like Tennessee, Alabama and North Carolina. It's usually pretty easy to navigate their websites to read about the doctors within each specialty and learn what their areas of focus/research are.

To answer your question about getting an appointment... If calling to schedule an appointment doesn't work: Ask the scheduler (or call the receptionist at the office) and ask who that doctor recommends seeing. Email the doctor (you can get anyone's email). In your email mention the person who connected you to them, describe any specifics of your case, ask if they can work you in, and if they can't work you in ask who they would recommend seeing if they were in your situation.

I think when the life of a loved one is at stake it's appropriate to be shameless in seeking the care they need. If you consider your entire network you're probably only 2 or 3 degrees away from a leading specialist. Somewhere in your network of family, friends, coworkers, neighbors, religious group, former classmates, civic organizations, kids' sports teams, social media, CoBF, etc there is someone who will gladly introduce you to someone that will gladly help you solve your problem. You just gotta be shameless and tenacious. I learned the lesson from my dad when he was faced with my mom's first bout of cancer. After her doctor estimated a 20% chance of survival, my dad shamelessly leveraged his network to find a new doctor. He ultimately called the CEOs and Presidents of the largest hospital, health system, med school and health insurance provider in our state to ask for referrals. With their help they found a new doctor. 30 years later, much to my wife's dismay, my mom is still alive and kicking. Haha.

True story I like to share with people who have a specific life threatening issue - like cancer. My mom had breast cancer in the 90s and then got a lymphoma about 10 years ago. Her (insert expletive) doctor, of course, referred her to a general oncologist within his own medical group. Going to a general oncologist sounded like a death sentence to me, so I emailed a radiologist I knew that worked at a local, reputable, teaching hospital. I told her the situation and asked for her recommendation. She then recommended a colleague that was one of the LEADING SPECIALISTS in the world on how to treat lymphomas in women who had already received chemo for breast cancer! When we went to meet with that doctor they told us two things: - there is not a cure for my mother’s cancer. - but, he would collaborate on her case with other world-renowned specialists at MD Anderson, Emory, Hopkins, Mayo, etc to devise a treatment plan. Fast forward through a few months of treatment and she was completely cured!! Long story short, if you have a specific medical issue: - do whatever it takes to find THE specialist and travel to meet with them! (I’m a big fan of teaching hospitals.) - make sure they collaborate with other leading specialists at other reputable hospitals.