glider3834

@SafetyinNumbers from SEC filing On November 16, 2021, the Company executed a binding agreement to sell a 9.99% minority stake in Odyssey to the Odyssey Investors for consideration of US$900,000,000. https://www.sec.gov/Archives/edgar/data/915191/000110465921140897/tm2132409d1_sc13e4f.htm I read that as an equity sale (via new issue) for a 9.99% stake(rather than a bond issuance) If it was a mandatory convertible - it must be converted by some future date into an equity interest - but in this case the 9.99% minority stake appears to vest immediately with the purchasers (and then Fairfax has option to repurchase at some future date) I would never say never but thats just my reading based on the wording

@Maxwave28Exco Resources Chou Associates Fund are also shareholders in Exco & it appears they have increased the fair value of their Exco investment by 29% YTD to 31 Aug-21. All of this fair value increase has happened since 30 June. This fair value increase in Exco is probably what might be expected given the big jump in natural gas prices in 2021. Fair value = US$10.47 per share at 31 Dec-20 Fair value per share = $13.51 at 31 Aug-21 (assuming they held same number of shares as at 30 Jun-21) Assuming Fairfax are using similar valuation approach to Chou Funds, then we could expect approx 29% increase YTD in fair (market) value of Fairfax's stake in Exco. At 31 Dec-20, Fairfax had a fair vale of $238 mil on their Exco holding(same as carrying value). A 29% increase would be $69 mil increase in fair value on this position over carrying value. Looking at the Q3 Interim report from Fairfax, it looks like they have increased the fair value of of All other - non-insurance associates (which would include Exco) between Q2 & Q3 by $67 mil - so its possible that this Exco fair value increase has already been taken up by Fairfax - we will have to wait for the 2021 Annual report to know for sure!

Digit wins Digital Insurer of the Year award at 25th Asia Insurance Industry Awards 2021 https://www.apnnews.com/digit-wins-digital-insurer-of-the-year-award-at-25th-asia-insurance-industry-awards-2021/

@Viking we can change 4. to 'Life insurance and Run-off' - see below The assets, liabilities and results of operations of Eurolife's life insurance business were consolidated in the Life insurance and Run-off reporting segment and those of Eurolife's property and casualty insurance business were consolidated in the Insurance and Reinsurance - Other reporting segment

100% agree

remember this interview with Prem in Globe & Mail in December 2020 https://www.theglobeandmail.com/business/article-fairfax-ceo-prem-watsa-touts-traditional-value-investing-amid-frenzy/ these were some of the tech stocks that Prem had concerns about (notice how he says 'wonderful companies' - his comments are strictly around valuation!)- avg YTD return of this group (PTON,SHOP,ZM,PINS) is -31% “These are all wonderful companies, but their valuations are insane,” added Mr. Watsa in an interview last week, as he described his speech to staff earlier in the month. “As in the past, this will end – and it will not be pretty.” Here are some of the value stocks that Prem was keen on - avg YTD return of this group (STLC.TO,ATCO,XOM) is +48% the contrarian investor is bullish on the prospects for Fairfax investments tied to an economic recovery, such as steel maker Stelco Holdings Inc., container shipping company Atlas Corp. and unloved energy play Exxon Mobil Corp.

all good

The award for "Best Consumer Digital Bank in Western Europe for 2021" (The Best Digital Consumer Bank in Western Europe for 2021) was won by Eurobank https://www.cretapost.gr/665795/eurobank-anadichthike-kalyteri-psifiaki-trapeza-gia-katanalotes-sti-dytiki-evropi/

Ok so this is what I think could happen (& a lot of assumptions below so bear with me - I am simply trying to understand how these transaction could potentially impact shareholder's equity - we need to wait for final numbers in Fairfax's Q4 report !) Pre-transaction - Fairfax owns 100% of Odyssey (lets estimate carrying value at $5.6 bil at 30 Sep-21) Post transaction & post dividend (to Fairfax holdco) - Fairfax owns 90% of Odyssey ( lets call them 'B shares') - estimate $5.04 bil OMERS/CPPIB (Non-controlling interests) own 10% of Odyssey (lets call them 'A shares') - estimate $560 mil So Odyssey total equity (after dividend paid to holdco) = $5.6 bil (ie so underwriting capital strength/shareholder surplus unaffected by this transaction) So in terms of estimated impact for Fairfax's shareholder equity -common (again using assumptions above) Fairfax new carrying value (Odyssey) 90% interest ('B shares') = $5.04 bil (decrease of $560 mil on pre-transaction value) Fairfax Holdco cash = $900 mil increase (from Odyssey dividend) Estimate Net increase Fairfax shareholder equity = $340 mil So in this above scenario based on above assumptions, I am guessing there would be an increase (ignoring tax impacts if applicable) in shareholder equity for Fairfax (bottom line I would guess this Odyssey transaction is accretive to book value per common share - the actual $ amount still to be confirmed in Q4 report) And this would be before taking into account the substantial issuer bid & normal course issuer bids that if successful, should also be accretive to book value per share. Any comments/thoughts on the above guys?

@ParsadI will have a go at this It looks like IFRS 3 gives the choice to recognise non controlling interest (NCI) at fair value or as a proportionate share (%) of net assets of the sub (Odyssey) . It looks like the more common approach is to choose the latter in this type of business combination- in that case then I suspect Fairfax's carrying value in Odyssey Group initially would increase by the difference between the $900 mil sale proceeds less proportionate share (approx 10%) of net assets of Odyssey acquired by NCI https://www.iasplus.com/de/binary/dttpubs/0807ifrs3guide.pdf Here is how the accounting could look https://www2.deloitte.com/content/dam/Deloitte/us/Documents/audit/ASC/Roadmaps/us-audit-a-roadmap-to-accounting-for-noncontrolling-interests-2020.pdf I need to look further into the impact of the subsequent dividend that is paid to holdco by Odyssey to fund the share buyback. Just my initial thoughts, we need to wait for Fairfax's reporting on these transactions to understand more about the new series of shares & impact on the financials, book value etc

+1 agree - Atlas's share price would be a lot higher IMO if they chartered at daily rates - but thats not the long-term sustainable model they want (short-term pain for long-term gain - as their net eps continues to tick higher the share price should respond. I think these one-off non-cash charges of around $130 mil over Q2 & Q3, related to debt extinguishment, may also be obscuring their underlying operating earnings for those investors who are just working off the headline numbers. Agree just give it time ...

I wanted to respond to the Fairfax owns 'cyclical crap' discussion points raised - thought better to do it in this thread & not the SIB thread. If we just take a step back for a moment & think about the whole investment portfolio positioning - because I believe the strategy is really the critical piece. 1. Fairfax has 44% of their investments in cash & investments - higher interest rates will allow them to raise their fixed income allocation & increase interest income ( if you believe interest rates are headed higher then you would give this part of their strategy a tick & this is 44% of their total portfolio!). 2. Fairfax is long India - this could be the most important & smartest strategic call by Prem over the years - India is now the number 1 emerging market economy in the world (sorry China!) & while their sharemarket looks decidedly frothy , India's economic prospects in terms of GDP growth etc look strong. Fairfax's Indian investments over the last few years have done exceptionally well. Lets take Digit in this context - India has GDP growth rate of 7% & has been growing premiums at high double digits (sounds a bit like US GDP growth rate in the 1960s & Geico when it started off when it had a similar growth rate - like Digit , Geico was challenging the status quo). Just on Digit because I am being cheeky here - media reports I have read suggest that Berkshire said no to Kamesh Goyal when he asked Berkshire to invest in Digit & Ajit Jain actually introduced Kamesh to Prem & rest is history as they say. 3. Fairfax is long Greece (& Europe) - to be fair this has been a terrible call by Fairfax for many years - but it would be a mistake now for Fairfax to throw in the towel with Greece with this economy firmly set to rebound - the real estate market & property prices are on the rise, GDP in 7% area . Fairfax's strategic decision to maintain its exposure to Greece now IMO is the right one. Eurobanks results this week will be worth checking out - I am quietly optimistic - Eurobank has now become the opportunistic, value investor picking up stakes in banks in SE Europe where it sees opportunities, so its not just recovering, its now also in growth mode (a potential dividend on the way in 2022 ?? 4. Fairfax is long resource plays - this is a bet on inflation IMO as well as the individual management teams & company prospects - insurers need to hedge their inflation risks in managing their liabilities 5. Fairfax is long real estate (eg Kennedy Wilson, Toys r us portfolio) - ditto on 4. 6. Fairfax is long covid recovery plays in travel, hospitality, dining & retail. Many of their investees that were hammered by covid, have used covid to digitise & streamline their cost bases. So coming out of covid have opportunity to deliver better earnings(eg Thomas Cook India, Recipe) - keep your eye on the profit from associates & non-insurance segment contribution to the Earnings statement over the next few quarters. 5. Fairfax is long Fairfax - their TRS position is effectively their 4th largest equity holding with around US$900 mil or so exposure ! They are also raising spare cash not to 'empire build' but to buyback their own stock - which company does Fairfax understand better than any other company as an investment - itself! This is a no brainer & good strategic call IMO. 6. Fairfax is an international insurer - owning equities in many different countries is also part of their strategy to match insurance liabilities in those different countries. 7. Fairfax is an investor that likes to own concentrated positions & have a seat at the table - thats why you will see them holding big stakes & yes liquidity is a potential issue, however, in many cases these are also publicly listed companies (also Fairfax's cash & short-term investments effectively hedge their equity positions & provide liquidity during market downturns like 2020). Often the companies Fairfax has big stakes in are in that US$1-5 bil size area & perhaps that is just a function of Fairfax's market cap & investment universe, they can't afford a BNSF like Berkshire but what about Atlas with an ex-Berkshire manager at the helm?? There are other aspects to Fairfax's strategy including their preference for management teams who are strong capital allocators with good track records , but I wanted to highlight the above. I think we would all like them to dump BB at some point but is now the best point? The challenge here is that BB operating performance actually looks to be improving, Ivy looks very interesting - are they being stubborn here - maybe - does BB need to be a great investment for Fairfax investment thesis to play out - not really IMO. I have seen a few posts suggesting Fairfax should maybe have jumped into the MSFT,APPL type investments - I agree but its too late to now jump on that bandwagen - we are talking about stocks that have gone from multiples in the teens to the 30s, 40s (that continued multiple expansion with interest rates now starting to increase looks to be challenging from here) - Fairfax do have GOOG which is a smaller $50 mil or so position -I believe they won't shy away from a big tech company investment like GOOG at the right price (personally I wish they had taken a bigger slice of GOOG when they had the chance but anyway) Worth noting two amongst Fairfax's top 10 investments that are non-cyclical- BDT partners largest investment is a beverage manufacturing business (I suspect this is Keurig Dr Pepper), Fairfax India's largest investment is in infrastructure - Bangalore Airport. Anyway there is my Sunday afternoon ramble

good pick up thanks Viking - its like that saying always go back to the source - I guess thats the potential issue with any 3rd party sites - not sure if yourself (or anyone) has a site they visit thats free which has analyst ratings, I prefer not to subscribe. I like to be aware of analyst ratings (& ideally if information is available understand their reasons & how they get there) not to rely on but rather if it is massively different from my own target it leads me to check, double-check & triple-check again my investment thesis

for what its worth - appears to be a few analyst upgrades for Fairfax since buyback announced https://www.marketbeat.com/stocks/TSE/FFH/price-target/

yes sure Viking - $475 mil cash purchase - partly funded via two capital raises Sep-21 - rights issue 50 mil KWD (circa US$165 mil) - was fully subscribed not sure Fairfax's final allocation https://www.gulfinsgroup.com/Home/Investor-Relations/Capital-Increase Oct-21 - perpetual bonds issue 60 mil KWD (circa US$199mil) S&P assigned 'BBB+' issue rating to the subordinated notes that GIG is issuing. This came after the group announced that it had obtained all the necessary regulatory approvals that it is issuing up to Kuwaiti dinar (KWD) 60 million (US$199 million) of Tier 2, junior, subordinated, perpetual notes, which will qualify in their entirety as capital for solvency purposes https://www.gulfinsgroup.com/Renderers/Showmedia.ashx?Id=9416b770-8dee-494c-a22b-419e8e3b2ca3&download=false assuming they fully participated in the rights issue, then I suspect Fairfax's ownership would remain around same %

cheers @wondering - I appreciate the contribution everyone makes on this board & try to return the favour as best I can

not a huge holding for Fairfax but LFL has launched a 10.7% substantial issuer bid after a record 3Q result - Fairfax stake around 9% or US$140mil approx now but could get pushed up further with this buyback- LFL looks to be trading for less than 10x PE - looks interesting I might take a look further at this one https://finance.yahoo.com/news/leons-furniture-limited-announces-intention-133000362.html https://www.lflgroup.ca/English/news/news-details/2021/LFL-Canadas-Largest-Home-Furnishings-Retailer-Releases-Record-Financial-Results-for-the-Third-Quarter-ended-September-30-2021/default.aspx

I just had a look on Morningstar here https://www.morningstar.ca/ca/report/stocks/ownership.aspx?t=0P00006821 Apparently the top 20 funds & institutions are sitting on around 11.89 mil of FFH TSX listed shares or 41.7% of total shares held. Also worth noting that there are institutional investors who appear to have been recently selling Fairfax shares, who are sitting on 100,000 or more share positions - I think the liquidity of this SIB at potential premium to current share if tendering up closer to US$500 (current price US$460) could be attractive - hey the US$40 extra might even help pay the deemed div tax (if applicable to that seller)!

Gulf Insurance group results look strong & obviously benefiting from AXA acquisition https://www.insurancebusinessmag.com/asia/news/breaking-news/gulf-insurance-group-profits-skyrocket-242-316608.aspx Shares have advanced close to a 52 week high - current market cap 313 mil KWD ( approx US$1.04 bil ) Fairfax ownership 43.4% - now worth approx US$450 mil) I think part of GIG investment is included in Riverstone sale - I think Fairfax will repurchase unless they want to sell in meantime - either way I believe this GIG - Riverstone portion will be reflected in Fairfax's earnings as a derivative gain (from GIG share price increase) on their repurchase contract option.

This has been bugging me & please disregard my last post on this one- here goes Outstanding shares = Float (public) + Restricted shares https://www.wallstreetmojo.com/outstanding-shares-stocks/ (figures below in thousands) Public float = 24,167 (below) Share-based award - dilutive 1,558 & anti-dilutive 1,269 = 2,827 (at 30 Sep-21 from Q3 '21 Interim report) Outstanding shares = 26,994 (which is close to figure announced I think of 26,986) So I suspect the basic outstanding shares number (used to calculate Fairfax's book value per share) has not changed too much from 30 Sep-21 - does the above sound right guys?

I think this is a bit of a litmus test - if SIB is successful in whole or in part, then I don't think they will stop there - if Fairfax 's shares stay cheap- I think they will continue to find ways & means to buyback more shares (maybe sell a further slice of Odyssey) but it won't be at the expense of their underwriting capital strength& thats why they chose this path from a risk management viewpoint. I am pleased Fairfax are showing here clear intent - they are not simply going to sit & pass up this opportunity. We all talked about this previously on this board - the only path was to sell all or part of a sub to fund a major buyback. Also just on the potential issues with SIB with taxes etc - maybe that is one of the reasons they entered into the TRS due to the practical side of running a SIB - just a thought

I should add disclosure - I have small indirect interest in BRK

+1 agree - thats why I prefer Fairfax over Berkshire

We could only wish - I am taking the view Berkshire could be a better investment when WB eventually makes his departure from this world which sounds a bit morbid but it may lessen investor appeal or cause a sell off, meanwhile they have a deep bench of talent. I wonder if Buffett do a TRS on Berkshire's stock if he could get it at 20% or greater discount to book value? He hasn't shied away from using derivatives in the past. Although given their cash position maybe unnecessary.

I think we should look at this substantial issuer bid from a liquidity perspective as well for institutional investors & not looking at it purely from a retail investor angle. If you are a large institutional investor who maybe has been holding onto Fairfax for a long period of time - the SIB provides an opportunity to divest - with the current avg daily trading volume just 50,000 shares - it makes it very difficult to sell a larger position & heavy volume selling will likely impact price negatively. Also if a institutional investor has made an internal decision to sell because they have fundamental reasons for not owning the company then tax considerations will be of secondary importance, their first consideration will be that they are stewards of their fund investors capital and they have other investments which they deem to be more attractive. Also they can tender their shares at US$500 a share - a decent premium to current price. We are also running into the end of the calendar year & for institutions that want to rebalance their portfolio this is the time they will want to do it - so the timing of this SIB is relevant IMO. Also from tax perspective institutions that are pension funds or running pension accounts may see it as more attractive, or if they are sitting on a capital loss then maybe they can minimise the tax impact. I wouldn't jump to the conclusion that this SIB won't succeed at least partially & if they soak up maybe 50% through the SIB & maybe another 50% using their NCIB over the next 3 months then that could still work - I have no doubt that Fairfax would have taken on feedback in the past from insitutional investors & would have done their own research internally prior to launching this - there is a cost associated with it as well.