glider3834

smart timing on their Enthusiast gaming sales - I like these 'platform content' bets (Blue Ant & Boat Rocker) by Fairfax because they have strong tailwinds (in our house we only watch streaming TV) - Boat Rocker still expects its revenue to materially ramp up in FY22 as fewer covid restrictions allow them to ramp up production - not too worried by the share price dip since IPO.

Partner re sold for around 1.28 x BV https://leaderpost.com/pmn/business-pmn/exor-covea-clinch-9-bln-partnerre-reinsurer-deal-on-pre-pandemic-terms-2

Yes its feels like policy makers have their heads in the sand https://www.reuters.com/breakingviews/crypto-poses-systemic-risks-that-need-swift-remedy-2021-09-07/ I often think what would the world be like if we could only invest in crypto & not in any other asset class? Well we would be massively capital starved & that would affect everything - the pace of innovation & the quality of all our lives would be considerably reduced. Like Bill Gates I think said said, better to invest in things that actually create goods & services that people need and want - thats creating real value for society. Yes the blockchain is incredible technology but the crypto currencies themselves have this primary utility as trading toys.

https://www.livemint.com/companies/start-ups/acko-turns-unicorn-after-255-million-fundraising-round-11635360200201.html Digit's rival Acko valued at $1.1 billion in recent fundraising round. Acko is growing GWP faster than Digit but off a smaller premium base. Acko targeting 1200 crore GWP for year end Mar-22 (FY22). Digit has written 2,200 crore in GWP in 1H FY22 https://indianewsrepublic.com/digit-insurance-is-targeting-premium-sales-of-sek-6500-by-october-2022/507088/ & assuming similar growth in 2H FY22, Digit will write 4x more premium than Acko. I think this provides a decent insurtech comparable & IMO further supports Digit's recent valuation.

FFH (US listing) vs S&P500 over last 5 years - yikes my data estimates below - for S&P data from https://www.multpl.com, FFH data from morningstar.ca https://www.morningstar.ca/ca/report/stocks/valuation.aspx?t=0P00006821&lang=en-CA except for Fairfax price to forward book from https://seekingalpha.com/symbol/FRFHF/valuation/metrics S&P multiple expansion y/e 2016 S&P price to book 2.91 & price to sales 1.95 (& div yield 2.0%) current S&P price to book 4.87 & price to sales 3.13 (& div yield 1.3%) FFH multiple compression y/e 2016 FFH price to book 1.18 & price to sales 1.13 (& div yield 1.9%) current FFH price to book 0.7 & price to sales 0.48 (& div yield 2.4%)

HWIC Asia Fund (parent FFH) looks like this is the investment vehicle through which FFH holds its IIFL positions https://trendlyne.com/portfolio/superstar-shareholders/custom/?query=Hwic Asia Fund Class A Shares note recent $15mil approx investment in 5paisa part of cap raising closed in July 2021 -https://inc42.com/buzz/zerodha-rival-5paisa-to-raise-over-inr-250-cr-through-equity-issue/ Other investments include - 49% stake in Quantum Advisors - US$3 bil Asset manager https://hedgefunddb.com/Home/FundDetails/801-70375/QUANTUM-ADVISORS-PRIVATE-LIMITED - 39% of Eagle Insurance - appears to be a small insurer in Mauritius https://www.eagle.mu/our-history - HWIC has 2.97% interest in JKH & remaining 10.75% held by FFH (via their broker Citigroup) - https://keells.com/resource/annual-report/John_Keells_Holdings_PLC_AR_2020_21_CSE.pdf

true -it probably makes sense from liquidity point of view to hold a big cash position if you are over-weighted on equities (like in 2020 they were able to hold all their equity positions & were not forced sellers). So maybe higher rates could see a shift to greater bond weighting & lower cash and potentially lower equities weighting - but I am just speculating.

I suspect they would want to make more than an extra 1% but just to illustrate P&L $ impact

Yes agree Viking I think they can do 700 UWP provided we have a normal cat year - will be pressure from Ida/Euro storms on Q3 so high 90s CR would be a decent result for 2021 I think the operating earnings picture (excluding investment gains) will become a lot more visible over next 12-18mths - if they can do 700 UWP, 700 approx interest & divs, 500 profit from Assoc and 100 from non-insurance businesses (incl Thomas Cook, Recipe etc) that would get them to $2 bil in revenue before any investment gains. Also interest on fixed income is the wild card here, 10yr has moved up to around 1.64% & Fairfax have around 39% or $18 bil in cash & short term investments (1/2yr treasuries) that are basically making close to nothing, if they can park say 50% into bonds earning an additional 1% yield, that would add $90 mil per annum to their interest income. Also Fairfax have I believe a duration of around 1.8 years on their fixed income portfolio which I think would put them at low end compared to their peers - so all else being equal if rates move higher, then Fairfax's BVPS is more insulated from higher rates (will fall less) plus they have the opportunity to dial up their interest income.

https://www.thehindubusinessline.com/companies/thomas-cook-india-witnessing-a-huge-surge-in-demand-for-leisure-travel/article37119888.ece

I suspect this helps provide an inflation hedge along with their real estate exposure & their short duration positioning (to take advantage of higher interest rates) on the fixed income side India is probably the #1 EM globally https://asia.nikkei.com/Opinion/Global-investors-should-start-paying-attention-to-India-s-rise But the real story is that India has unfailingly delivered higher annualized returns than the Emerging Markets Index across all time periods. India has also performed better than China, for the most part. Cumulatively, over the past 10 years, in dollar terms, MSCI India has returned 124% as against 66% for the Emerging Markets Index, and 106% for the CSI 300, which includes the top 300 stocks traded on the Shanghai and Shenzhen stock exchanges. & around 9% of their total investment portfolio (including fixed income)

Are Q3 results usually on last Thursday of month - I think that would be next Thurs 28 Oct ? No CC announcement yet ...

thanks Sanjeev for sharing - family succession is common in insurance industry - Markel Corp, WR Berkley I remember Prem saying at some point he told both his kids that he didn't want them working for him early on in their careers & encouraged them to find their own way in life working for external employers - I am sure that has shaped them as well. Fairfax has a great team on investment & ops side so I think the key thing is maintaining that right culture within Fairfax which is,as a shareholder I would be looking for from Ben & Christine - but lets hope Prem isn't going to disappear on us just yet

thanks nwoodman

I am optimistic on India economy recovering post-covid but market valuations look very hot in India compared to other emerging markets- a lot of Fairfax India's holdings & FFH's holdings have had large run ups over the last 12 mths - I think we should all be prepared for more volatility & downside risk but given the wide FFH/FFH India valuation discounts IMO I am not worried so much if we see some downside here on individual holdings https://economictimes.indiatimes.com/markets/expert-view/market-very-frothy-exit-and-take-out-some-money-now-sandip-sabharwal/articleshow/86473289.cms

Yep I remember investing in Sears years ago following that same train of thought & it was that big red CFO number that kept repeating itself that ultimately caused me to exit. Its interesting Fairfax has a a lot of real estate indirectly owned via Common Stock holdings whose primary business is not real estate investment - just three that come to mind - via Eurobank equity holding - (ex Grivalia) real estate portfolio has asset value of €1.4 bil (FFH 31% share worth approx $504 mil) -via Stelco (FFH 15% share $37 mil??) - Stelco also is preparing to sell a parcel of land adjacent to its operations in Hamilton, Ontario that could be worth $250 million.https://www.barrons.com/articles/canadian-steelmaker-stelco-is-a-low-cost-producer-and-has-an-investor-friendly-ceo-how-that-could-boost-the-stock-51633365262 - via BIAL (via Fairfax India 54% ownership of BIAL) - 460 acres - (FFH stake assuming Riverstone buyback 460 x 54% x 36.6% = 90 acres - value???) Real Estate Monetization: BIAL has approximately 460 acres of land adjoining the airport that can be developed. Most of this land is undeveloped and Bangalore’s historical population areas are getting congested, so the city is expanding in the airport’s direction. BIAL anticipates significant upside, over time, from monetization of this real estate. We provide below an update on the significant progress made in the actions to monetize the land available for development. • A 100% owned special purpose vehicle (SPV) subsidiary of BIAL was incorporated to carry on the real estate activities of BIAL. This entity, Bangalore Airport City Limited (BACL), is now capitalized and staffed and is expected to be self-funding as we move forward. Plans to develop the first 176 acres of land have 9 FAIRFAX INDIA HOLDINGS CORPORATION been advanced and several deals are being negotiated. Infrastructure planning and detailed design for this parcel have been completed. • Anchored on the principles of a smart city, BACL will focus on four asset classes – business parks; a retail, dining and entertainment village (RDE); hospitality; and convention and exhibition centres. • Despite potential partners’ and investors’ inability to visit the site because of the pandemic, significant progress has been made in project plans. • A land lease for a 3D printing facility has been completed and the first payment received. • A land lease for a large central kitchen for the premier airline services company has been agreed, although payment has been delayed because of pandemic related disruptions. • A term sheet has been signed for a joint development ‘‘built to suit’’ campus for a multinational corporation. • A term sheet has been signed for a joint development trade centre.

no worries different - Davos brands was sold in 2020 Exco an equity accounted associate & has different carrying value - this oil & gas business (one business not a collection) sits under limited partnerships so sits under 'Common Stocks' that are MTM on Balance sheet Looks like Quantum are managing around 3bil USD & HWIC (Fairfax) own around 49% https://www.quantumamc.com/about-us/our-sponsor/95 - I had a quick look at SEBI to confirm but got lost & now my partner is calling me for dinner

great podcast thanks nwoodman

great work too Viking - will check it out

thanks Viking - on the limited partnerships - AR 2020 At December 31, 2020 limited partnerships and other consisted of 51 investments, the three largest being $299.5 (beverage manufacturing), $191.8 (industrials) and $146.4 (oil and gas extraction) BDT Capital partners do have a $4 bil position in Keurig Dr Pepper, so could this be the mystery beverage manufacturer investment ? https://www.sec.gov/Archives/edgar/data/1510974/000095012321011542/xslForm13F_X01/0000950123-21-011542-5304.xml The oil & gas extraction business appeared as 3rd largest for the first time in 2020 - opportunistic timing perhaps

article on Eurobank - sorry the English translation is not great https://www.mononews.gr/trapezes/chrimatistirio-ti-odigise-tin-eurobank-se-ipsila-21-minon Estimates are already circulating in the market for the dividend that Eurobank is going to distribute, which is estimated to be between three and four cents, which, if it happens, justifies a dividend yield of about 4% . The revenue for the dividend that Fairfax should expect, without the 5% tax, should be estimated between 37-49 million euros . As recorded by foreign reports, such as Morgan Stanley a month ago, Eurobank aims at 2022, and in the first months of next year may have managed to reduce the percentage of red loans from its balance sheet to its levels European average, which provides for 5% . Already after the agreement with DoValue , the NPE's index is expected to fall to just over 7%. The prospect of a dividend, however, is what fuels investment interest today, as foreign analysts give a target price above 1 euro (1.07 euros according to Morgan Stanley).

good summary Viking on 1. thats probably the main one - negative impact from Q3 catastrophes on insurance result - how much? on 11. I am curious if any changes - apart from Atlas Corp warrants which appear to have been exercised , they don't appear to have really added any new significant equity positions up to Q2 - what about Q3? on 12. if the premium growth rates are still good, I suspect they will want to keep allocating capital to subs but good question viking - how much capital do the subs actually need? Because as the discount to book keeps growing I think it raises the stakes around share buybacks - if, when & how much??

Kamesh Goyal said they are waiting on regulatory approval for Digit's capital raising & expecting by end of this month - could be delaying the timing so they can basically say this is done??

Another Fairfax insurtech investment which appears to be off to a good start is Ki insurance - below from Brit's 1H 2021 report KI: Underwriting traction and continued development In its first six months of trading, Ki, the first algorithmically driven Lloyd’s of London syndicate, has gained excellent traction, with GWP recorded during the period of US$114.2m. It has had a very positive reception from its broking partners since launch, and has transacted with each of its broking partners and in all of its planned classes of business. It has also significantly expanded its market presence by onboarding the reinsurance divisions of its partner brokers. Working closely with its partner brokers, Ki has continued to update and enhance the platform, further streamlining the placement of risks. Enhanced by the launch of version two of its platform, Ki now has over 1,000 active users and is generating approximately 40 quotes per day. Interim Report – 30 June 2021 12 Ki has also developed and released its first broker API. This transformative step will allow partner brokers to integrate digitally with Ki and create a totally seamless connection to Ki’s algorithm to obtain quotes within their own broking platform. This will further accelerate access to Ki’s capacity, providing straight-through processing of data and a fully integrated end-to-end quotation process between market participants at Lloyd’s. We were delighted that Ki won the Digital Insurance Award at the 2021 National Insurance Awards. https://www.artemis.bm/news/blackstone-puts-weight-behind-ki-as-brits-algorithmic-syndicate-raises-500m/

yes it is - S&P500 div yield is around 1.4%