glider3834

Honestly you have raised a good point - I agree the website needs to be optimised for mobile so that information is more accessible to investors - I have an android & when I click on the menu headings eg 'Financials' or 'News" on my mobile it will automatically direct me to the first menu item eg "Shareholder letters' under 'Financials'. I am unable to select 'Annual reports' for example on my mobile. Does anyone else have this problem? I think there should be an Investor relations email as well - this is useful for international investors who might want to submit a question outside normal business hours. Fairfax's shareholder letters are excellent in terms of communicating what is going on 'under the hood' but I agree that the website could also highlight some key messages around key investments, track record and even commitments to ESG & their incredible support for charitable endeavours. I know Fairfax believe in keeping their head office running costs low & let their results do the talking , however, even with a small marketing/IT cost they could deliver a big punch in terms of articulating their attractiveness as an investment.

recent article mentions Fairfax Financial Cheers https://www.marketwatch.com/story/10-stocks-that-have-what-it-takes-to-be-a-perfect-company-11628125333

I agree with your intent - transparency, simplification (as long as its enhances value) will help investors better understand Fairfax & ascribe a higher multiple to the shares. With a very large TRS position, Fairfax (& shareholders) have everything to gain from this outcome! But how to do this? Non-insurance companies provide the insurance business with diversification & this is also helps support Fairfax's capital position (see also Berkshire, Markel who have successfully done this). A pure insurance platform business I believe would theoretically need to hold a greater proportion of its assets in fixed income (when interest rates are extremely low) & that would likely result in lower investment returns. I think IPO'ing these assets to effectively put a market multiple on non-insurance subs whose value might otherwise be hidden is one strategy which they are doing & it also provides those companies with access to the capital markets. Providing better communication around what Fairfax actually owns (see 2020 Shareholder letter & prem's breakdown) Impact of Covid is not be underestimated - it has really had a big impact on Fairfax's non-insurance businesses that are operating in travel, retail, hospitality - I think as vaccination drive continues, the impact from Covid will start to ease & we will start to really see the earnings potential from these businesses. Does it make sense to monetise investments now that are still enduring the impact of covid? I think thats a case by case decision as the IPO market is excellent at the moment. re Hamblin Watsa - it was brought in house & in the 1992 letter (quote below) Prem talks about why they did it - point 3. probably relevant here "Why did HWIC make sense for Fairfax? Mainly, for the following three reasons: 1) It was a very good investment for Fairfax. Under very reasonable assumptions (i.e. no incentive fees or additional funds under management), Fairfax could achieve its 20% return on investment. Also, a multiple of 3.8 times revenue and 8 times pre-tax earnings was reasonable compared to private transactions and public valuations of investment counselling firms. Furthermore, we paid for most of the purchase by issuing shares of Fairfax at a fair price of $28 per share. 2) It brought proven investment management into Fairfax. 3) It removed my perceived conflict of interest and placed all of my interests in one pot." I agree with you having investments eg in real estate (Kennedy Wilson) or family run businesses (BDT) being managed by investment managers with great track records who are experts in their niche. Fairfax are right pursue this operating model for their non-insurance businesses IMO & avoid picking up turnarounds. I would like to see Fairfax raising cash where-ever possible & buying back shares - if there was one investment they should make now, this is the one of the best ones to help drive BV growth, earnings & higher market multiple..

at bottom of p73 of Interim showing the fair value (7138) & carrying value (5211) for non-insurance associates (including Fairfax india) as presented in the consolidated financials - there is a difference of 1.9bil The carrying value includes Fairfax India but appears they are also including non-controlling interests for Fairfax India in 1301.2 carrying value . Non-controlling interests own 71.6% or 931 mil (around 36 per share) which might explain difference?? Disclaimer here - I haven't read the actual RBC report & methodology, I just saw the headline posting in this thread so quoted from there Anyway I think better to work on $29 excess per share number as this is being reported by Fairfax - I think its worth pointing out that FFH are using Fairfax India share price (currently circa US$13 per share) as fair value for their Fairfax India stake not book value (circa $19 per share) in that $29 number so I think its conservative IMO Using US$29 excess plus BV $541 (30 June) plus expected Digit revaluation $46 (3Q21) gives adjusted BV of US$616 or P/Adjusted BV =0.7 still cheap IMO

+1 I agree with Viking I sold my shares in FFH in 2016 when it was trading at around CAD 700 per share because with their hedged positioning I couldn't see enough catalysts at that share price. I re-established new holdings in the C$450 ish area over the last 9 mths, but the difference this time is that I can write a full list of catalysts now - most of which have been discussed on this forum The risk/reward set up is completely different now IMO But everyone is free to have their own views - I like hearing the bear arguments as a counter-check on my own investment thesis to see if I have missed something

no worries

interesting article - could China's regulatory moves could provide further tailwinds for Digit, Fairfax India & FFH?? https://www.bloomberg.com/news/articles/2021-07-30/venture-capital-firms-turn-to-india-with-china-s-tech-crackdown Does anyone remember Prem saying something along these lines- in China the opportunities are known but the risks are unknown, but in India the risks are known but the opportunities are unknown

Gregmal when you look for an inflection point for a stock - are you looking at technical stuff like trading volume or daily buy/sell ratios?

for what its worth - interesting both Cormark & Scotiabank raised their price targets further on 2/8 after Q2 results https://www.marketbeat.com/stocks/TSE/FFH/price-target/

if BV is $541 (30 Jun-21) & we adjust for expected $46 increase from Digit revaluation of convertible preferred shares in Q3 & adjust a further $57 (see below - from RBC recent analyst report) - can we say adjusted BV is closer to US$644 per share (versus $431 share price) for a P/adjusted BV = 0.66? “The excess of estimated fair value over carrying value of all Fairfax non-insurance associates including Fairfax India associates is about $1.9B or more than $57/share after-tax (not included in book value).”

+1 agree - I think they will continue use available cash to buyback stock & future large insurance acquisitions are unlikely

on share issues - its all about the economic value added from the share issue that is important & not the issue itself. Here is Prem quote From Fairfax Annual report 2017 Over our history, we have issued 29.5 million shares as we expanded Fairfax from net premiums written of $10 million to $10 billion (current run rate of $11.5 billion). During this period, we have also reduced our shares outstanding by 6.7 million, for a net increase of 22.8 million. As the table below shows, our shares outstanding have grown by 5.6x while net premiums written, investments and common equity have increased by 1,000x or more. Henry Singleton, at Teledyne, reversed this trend, as you know, and over the next ten years we expect to do the same – use our free cash flow to buy back our shares! on TRS - Viking has correctly identified that they are in a position to influence the TRS outcome which is important - the size of the TRS position is really large & I think this could turn into one of the best investments they make over the next 6 mths given the discounted level where FFH shares are trading - lets see how we go;)

Just checked - interesting stat - Allied world GWP was around $3bil in 2017 & it looks like Allied GWP is around $3 bil for just the first 6 mths of 2021!

I think a 'permanent discount' is reasonable to apply if results are consistently poor & that applies to any listed company. But if Fairfax keep delivering great results, then share price will eventually start to close that gap with fair value IMO I think its a waiting game now as analysts, investors digest their results & start to adjust their fair value estimates and act accordingly (see recent analyst upgrades!). On top of this you have retail investors, hedge funds that won't even touch a stock if the technical indicators are poor or they cannot see enough momentum in the share price. So IMO it tends to be the value investors who jump on board first and then the technical investors who wait for the water to get warm before they jump aboard as well.

What a great result - 27% growth in GWP and 94% CR immediately stood out - quarterly operating result for insurance & reinsurance looks to be a record I believe at$398 mil - we are only half way through the year but still excellent progress so far. The non-insurance operating result has a lot more room to improve too as we continue covid-19 vaccination effort provided the economic recovery stays on track, so I think when looking at normalised operating earnings potential for Fairfax there is still appears to be a lot of scope for growth. Great to see even a small buyback of $63 mil in 2Q '21 hopefully that will continue

I would just add to Sanjeev's points that changes in the market values of Fairfax's non-insurance investments in associates & consolidated subs are not being captured by book value, so book value needs to be adjusted IMO if you want to measure Fairfax's intrinsic value. In Q1 2021, the mark to market movement of these non-insurance investments increased by $1.1 bil. Some of these significant non-insurance investments have been directly affected by Covid-19 & re-opening restrictions - Bangalore Airport, Thomas Cook India, Recipe etc - so operating earnings should improve as vaccination drive heats up.

no worries nwoodman I was going to write a response but I think this article sums up some key insights into Digit's potential growth in health insurance. https://kr-asia.com/how-insurtech-startups-in-india-are-increasing-insurance-penetration-in-the-country Here are a few quotes On health insurance In the first half of FY 2020-21, health insurance premiums occupied the top spot in the non-life insurance segment for the first time in India, according to the General Industry Council. “When the world was hit with the novel coronavirus, the fear of hospital bills and losing an earning family member to the virus hit the roof. And so did the need to get health protection,” Vivek Chaturvedi, chief marketing officer of Digit Insurance said. A survey conducted by insurance provider Max Bupa last year said there has been a significant shift in the consumer mindset regarding the importance of health insurance coverage. The survey found that 71% of respondents considered health insurance necessary after the pandemic hit the country, compared to just 10% interested in getting insurance before the pandemic. Also here is another older article which I think you will find interesting https://yourstory.com/2018/05/rs-350-cr-investment-within-6-months-operations-digit-plans-take-prime-spot/amp Here are a couple of quotes On customer experience “The insurance industry has seen lots of changes in the last 15 years in India. Unlike other sectors, we have not seen insurance companies redefining the customer experience. Further, only 29 percent of insurance customers are satisfied with their current providers, and we hope to change that.” (Kamesh Goyal) On hiring team The company made sure it hired employees not only from the insurance, but from non-insurance backgrounds such as ecommerce, consulting, and technology, among others. In fact, around 53 percent of Digit’s team is from the non-insurance background.

I haven't had a chance to take a look but looks like a very solid result - also I saw this article which shows an overlap between WRB & Fairfax's businesses - looks like both WRB & Fairfax rank as 4th & 5th largest players the US E&S market based on Q1 2021 DWP , as WRB wrote 630 mil & Fairfax wrote 625 mil in E&S DWP according to SPG global report https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/insurers-log-big-q1-premium-growth-in-increasingly-important-us-e-s-market-65140072 Here are some comments Broker Ryan Specialty, which placed 70.6% of its total premiums in the E&S market in 2020, said in an IPO filing that the "emergence of complex, unique or otherwise hard-to-place risks," as well as the need for specialist solutions, has driven meaningful growth within what it described as the "increasingly important" U.S. E&S market.

I honestly felt the same way as Prem when I saw the number on this one, but I can see now that for FB it was a strategic move to protect their own business (WA had 450 mil users at the time & higher level of user engagement than FB) - so it was strategically important and they saw potential I am sure to grow the functionality & monetise over time. But was it worth $19 bil? Maybe you could make the case based on $s per user but I suspect MZ really just wanted to seal the deal - it was probably worth more to FB than anyone else. I think you will see a lot more on monetisation front with Whatsapp for Business over next few years - saw this recently https://www.socialmediatoday.com/news/facebook-announces-the-next-stage-of-its-ecommerce-push-including-shops-on/602239/

Really good discussion guys. I think I read WB saying something along these lines & it probably describes any personal relationship or marriage too as well but essentially don't expect to find a perfect partner (in Fairfax) you have to accept (& embrace) their imperfections. Fairfax might miss the next Amazon because they are valuation conscious, however, based on their 35 year track record they are also not going to blow up the company How? because they are constantly worried about the downside risk & having a margin of safety. This is a consistent theme to their investment approach - if you read all of Prem's 35 shareholder letters, the way they structure their investments is intelligent. They generally want to lead with debt, convertibles &/or warrants & then maybe hold a smaller equity component - Why? because they want to limit the downside but still preserve benefit of the upside. They also want to pay no more than 10x free cash flow. If you look at their investment in Blackberry, more than half their investment is sitting in convertible debt - protect the downside! The other point I want to make is that when you have a valuation obsessed focus, sometimes you can absolutely hit the ball out of the park - look at Digit (albeit early days!) It sums up their investment approach 1. Bet on management (Kamesh Goyal extremely talented insurance CEO in India with a track record) 2. focus on margin of safety (they spent around 150 mil for a stake now worth close to $2.3 bil) 3. Leveraged their deep understanding of insurance, the Indian market & their understanding of how digitalisation is transforming insurance industry (see also their investment in Ki via Brit). Now the imperfections - I would have liked to see them peel back on some of their more cyclical investments (RFP, Stelco) & I have raised this before - unfortunately lumber prices have fallen (demand destruction!) considerably since May & RFP share price is down a lot since then. On debt - I agree they need to complete the Riverstone deal which hopefully will happen soon (has been approved by EU so no anti-competition issues here) & improve their capital position. Its also important to understand that the debt for the non-insurance subs is non-recourse to Fairfax.

Fairfax have been sitting on their position with BB (no insider sales that I can see as yet)-maybe they want to see how the development & monetisation of Ivy plays out - product is due to ship in Feb-22. Blackberry Ivy is really interesting and could have huge potential but they need to execute - its too early to say but maybe there will be greater visibility over the next 6 months

Excellent summary Viking

I meant to say 'potential appreciation from the listing of BIAL & other privately owned investments'

Yes Viking definitely a lot of positive catalysts for Fairfax India and FFH is carrying their position in Fairfax India at around $9.66 per share (at 31 Dec-20) which looks to be close to 50% of Fairfax India's book value if it is around $18-19 which does not even capture potential appreciation from BIAL & other privately owned investments. With BIAL, I suspect they will be patient with the IPO & they have said it will be IPO'd subject to 'market conditions'. Hopefully they can increase their stake in BIAL by bidding for the govt stake & then deferring the listing at least until covid situation (3rd wave) settles down. THat would then set the stage for hopefully a successful IPO and also reduce any risk of OMERS exercising their ratchet clause.

impeccable timing thats for sure with this IPO