glider3834

this article is relevant to discussion on valuation https://www.insidepandc.com/article/2cdgrj2sqw8zb25mjo2yo/specialty-lines/ipc

I wrote a bit a long winded reply but main point I would say is that we have to give Fairfax credit for their fixed income mgmt - luck plays a role but you have to put yourself in a position to take advantage - they saw more value in the optionality of holding cash over stretching for the limited yield on offer.

one potential driver of future earnings will be future additional impact on EPS if/when they acquire additional shares from minority interests in Odyssey, Brit, Allied - as premium growth slows & they can build excess capital in subs, they should be in better position to generate cash to pay divs to holdco &/or buy out minority interests IMHO

thanks viking its interesting how price can drive narrative

this is an interesting article on Pacwest deal for KW & FFH which shows it was a strategic acquisition & looks like portfolio is performing as expected https://commercialobserver.com/2023/11/kennedy-wilson-expanding-debt-platform-reach-pacwest-loan-acquisition/ 'The loan portfolio Kennedy Wilson assumed has remained healthy despite the many market headwinds that unfolded over the past 18 months due largely to rising interest rates. Whitesell said there are zero losses in the portfolio as a result of low leverage and a strong asset management team that actively works with borrowers to rebalance loans as needed. The portfolio is facing some looming maturities, with about half of the loans positioned for an immediate paydown and the rest expected to receive extensions, according to Whitesell.'

I am not an expert but I think under IFRS 9 if Fairfax's business model is managing certain financial assets for changes in fair value (see below) it would classify them at FVTPL assets - purchases & sales of these FVTPL investments appear under operating activities. These FVTPL designated investments are different to investments in associates, subsidiaries, real-estate, P&E or intangibles (see below) where purchases or sales of these assets appear under investment activities.

I think Fairfax can only take perf fee in shares up to 49% ownership 'In no instance will Subordinate Voting Shares be issued to satisfy the Performance Fee if, after such issuance, Fairfax and its affiliates would own more than 49% of the outstanding equity capital of the Company on the date of issuance.'

Yes would be good to know - I suspect they want to finish their actuarial review of y/e reserves before they publish an official number, having said that they probably update this number during the year, as they need to determine what dividends they can pay to the holdco from the insurance subs.

I am not sure if I have said this before so apologies if I am repeating myself, but I met Brian Bradstreet at the FFH dinner in the year after Fairfax had the big CDS win, he really came across as very down to earth - maybe not what you would expect from someone who had helped Fairfax make $2B or so on their CDS bet. I asked how he knew about the issues at AIG & he said it was there if you read the footnotes. My takeaway from this brief conversation was here is a guy with who doesn't have a big ego & who really does the work & that honestly impressed me.

looks to be Grivalia's largest luxury hotel investment With an investment approaching 300 million euros, Grivalia Hospitality inaugurated yesterday, with the participation of the Prime Minister , Kyriakos Mitsotakis , the head of Fairfax, Prem Watsa, and prominent names from the business and artistic worlds, the first luxury tourist complex One&Only in Greece and one of the three planned by the Kerzner International group in our country. https://www.powergame.gr/akinita/533059/to-proto-oneonly-anoigei-tis-pyles-tou-stis-11-noemvriou/#google_vignette

SJ yeh agreed - I dug into this a bit because I hadn't been able to understand the shareholding structure for Ki

sure breakdown is Brit has 100M Ord A shares (1 vote each), Blackstone have 150M Ord B shares (0.64 vote each) and 250M Ord C Priority Div shares (non voting); and key execs have 80K Ord G shares (non voting)

Just looking at Articles of Association public filing from Ki Financial https://find-and-update.company-information.service.gov.uk/company/08821629/filing-history?page=1 With Ki, Brit has approx 20% economic ownership & 51% voting power. But interesting is that it looks like Blackstone's C shares (approx 50% of outstanding shares) carry a fixed 8% priority dividend entitlement, but are also redeemable by Ki (see below). Assuming Ki was able to redeem and cancel these C shares from Blackstone , it would increase Brit's ownership from 20% to 40% approx. Terms of Investment Agreement 19 September 2020 between Blackstone, Brit etc don't appear to be available, so we don't have all the information here. Recently Ki has been getting more traction in the follow market, so its worth considering what Ki could be worth and what Fairfax's ownership stake could be. https://www.reinsurancene.ws/ki-teams-with-travelers-aspen-to-expand-digital-follow-capacity/ https://www.insuranceinsider.com/article/2cc4cx6ph8z1opv140x6o/london-market-section/opinion-ki-who-owns-the-follow-market

https://www.insider.gr/epiheiriseis/294623/jp-morgan-katalytis-gia-ti-eurobank-i-exagora-tis-ellinikis-trapezas-blepei JP Morgan expects significant upside for Eurobank's shares , recognizing that the acquisition of an additional 7.2% (29,710,012 shares) in Hellenic Bank , thus reaching 55.3% and pending the approval of the regulatory authorities that will now make it a subsidiary of the group, will act as a positive "catalyst" for the systemic bank. In this light, the American house significantly increases the target price for the Eurobank share to 2.60 euros from 2.25 euros previously , with an "overweight" recommendation

check out https://www.bnnbloomberg.ca/greece-s-eurobank-plans-to-expand-overseas-wealth-management-1.1942573

they paid 380M dividends from insur/reinsu subs to Holdco in 2022 (excl C&F pet sale div) but only $79M in 1H23 so far (excl Brit div from Ambridge sale). So just to match 2022, they would need to pay another $300M divs to Holdco in 2H23. Looking at 1H23 operating income of insur/reinsur subs of $1.75B (vs $1.2B in 1H22) or increase of 46% YoY, & if things continue int he same trend over the 2H23, I think insurance subs might build decent amount of div capacity on top of $2.7B (rounded) level at 31 Dec2022. In 2022, the subs built up around $700M in div capacity (ie from $2B to $2.7B), after paying $380M in divs to the Holdco (with group interest and dividend income $960M in 2022) So if operating earnings of these insurance subs in 2023 are now trending over 40% above 2022 (with group interest & dividends expected at over $1.5B in 2023) , then couldn't we see an even bigger build in div capacity in insur/reinsur subs in 2023 assuming same divs paid to Holdco as in 2022? We are still not through end of hurricane season (he says with fingers crossed ) ,& there are always other risks that could create volatility in insur sub operating results, so nothing is guaranteed of course with the above, but really I am just trying to extrapolate what trends I can see in operating result of the insurance subs YTD SJ I do agree with you it would be better to see more cash in the Holdco over time

Not sure how you got this number 'The company believes that holding company cash and investments, net of holding company derivative obligations, at June 30, 2023 of $1,064.2 provides adequate liquidity to meet the holding company’s remaining known commitments in 2023'

Moody's has upgraded Fairfax's senior debt

just for context, looks like they locked these rates in on around 9% of their fixed income portfolio

no worries - they would control 64% of BIAL but I think underlying ownership is then split FIH 59% (direct & via Anchorage) & OMERS 5%.

disclaimer - below figures could be wrong - this is not investment advice & always do your own due diligence So this is just a snapshot of top 5 holdings of Fairfax India representing 83% of their total assets vs their YE Mar 2023 net income If we ignore BIAL, the 2nd to 5th largest holdings, trading on a FY23 PE of 10.7 x (using avg exchange USD/INR rate of 80.31) but note I haven't looked deeply into operating earnings of these businesses. With BIAL I don't regard the earnings number below as meaningful as T2 was only just starting to open up in January & T2 is still not operating at capacity. But in 2019 the net earnings for BIAL was 68M (for T1 only). Also I have noted 52% economic ownership below for BIAL but assuming FIH buy another 7% from Zurich later this year, this should move to 59%.

thanks viking John Keells (JKH) convertibles - not a big investment but a very tidy one so far, with strike LKR 130 & current share price at 192.5, look like they are up around 48% plus Fairfax are getting interest at 3% p.a while they wait to exercise. This would probably make it close to top 20 position or $200M investment on a converted position basis. When you think of the enormous economic challenges Sri Lanka has faced over last year or so & still has a lot to work through - in that context JKH's USD results below are pretty remarkable. Assuming conversion, Fairfax would hold close to 24% of the business and would make Fairfax the largest shareholder which gives this investment real strategic value IMHO.

So just on your BV question re Digit, not a legal expert here but looks like Fairfax has recognised the fair value gain on the Compulsory Convertible Preferred Shares in Go Digit Infoworks (majority owner of Digit Insurance), not the fair value gain under IFRS they would receive on their equity shares on achieving majority ownership or control of Digit. On your Nationalisation question. My view is foreign Investment is critical to India's & Modi's current strategy to drive economic growth and strategic objectives (incl national security etc) - we have seen Modi flying all over the world in recent months meeting with world & businesses leaders eg Big Tech CEOs etc to encourage them to bring foreign investment to India. Any threat to nationalise here over this issue, would would undermine all this work & run counter to that strategy. And you have to look at Modi's economic track record as well which has been pro-business. So I think this is a low risk here IMHO.

https://www.theinsurer.com/reinsurancemonth/brit-shows-blueprint-on-how-apollo-may-exit-3-5bn-aspen/