This2ShallPass

"the company estimated the fair value of its investment in Jaynix using a discounted cash flow analysis based on multi-year free cash flow forecasts with an assumed after-tax discount rate of 28.2% and a long term growth rate of 1.5% (December 31, 2022 - 21.6% and 1.5% respectively)." Why bother investing in a sector where you need to have a 30% discount rate and 1.5% growth rate? That too invested only $32M (though fair value now is $45m). These small investments are a head scratcher and is a distraction for management.

"company estimated the fair value of its investment in Sanmar common shares using: (i) a discounted cash flow analysis for Sanmar Egypt, based on multi-year free cash flow forecasts with an assumed after-tax discount rate of 11.0% and a long term growth rate of 3.0% (December 31, 2022 - 13.2% and 3.0%, respectively); and (ii) the unadjusted bid price of Chemplast's common shares. At September 30, 2023 the company held a 42.9% equity interest in Sanmar (December 31, 2022 - 42.9%) and its internal valuation model indicated that the fair value of the company's investment in Sanmar was $301,293 (December 31, 2022 - $337,846)" From Q3 report. Sanmar = Sanmar Egypt management valuation + Sanmar India market valuation. As of Sep 30, 23, market value of Fairfax's 43% Sanmar India share was $396M. Based on above, then looks like Egypt is valued at -$95M. Is this correct?

Based on some deep fundamental analysis, I can confidently say it's going to be a shtload more

Thanks, I started getting a little worried that Ki was that big % for Fairfax..phew. Btw, are the 23M shares without the swaps, so in reality it's like 21M? They killed it with the duration, 4 years I haven't increased my position since ~$500 but today it might be an even better opportunity. Thinking of adding to my already large but <30% position..

This would be a good indication of how they think about minority shareholders. 287M in cash, no reason not to do a SIB and take out 10% of shares. But, if they buyback at significant discount, wouldn't BV increase which means Fairfax gets even more performance fees? Is omers and Markel not willing to participate (even at this discount) a cause for concern?

If you look at my earlier post, I said Fairfax India made 8.5% using BV in 8.5yrs and MINDX is 14% in 10 years. So even if you compare at NAV, they're doing bad. Btw, most closed end funds trade at a discount. So, in practical terms, we need to think 20% discount and if you do that it looks even worse. Everybody wants to invest in India now and even with that tailwind discount has not closed, granted it came off the lows. I don't know how you're saying Fairfax destroyed Matthews. 8.5 yrs is a long time, soon they have to figure out a way to surface value, we're not here for moral victories. What's taking so long w Anchorage? With every performance period, where parent Fairfax calculates performance on BV and gets stock at market value, minority shareholders are getting screwed. Adding salt to the wounds..

The one major India focused MF is 13.8% CAGR in 10 yrs. In USD. https://global.matthewsasia.com/funds/mutual-funds/asia-growth/india-fund/ Let's do a 5 yr comparison, MINDX is 8.3% CAGR, 48% cum vs. -11% for Fairfax India. Discount or not, they're getting lapped. FFXDF is a one trick pony, until they can replicate the success of BIAL it's hard to say they're great management..

Not sure about this. BIAL was great. But one of the IIFL has been recently called out for securities fraud (or something pretty bad), how did management miss something like that. Sanmar was loaded w debt when they bought it, an IPO helped but really what makes it a high quality company? Last year, they made two investments <$50M and now I guess they'll swing at a whale like IDBI, what's the investment strategy here. Are we giving too much of a pass to Fairfax India because of how well Fairfax management has done? If you look at performance, even looking at BY, it's doubled in 8.5 years (~8% cagr). Average at best. I'm holding on due to BIAL but the Anchorage IPO keeps getting delayed.

I asked this question a while back. There was some discussion, but didn't get good comparables for which P&Cs are closer to FRFHF. I did some research and decided to hedge with OTM puts against a basket of companies. My goal is simple, I don't want to overthink it - my FRFHF position is large and the tail event that could really hurt me is a once in 50-100 yr hurricane. I'm not trying to hedge against hurricanes in general, that's part of investing in an insurer, just the big one. Based on my analysis, I'll have to pay the equivalent of ~$8-10 per Fairfax share to get the hedge during hurricane season. I plan to do it for 3 years and could cost me $30-50 total. Here are the hedges I put at end of July Travelers ~10% OOM Put, premium cost ~0.9% (Oct'23 expiration) Chubb ~10% OOM Put, premium ~0.9% (Nov'23 expiration) Allstate ~10% OOM Put, premium ~1.1% (Oct'23 expiration) Progressive ~9% OOM Put, premium ~1.8% (Nov'23 expiration) Markel ~10% OOM Put, premium ~0.6% (Oct'23 expiration) WRB ~10% OOM Put, premium ~0.6% (Oct'23 expiration) - didn't buy WRB puts as they're a well managed insurer https://www.reinsurancene.ws/top-100-u-s-property-casualty-insurance-companies/

Isn't this a big deal? Looks like some serious errors by IIFL securities...poor quality management, not sure how FIH didn't see the signs before.

Ok, I misunderstood. When I saw the premiums I decided not to look at them further. I'm only interested in buying puts on insurance companies with similar exposure to Fairfax. That's a simple and direct hedge and my goal is to limit loss exposure. To clarify further, not worried about regular hurricanes (that's part of doing business) but a once in 50 or 100 yr storm..

Generac is a no go, premiums too high. https://www.propertycasualty360.com/2022/03/10/naic-top-25-pc-insurance-companies-of-2021/?slreturn=20230519161646 I looked at premiums for some comparable companies to Fairfax in this list. Criteria - ~15-20% OTM puts, Nov 17'23 expiration (or extrapolated) Generac - 7% put premium Hartford - 1.25% AIG - 1.5% Markel - 1.9% WR Berkeley - 3.2%

This is exactly what I'm planning to do, since we cannot do it on Fairfax want a couple of close proxies. I'm not overthinking it, my exposure to Fairfax is really large and paying cheap insurance is worth it (for me). I'll look at Generac. Any other insurance companies? Or any relevant source that shows hurricane exposure by company, I'll try to do some research and post here as well.

To the insurance experts on the board, can you pls suggest 2-3 companies that are close to Fairfax from hurricane exposure standpoint? I'm giddy about Fairfax prospects over the next few years as well. But it's ~30% of my pf and I want to be prudent, so planning to take small otm hedge to reduce my losses in a worst case event.

I have owned it almost from the start, has been a terrible investment so far. BIAL is the crown jewel and the main reason I'm still holding. As many have pointed out, the runway for BIAL is so good and it'll be a homerun investment. Once the IPO happens, you will see a rerating (discount stays same / widens, but market value of BIAL will likely be higher than $2.5B). I'll revisit my Fairfax India holding after the Anchorage IPO. I have questions about their strategy, last year bought 2 small companies for $30M and $50M, this year trying to buy multi-billion dollar IDBI..

Are Fairfax options available in Canadian exchanges? If so, why not? Which other public insurance companies closely resemble Fairfax (from an insurance exposure to major hurricane standpoint)? I'm planning to take a small insurance () with OTM puts during hurricane season, premiums have to be right though..

Typically, closed end funds with publicly listed holding trade at a big discount. Look at Prosus, the discount didn't close for years until they decided to sell TenCent shares. There's no reason to pay the performance fees when the securities can be bought directly. Fairfax India can have a good future making investments in the $200-500M range. They have a crown jewel asset in BIAL that will keep growing. I'm questioning their strategy of late, last year they bought two small investments for $80M..not big enough to move the needle and just a distraction. Now going the other way w IDBI..

Looked at it some more - their shareholder's equity is $2.6B ($330M in cash and $500M in debt, not sure how much is drawn). The only way to be the main partner in this deal is to sell their other major investments (Sanmar and IIFL). I'm struggling to see how this makes any sense - why go after something so big? IDBI feels like more suited for parent Fairfax. Also, if the deal completes, the discount is never going to close - IDBI will be a much bigger % of Fairfax India value and not sure many will want to pay the performance fee..

IDBI current market cap ~$7.3B, with premium you're looking at ~$8B and to get a majority stake need >$4B. Can Fairfax India be the main owner with partners, they still need ~$2B right?

How will Fairfax India pay for IDBI, can they afford it?

Amazing quarter, great to see duration at 2.5 years! That's all we were asking last Q, there was no need to stop at 1.6 but glad they made it up this qtr. And locking in $3B at 3.75% for next 6 months gives more room..

I'm also curious how do you get to originate loans like this. 60% LTV loans are gravy, the default risk is so low and no one is transferring these loans to you (not cheaply at least). Also, there's no way those borrowers get a floating rate at 8%. Are majority of their loans in Ireland / UK and are the mortgage int rates much higher than US? Basically this sounds too good to be true, what am I missing?

60% on average suggests there are loans much below and some that are higher. For example, I'm sure the LTV on my mortgage is much much lower. Even if they have 20% loans at 80% LTV isn't that risky? 7.9% floating rate scares me to be honest, this is how we got the housing crisis in the first place...ppl taking floating rates and paying sky high prices for homes.

I tried looking at the last 8 years as that seemed like the inflection point. Fairfax is higher but not by much and maybe there's some international new business / inorganic growth there as well.. Gross premiums Markel (2015-22) = $4.63B to $13.2b (185% growth) Fairfax (2015-2022) = $8B to $25B (212%. 2022- Page 11 of shareholder letter without Allied, I assume this is at Fairfax share of GPW)

Going from 4.5% to 5% in 2 years is not noise. Markel went down from 5.8% to 5% in that period and most major insurers are also down..